Environmental Issue Management

Environmental Issue Management:Towards a Multi-Level Theory of

Environmental ManagementCompetence

Pursey P. M. A. R. Heugens*Utrecht University, The Netherlands

ABSTRACTThe continuity and profitability of business firms are under constant threat from envi-ronmental issues – forthcoming developments in the environmental domain orinvolving environmental stakeholders that are likely to have an important impact onthe ability of the enterprise to meet its objectives. Managers must forge responses tosuch issues, but must they respond in an ad hoc fashion to every issue or can theydevelop more coherent environmental management competences? Empirical evi-dence was collected from a case study of the environmental issue management prac-tices of Unilever, one of the largest food and personal care companies in the world.This company’s approach to dealing with the issue of genetically modified ingredi-ents reveals that issue managers face a complex level-of-analysis problem when con-fronting environmental issues: how to translate individual-level knowledge intoorganization-level outcomes? The theory developed here suggests that once firmslearn how to span this chasm, they are able not only to address discrete environ-mental issues, but also to build competitive environmental advantages through thedevelopment of integrative organizational competences. Copyright © 2005 JohnWiley & Sons, Ltd and ERP Environment.

Received 11 November 2003; revised 19 March 2004; accepted 10 July 2004

Keywords: issues management; genetic modification; environmental management competence; knowledge acquisition;

knowledge application

Introduction

MANAGERS WHO ARE CONCERNED ABOUT THE CONTINUITY AND PROFITABILITY OF THEIR

organizations must formulate adequate responses to strategic environmental issues – forth-coming developments in the environmental domain or involving environmental stakehold-ers that are likely to have an important impact on the ability of the enterprise to meet its

Copyright © 2005 John Wiley & Sons, Ltd and ERP Environment

* Correspondence to: Dr. Pursey Heugens, Utrecht School of Economics, Utrecht University, Vredenburg 138, 3511 BG Utrecht, The Netherlands.E-mail: [email protected]

Business Strategy and the EnvironmentBus. Strat. Env. 15, 363–376 (2006)Published online 21 March 2005 in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/bse.438

364 P. P. M. A. R. Heugens

Copyright © 2005 John Wiley & Sons, Ltd and ERP Environment Bus. Strat. Env. 15, 363–376 (2006)DOI: 10.1002/bse

objectives (Hoffman and Ocasio, 2001). However, global complexity and dynamism seem to render thetask of environmental issue management almost impossible for large or internationally operating com-panies. For most environmental issues, probability-based assessments of all potential impacts on everybusiness or country unit of the firm are bound to fail. The sheer complexity of this task unavoidablycreates a situation of information overload, in which the amount of data that needs to be generated andprocessed by far exceeds the cognitive ability of even the brightest individuals or best-composed man-agement teams (Dutton, 1993). Therefore, what managers need most is a systematic method for mon-itoring change, such that when an environmental issue arises someone in the company will notice it,monitor it for as long as necessary, and ‘sell’ the issue to a relevant manager who can then formulatean adequate response (Bansal, 2003).

These latter activities are commonly referred to as strategic issue management, ‘a process to organizea company’s expertise to enable it to participate effectively in the shaping and resolution of public issuesthat critically impinge upon its operations’ (Arrington and Sawaya, 1984, p. 148). Strategic issue man-agement is widely regarded as a crucial managerial task (Wartick and Heugens, 2003), but must man-agers respond in an ad hoc fashion to every discrete environmental issue or can they develop dedicatedenvironmental management competences to bring coherence to the various measures they take?Straightforward as this question may seem, answering it requires the development of a relatively sophis-ticated multi-level theory because this question encompasses a complex level-of-analysis problem: Howcan individual knowledge, gathered through first-hand involvement with environmental issues, con-tribute to organizational outcomes related to the resolution of such issues?

Empirical evidence to address this question was collected from a case study of the environmental issuemanagement practices of Unilever, one of the largest food and personal care companies in the world.Findings are presented from a longitudinal investigation of this company’s learning–action network, con-ducted in the Netherlands during the period 1992–2001, and focusing specifically on the introductionof genetically modified ingredients in its food products (Heugens, 2003). The remainder of this paper isorganized in four sections. First, received theory from the fields of issue management and competence-based thought is discussed in a brief review section. Second, the case study is presented, starting with abrief discussion of the study’s methodology, followed by its findings. Third, an analysis is provided ofthe case results against the background of the above research question, in order to develop a number oftestable propositions for future research. The paper closes with some brief conclusions.

Strategic Issues and Organizational Competences

This brief review of received literature has two ambitions. First, the concept of strategic issue manage-ment is introduced, which will later on in the paper be used as an ordering scheme for structuring thecase study findings. Second, three hierarchically related concepts from the literature on competence-based thought are introduced here (organizational skills, capabilities and competences), which will subsequently be used for analyzing the data.

Issues Management

Managers who want to secure the continuity and profitability of their businesses must proficiently dealwith forthcoming environmental developments that have not yet achieved the status of a decision event(Dutton and Duncan, 1987). Typically, such developments are handled with the help of an implicit orexplicit issue management system, ‘a systematic procedure for early identification and fast response toimportant events both inside and outside an enterprise’ (Ansoff, 1980, p. 134, italics in original).

Environmental Issue Management 365


Issues management systems commonly consist of three distinct parts or phases, which are usuallylabeled ‘identification’, ‘evaluation’ and ‘response’. In combination, these three functionally interrelatedand longitudinally overlapping parts of the issue management system enable companies to formulateadequate responses to strategic and environmental issues (Wartick and Mahon, 1994). It is certainlypossible to identify additional functions of issue management systems, over and above the aforemen-tioned responsiveness function. These include, but are not limited to, organizational learning (Duttonand Ottensmeyer, 1987), symbolism for the establishment of societal legitimacy (Feldman and March,1981), a ‘window in’ the corporation on behalf of society (Post et al., 1983), and the management of insti-tutional pressures (Greening and Gray, 1994). Yet, all of these functions are peripheral as comparedwith the responsiveness function. This review is therefore limited to a discussion of the three core phasesof the issue response process.

• Identification. The goal of issue identification is to enable the organization to register (or even predict)the emergence of strategic issues (Ansoff, 1980). When managers seek to identify strategic issues,they must collect issue-relevant information and subsequently disseminate it throughout their orga-nizations (Dutton and Ottensmeyer, 1987). In the process, they help the organization cope with thecontinuous stream of weak signals and vague stimuli emanating from its environment (Ansoff, 1980).In this respect, Gollner (1983) makes a distinction between issue scanning and issue monitoring. Thepurpose of scanning is to identify the key trends and changes that might affect an organization, whilemonitoring is meant to keep track of the previously identified potential issues. The scanning and monitoring functions can either be performed by pro-active individuals, whom Nolan (1985) calls‘issue entrepreneurs’, or at the organizational level by specially designed ‘environmental scanningunits’ (Lenz and Engledow, 1986).

• Evaluation. The second phase of issue management is concerned with interpretation, the purpose ofwhich is to ‘imbue data with meaning’ (Daft and Weick, 1984). Interpretation is a cognitive attemptto bring meaning to an issue, a process that can be described as ‘sense-making’ (Daft and Weick,1984). Making sense of carefully monitored events is critical, because organizations fail at least asoften from deficient sense-making as from wrong decision-making (Weick, 1993). Responses cannotcome about without interpretation, because ‘no issue is inherently strategic’ (Dutton and Ashford,1993, p. 397). Only if top management believes that an issue has implications for organizational per-formance will issues be endowed with strategic characteristics.

• Response. The final phase of the issue management process is concerned with formulating and imple-menting responses, activities that bestow legitimacy on the firm that is undertaking them (Dutton andOttensmeyer, 1987). Responses can either be relatively weak and generic to accommodate for severalcontingencies, or they can be highly forceful and specific, aimed at the resolution of what Dutton(1986) calls crisis issues. They can take a variety of different forms, such as discussion among orga-nization members, the formalization of issue management activities in specialized departments, theuse of committees as liaison devices, commitment of money and staff and integration of issue man-agement with strategic planning or decision-making activities (Bhambri and Sonnenfeld, 1988; Postet al., 1983). Some of these options will pass in review when the case study is reported.

Organizational Competences

The notion that firms are fundamentally heterogeneous, in terms of their resources and capabilities, haslong been at the heart of strategic management (Peteraf, 1993). A stream of recent publications hasresulted in what is currently known as the resource-based view of the firm, a model unique to strategicmanagement of how firms compete (Barney, 1991; Teece et al., 1997). One of the important accom-



plishments of this resource-centered view is that it has provided not only a framework for identifyingfirm-specific sources of competitive advantage, but also a coherent vocabulary for describing suchsources. Three hierarchically related terms from this vocabulary are meaningful for analyzing the casestudy materials reported here, notably skills, capabilities and competences.

• Skills. A skill is a specific ability or proficiency deriving from practice or experience that allows orga-nizations to perform certain tasks. According to Nelson and Winter (1982), skills are embedded inorganizational routines: repetitive and predictable behaviors developed by organizations when usingcertain resources. Skills tend to be useful only in specialized situations, and are typically developedwhen actors intensively use a specialized asset (Sanchez et al., 1996). Much of a firm’s learning oppor-tunities are determined by its present stock of available skills. Learning usually focuses on the improve-ment of existing skills rather than on the acquisition of radically new skills, thereby creating naturaltrajectories or path dependencies of skill development within a given firm (Teece et al., 1997).

• Capabilities. Like skills, capabilities can also be identified as repeatable, rule-guided patterns of actionin the use of assets to create, produce and offer products or services to a market (Sanchez et al., 1996).However, capabilities occupy a higher position on the hierarchy of corporate abilities, because theyrepresent more complex and often interactive combinations of various lower-level organizational skills.According to Teece et al. (1997), capabilities adapt, integrate and reconfigure internal and externalorganizational skills to match the requirements of a changing environment. In this view, the creationof new knowledge does not occur in abstraction from such lower-order skills. Rather, new learning isthe outcome of a firm’s combinative capabilities to generate new applications from often pre-existingstocks of knowledge (Kogut and Zander, 1992).

• Competences. A competence is an organizational ability to sustain the coordinated deployment of assetsin a way that helps a firm achieve its goals (Sanchez et al., 1996). Competences are at the top of thehierarchy of organizational abilities, not only combining several lower-order skills (like capabilities),but also integrating them to bring coherence to organizational actions and problem-solving routines(Prahalad and Hamel, 1990). To be recognized as a competence, an organizational ability must meetthree conditions (Sanchez et al., 1996). First, it must be characterized by organization. As Conner andPrahalad (1996) argue, competences emerge out of the coordination of irreducible knowledge differ-ences between individuals. A second condition is intention. If a firm somehow manages to reachcertain goals, but deploys its assets without observable intentionality, the goal attainment in itself canonly be attributed to luck, not to competence (Barney, 1986). Finally, the concept of competence hasthe connotation of being in a good position to reach certain desired results (Sanchez et al., 1996). Acompany that is unable to reach its objectives (e.g. fails to make its lower-level skills and abilitiescohere) will usually be regarded as incompetent.

Genetic Modification: a Case Study

Unilever is one of the largest food and personal care companies in the world with sales (2001) over €52billion. The company has a corporate center that has offices in the Netherlands and the United Kingdom.Employing some 265000 people, Unilever sells 1800 brands through 300 subsidiaries in 88 countriesworldwide with products on sale in a further 70. After its founding in 1929, the company slowlyexpanded its line of core products from soap and margarine to its current core businesses in foods,home and personal care products.

In this case study the focus is on the Dutch part of Unilever’s learning–action network in the foodssector (Heugens, 2003). The study examines this network during the 1992–2001 period, when the



company was confronted with the salient environmental issue of genetically modified food crops. Thesecrops (most pressingly soy and corn) represent important ingredients for its major food product lines.The introduction raised considerable controversy in Europe, as well as in the rest of the world, espe-cially Japan. As a consequence, Unilever was confronted with many stakeholders who protested fiercelyagainst the use of modified ingredients, urging consumers to boycott the company’s products.

Methods

The case study methodology is well suited to the goal of exploring environmental issue management,because little data exists on the topic (Yin, 1994). The case of genetic modification in a European contextwas selected as a research topic because of the issue’s increasing societal relevance and topicality. Itsimpacts range from a complete withdrawal of genetically modified ingredients from the own-label products of all major UK retailers except for Tesco (Jardine, 1999) to a petition held in Austria in whichone million people called for a ban on genetically engineered imports (Scott, 1998). The issue thereforemeets the criteria for an ‘extreme case,’ one in which the processes of theoretical interest (i.e. proces-ses of environmental issue management) are more transparent than they would be in other cases (Eisenhardt, 1989).

Four data sources were used in a triangulating fashion (Denzin, 1989) to analyze environmental issuemanagement practices: (1) 23 open-ended interviews with company officials, journalists, consumer rep-resentatives and members of environmental interest groups; (2) archival data containing personal cor-respondence between food industry members and their stakeholders; (3) roundtable discussions aboutthe issue involving industry representatives and environmental interest groups and (4) articles fromnational and international newspapers and magazines. Following a research procedure championed byDutton and Dukerich (1991), the open-ended interviews focused on six clusters of variables and ques-tions (see Table 1). The average interview lasted an hour and a half, in which questions were asked andnotes were taken simultaneously. Detailed interview reports were usually drawn up within two days afterthe research interview.

According to Eisenhardt, ‘analyzing data is at the heart of building theory from case studies’ (1989,p. 539). In order to facilitate the process of drawing conclusions from the data, an event listing was used:‘a matrix that arranges a series of concrete events by chronological time periods, sorting them into severalcategories’ (Miles and Huberman, 1994, p. 111). Such listings present a highly structured and very con-densed overview of the case study data, while preserving the historical sequence and flow of the events.Table 2 provides a short version of this listing.

Findings

‘Roundup Ready’ soy was the first genetically modified crop that received the approval of the Dutch gov-ernment. Soy is an important crop because approximately 60% of all processed supermarket goods inEurope (e.g., soups, chocolate and cookies) contain the ingredient (Winter and Steger, 1998). Soybeansare genetically modified by the US life science company Monsanto to resist spraying with glyphosate, aherbicide sold by the same company as ‘Roundup’. Since the specialized knowledge of experts aboutthis technology is hard to translate into lucid terminology that the public can understand, a ‘risk infor-mation vacuum’ (Powell and Leiss, 1997) has emerged between scientists and consumers. In such avacuum, the results of scientific research are not communicated regularly and effectively to the public.Instead, partial scientific information ‘dribbles out here and there and is interpreted in apparently con-flicting ways, mixed with people’s fears’ (Powell and Leiss, 1997, p. 31). These communication difficul-ties have led to the development of an alternative vocabulary in the press, which fills the communicative



Variable clusters Illustrative questions

Opinions about modern biotechnology • What is your official position on genetic modification?• Under what conditions do you approve of the use of modern biotechnology?

Involvement with biotechnology • When did you become involved with biotechnology?• How are you involved with modern biotechnology?

Corporate communication strategy • How do you communicate with your stakeholders about the issue?• Are you satisfied with the outcomes of your corporate communication strategy?

Stakeholder relations • In what formal or informal collaborative platforms do you participate?• Are you still a member of these platforms?

Attitude of stakeholders with respect to • Would you call your stakeholders cooperative?cooperation • Can you discuss every topic with your stakeholders without immediately

politicizing the discussion?International dimensions of the issue • What factors determine the level of public attention for the issue in the

Netherlands?• What are the most influential institutions in other European countries with

respect to this issue?

Table 1. Interview guide

Year Actors Short description

1992 Unilever, Dutch food industry Various companies start an informal platform – Informal Consultations on Biotechnology

1995 Dutch food industry, Product Board† The board is appointed as the industry’s official spokesperson with respect to biotechnology

1996 Product Board A task force is established to manage the issue1996 Product Board, press, general public The task force organizes press workshops and public information

campaigns1996 Greenpeace, various Dutch ports Greenpeace blocks the ports of Rotterdam and Amsterdam because

of the arrival of modified soy1996 Unilever, government, consumers’ league Unilever, national government and consumer representatives agree

upon voluntary labeling1997 Greenpeace, Unilever, consumers Greenpeace distributes lists of products that could contain modified

ingredients at supermarkets1997 Greenpeace, Unilever, various Dutch ports Greenpeace blocks the main Dutch ports for the second year in a

row1998 Three Product Boards‡ A second crop is introduced: transgenic corn1998 Three Product Boards In response to the introduction of corn the Biotechnology Project

Team is initiated by three boards1999 Three Product Boards, Unilever, public The project team issues newsletters and offers free consultancy1999 Unilever A spokesperson states that ‘when and if consumer pressure builds

we would consider cutting out on soy’2000 Unilever, PepsiCo, Quaker Oats, Kellogg Companies organize votes on the use and labeling of modified

ingredients at annual shareholder meetings

Table 2. Event listing** Sources: personal interviews, Product Board archives and national newspapers.† The Product Board for Margarine, Fats and Oils.‡ The Boards for Margarine, Fats and Oils; Animal Feed; and Grain, Seeds and Legumes.



void by framing the issue in more appealing terms. It largely consists of nicknames and colorful descrip-tions, such as ‘Franken-foods’, ‘brave new foods’, ‘über-plants’, ‘unholy beans’, ‘demon seeds’, ‘termi-nator technology’, ‘techno foods’ and ‘seeds of discontent’.

The importance of this vocabulary must not be underestimated. Some of the neologisms certainlydisplay a sense of humor and the ability to put the issue in perspective. Other phrases are less innocent,and have set the stage for a heated public debate in countries such as Germany, the UK and France.Unilever tried to deal with these pressures cooperatively, sometimes by initiating new interorganiza-tional platforms for forging close relationships with noneconomic stakeholders, sometimes by partici-pating in existing structures. The next section will explain how Unilever used its experiences with thesecooperative arrangements to amass crucial individual-level knowledge on the issue of genetic modifica-tion, and how the company transformed this knowledge into collective-level competences through integration (Sweet et al., 2003).

Building Environmental Management Competences

The literature suggests that a knowledge-based view is the essence of the resource-based perspective.According to Conner and Prahalad (1996), the central theme in strategic management is that privatelyheld knowledge is an important source of competitive advantage. In general, the resource-basedapproach addresses performance differentials between firms by pointing at knowledge asymmetriesacross firms (Amit and Schoemaker, 1993). This view suggests that the acquisition of new knowledge byindividual organization members is an important pathway to superior performance (Kogut and Zander,1992).

However, the acquisition of privately held knowledge by individual members is only a first steptowards sustainable competitive advantage. A second necessary step involves the application of thatknowledge at the organizational level, which largely consists of integrating individual knowledge intoorganizational abilities (Sweet et al., 2003). As Demsetz (1991) suggests, efficiency in the acquisition ofknowledge requires individuals to specialize in specific areas of knowledge, whereas the application ofknowledge to perform certain organizational tasks requires that many areas of specialized knowledgebe brought together. Thus, knowledge acquisition and knowledge application occur at two separate levelsof analysis in organizations. The remainder of this paper will largely be devoted to concocting a theoryof how managers can span this chasm, solving environmental issues and developing organizational com-petences in the process.

Knowledge Acquisition

External parties are often recognized as indispensable sources of knowledge spillovers that can be‘absorbed’ by individuals working for the firm. Dyer and Singh (1998) introduced the concept of partner-specific absorptive capacity, which refers to the idea that organization members can help the firm developdedicated skills for recognizing and assimilating valuable knowledge from specific stakeholder groups.The case study reported here shows that Unilever gained a large number of valuable issue-related expe-riences from its interactions with external parties. For example, the company managed to fine-tune itscustomer service performance by listening to consumer demands and integrating them into corporatepolicy. As one company official reported his experiences,

If you are serious about providing customer service, you need to use a central information point. Aworried mother does not want to dial twenty different telephone numbers. From a consumer’s point



of view, centralization of responsibilities is the best alternative (personal interview, 18 November1998).

The same process of accumulating valuable experiences by listening to the needs of external parties canbe witnessed in the company’s dealings with the press. When a journalist of a major Dutch newspaperwas interviewed in the course of the case study, and was asked to compare the approachability of variouscompanies in the sector, he was surprisingly positive about his regular encounters with Unilever:

They [Unilever] understand my profession. What matters to me is that I have a personal contactperson inside the organization. I don’t want to speak to some kind of Public Relations official,because they are only a burden. Unilever lets me speak to people that are of interest to me (personalinterview, 19 November 1998).

Specialized knowledge of the kind that is reflected in the above statements always resides in individu-als. It is this type of privately held knowledge that forms the basis of more encompassing organizationalabilities (Conner and Prahalad, 1996). The various experiences of individuals that are codified in thesequotes were captured under the header of experiential knowledge. This form of knowledge is defined asan awareness or understanding that derives from one’s involvement with or observation of developmentsand trends as they occur. Verify with Proposition 1.

Proposition 1. Individuals acquire experiential knowledge through their involvement with the managementof discrete environmental issues.

Although experiential knowledge forms the basis for all more encompassing organizational skills, indi-viduals are capable of generating much more than this basic type of knowledge. Intelligent beings havethe ability to reflect upon their own behavior by means of a critical examination of past experiences. Thefollowing quote, derived from a research interview with a high-placed individual working for the ProductBoard for Margarine, Fats and Oils, illustrates this reflective ability. When this particular individual wasasked to contemplate upon the relative longevity of the various multistakeholder collaborative platforms,he revealed the following insight:

What we have learned from our experiences with the Informal Consultations on Biotechnology andthe Task Force is that it is important not to create a new organization for every new issue. Con-sumers do not distinguish between introductions. They are not interested in the differences betweenmodified soy and modified corn, so it is better if they receive their information regarding the entire‘menu’ of agricultural products from a single organization. You must respect existing channels, soto speak (personal interview, 28 November 1998).

A communication manager working for a large Dutch company that is a supplier to the food industryprovided another example. When this individual was probed for his experiences with the role of com-munication in the management of the biotechnology issue, he gave the following response:

We used to publish a lot about modern biotechnology, mostly factual information about the tech-nology itself. We attempted to use biotechnology as an image-builder. We used it as our motto, tocommunicate that we were using state-of-the-art technologies. In doing so, we failed to realize thatthere are two realities: one technical and the other societal. The technical reality is the more impor-tant one as long as you can keep modern biotechnology in the contained environment of the labo-



ratory. However, you will soon realize the importance of the societal reality when you start to usethe technology in the natural environment. People then want you to give them guarantees, not expla-nations (personal interview, 18 November1998).

Both of these examples provide evidence that individuals can compare various previous experiences, andthat they can hypothesize upon the reasons for success or failure. In their evaluative efforts, peopledevelop conjectures or propositions that link their performance with respect to environmental issuemanagement to certain key success factors or, alternatively, determinants of failure. This ability to findexplanations for past performance was labeled reflective knowledge. It entails learning that results from thoughtful inspection of previous experiences with developments and trends as they occur. SeeProposition 2.

Proposition 2. Individuals acquire reflective knowledge by contemplating on their past experiences with themanagement of similar environmental issues.

Furthermore, it is possible to identify a third category of human knowledge that builds upon both expe-riential and reflective elements. Several individual experiences create experiential knowledge, whereascritical contemplation upon past performance generates reflective knowledge, but these stocks of knowl-edge can still be very specialized and as a consequence highly dispersed throughout the organization.A third category of knowledge emerges when individuals seek associations between previously uncon-nected stocks of knowledge. The present research generated several examples of this type of knowledge.A high-placed official provided a nice example in a research interview. When he was asked for the mostimportant lesson to be derived from the introduction process of genetically modified ingredients, hemade the following statement:

The idea that we will ever achieve total consumer acceptance for modern biotechnology is an illu-sion, especially in the long run. ‘Business as usual’ before the introduction of modern biotechnol-ogy will be completely different from ‘business as usual’ thereafter. It is a fact of life that the issueof modern biotechnology has acquired a permanent position on the political agenda of many stake-holders. We can only succeed in keeping this issue at manageable proportions if we, on the onehand, maintain our good relationships with what we call ‘bridgeable partners’. On the other, wemust continue to inform the ‘unbridgeables’, stakeholders that are against biotechnology and thatdo not want to compromise. Maintaining our dialogue with them and supplying them with infor-mation are key (personal interview, 10 December 1998).

Insights of this kind are the result of combining and reflecting upon many dissimilar experiences. Suchinsights will be labeled integrative knowledge: enlightened learning that results from removing the cog-nitive barriers segregating two or more dissimilar stocks of reflective and/or experiential knowledge.Verify with Proposition 3.

Proposition 3. Individuals acquire integrative knowledge by combining past experiences with the manage-ment of various dissimilar environmental issues.

Knowledge Application

As the above discussion shows, specialized knowledge exclusively resides in the heads of individuals,but effective environmental issue management requires the coordinated application of such personal



knowledge at the organizational level (Demsetz, 1991). Application of knowledge is therefore a secondcrucial step towards the realization of competitive advantage. As Penrose has argued, ‘a firm may achieverents not because it has better resources [e.g., specialized knowledge], but rather the firm’s distinctivecompetence involves making better use of its resources’ (1959, p. 54).

As follows from the review of the literature on organizational competences, skills represent the lowerpart of the hierarchy of organizational abilities. Their low position on the ladder derives from the factthat they deal with specialized, idiosyncratic tasks. Skills are of limited use when they are applied beyondthe specialized setting in which they were accumulated. The preceding section has pointed at two exam-ples of organization-level skills. The first quote presented there, derived from an interview on 18 Novem-ber 1998, hints at a skill for operating centralized toll-free telephone lines. A second quote, dated 19November 1998, suggests a skill for informing journalists. Both of these quotes were used in the para-graph on experiential knowledge. This is not without reason. Porter (1980) describes skills eloquentlyas ‘economies of experience’. This shows great resemblance with how organizational skills are envis-aged here: as the result of applying experiential knowledge. See Proposition 4.

Proposition 4. Managers generate organizational level skills by combining, coordinating, and applying per-sonal experiential knowledge.

Capabilities take on an intermediate position in the hierarchy of organization-level abilities. They canbe envisaged as repeatable, rule-guided patterns of action in the use of assets to create, produce andoffer products or services to a market (Sanchez et al., 1996). Two of the quotes that were previouslyreported refer to such more or less stable patterns of action. The quote derived from the interview on28 November 1998 hints at a capability for stakeholder integration (Heugens et al., 2002). Sharma andVredenburg (1998) previously described this capability as ‘the ability to establish trust-based collabora-tive relationships with a wide variety of stakeholders, especially those with noneconomic goals’ (p. 735).The quote from the interview that was dated 18 November 1998 suggests a capability for two-way sym-metrical communication (Heugens, 2003). Grunig and Hunt (1984) have described this communica-tion type as one that enables a dialogue between a firm and all of its relevant stakeholders, aimed atunderstanding rather than persuasion. These two quotes appeared in the section on reflective knowl-edge, and this is not a coincidence. In the view expressed here, organizational capability results whenpersonal reflective knowledge is applied to lower-level organizational skills. Verify with Proposition 5.

Proposition 5. Managers generate organizational level capabilities by combining personal reflective knowl-edge with previously established organizational skills.

Competences occupy the top position in the hierarchy of organizational abilities. They reflect the abilityto deploy or use various stocks of skills and capabilities, even if there are considerable differences inkind between the stocks. This integrative dimension of competences (cf. Sweet et al., 2003) is similarto what Kogut and Zander (1992) have described as ‘combinative capabilities’ and Henderson and Cockburn (1994) as ‘architectural competence’. The quote that was derived from the interview dated 10December 1998 reflects an ability to integrate very diverse and seemingly unrelated experiences. It refersto important aspects of both stakeholder integration and two-way symmetrical communication. It is thiscombination of the ability to integrate the ‘voice of the environment’ (Hart, 1995) into fundamental orga-nizational processes and the ability to sustain a dialogue even with hostile stakeholders that comprisesa competence in issue management. This quote was deliberately used to illustrate integrative knowl-edge, because organizational competence is the outcome of a deliberative process in which managersapply personal integrative knowledge to lower-level organizational capabilities. See Proposition 6.



Proposition 6. Managers generate organization level competences by combining personal integrative knowl-edge with previously established organizational capabilities.

Discussion and Conclusion

The findings presented here show that there is a tension qua level of analysis between specialized, indi-vidual level knowledge on the one hand, and organizational level abilities on the other. As explained inthe six propositions forwarded in this paper, the findings of the case study suggest that only a highlyspecific trajectory of competence building can close the chasm separating personal knowledge from orga-nizational outcomes. Figure 1 provides a graphical representation of the trajectory that can be derivedfrom these six propositions.

The trajectory of competence building starts with knowledge acquisition at the individual level. Peopleaccumulate personal knowledge due to their involvement in or observation of the management of dis-crete environmental issues (Proposition 1). Managers close the gap between individual level knowledgeon the one hand and organization level abilities on the other by applying the experiential knowledge ofindividuals to the management of concrete issues. The resulting ‘economies of experience’ (Porter, 1980)will result in organizational skills (Proposition 4). Subsequently, individuals may generate reflective

IntegrativeKnowledge

ExperientialKnowledge

ReflectiveKnowledge

Skills

Capabilities

Competences

PersonalKnowledgeAcquisition

OrganizationalKnowledgeApplication

P1

P3

P2

P6

P5

P4

Figure 1. A trajectory of environmental management competence building



knowledge by overlooking their previous experiences and developing conjectures about the causes ofpast successes and failures (Proposition 2). In turn, managers can create organizational capabilities bycombining this reflective type of individual knowledge with previously established organizational skills(Proposition 5). Furthermore, individuals may build on their various stocks of reflective knowledge byremoving the cognitive barriers separating them, creating integrative knowledge in the process (Propo-sition 3). Finally, managers may create organizational competences by combining this latter type ofknowledge with lower level organizational capabilities (Proposition 6).

One question that remains is why one should care about building a competence for environmentalissue management. This paper will now be brought to a close with a brief answer to this question. It isa basic premise of the resource-based view that sustainability of competitive advantage requires resourcesthat are idiosyncratic, scarce and not easily transferable or replicable (Barney, 1991). Environmental man-agement competences generated through the above process should be able to meet these criteria. Theyare idiosyncratic and scarce because each organization employs a unique set of individuals, and becauseeach of these individuals possesses a unique stock of knowledge and experiences. Furthermore, thisknowledge and these experiences are not easily replicated, because they are generated through a path-dependent and interconnected process (Teece et al., 1997). As a consequence, the resulting competencesreflect high degrees of organization, intention and goal attainment (Sanchez et al., 1996). The conclu-sion of this paper must therefore not only be that organizations are able to build competences for man-aging environmental issues, but also that these competences make a valuable contribution to sustainedcompetitive advantage.

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Biography

Dr. Pursey P. M. A. R. Heugens is an Assistant Professor of Organization Theory at the Utrecht Schoolof Economics, Utrecht University, Vredenburg 138, 3511 BG Utrecht, The Netherlands.Tel.: 0031-30-253-7108Fax: 0031-30-253-7373E-mail: [email protected]

Documents

Environmental Issue Management