Manajemen Kelembagaan Bisnis_02

Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment

Despite burgeoning research oncompanies’ environmental strategies andenvironmental management practices, itremains unclear why some firms adoptenvironmental management practicesbeyond regulatory compliance. Thispaper leverages institutional theory byproposing that stakeholders – includinggovernments, regulators, customers,competitors, community andenvironmental interest groups, andindustry associations – impose coerciveand normative pressures on firms.However, the way in which managersperceive and act upon these pressures at the plant level depends upon plant- and parent-company-specificfactors, including their track record of environmental performance, thecompetitive position of the parentcompany and the organizational structure

STAKEHOLDERS AND ENVIRONMENTALMANAGEMENT PRACTICES: AN INSTITUTIONALFRAMEWORKMagali Delmas1* and Michael W. Toffel2

1 University of California – Santa Barbara, USA2 University of California – Berkeley, USA

Business Strategy and the EnvironmentBus. Strat. Env. 13, 209–222 (2004)Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/bse.409

of the plant. Beyond providing aframework of how institutional pressuresinfluence plants’ environmentalmanagement practices, various measuresare proposed to quantify institutionalpressures, key plant-level and parent-company-level characteristics and plant-level environmental managementpractices. Copyright © 2004 John Wiley &Sons, Ltd and ERP Environment.

Received 3 March 2004Revised 22 March 2004Accepted 6 April 2004

INTRODUCTION

Why do some firms adopt environ-mental management practices thatgo beyond regulatory compliance?

Is the adoption of these practices driven bypotential performance outcomes or by institu-tional pressures? Some research has analysedspecific factors external to the firm that drivethe adoption of environmental strategies suchas regulation and competitive forces (Aragón-Correa, 1998; Christmann, 2000; Dean and

* Correspondence to: Magali Delmas, Donald Bren School of Envi-ronmental Science and Management, Bren Hall 3422. University ofCalifornia. Santa Barbara, CA 93106-5131, USAE-mail: [email protected]

Brown, 1995; Delmas, 2003; Hart, 1995; Nehrt,1996, 1998; Russo and Fouts, 1997; Sharma andVredenburg, 1998), and pressure from non-governmental organizations (Lawrence andMorell, 1995). Other research has looked at therole of the characteristics of the firm to explainthe adoption of ‘beyond compliance’ strate-gies. This includes the influence of organiza-tional context and design (Ramus and Steger,2000; Sharma, 2000; Sharma et al., 1999) andorganizational learning (Marcus and Nichols,1999). Other analyses have focused on the indi-vidual or managerial level, examining the roleof leadership values (Egri and Herman, 2000),and managerial attitudes (Cordano and Frieze,2000; Sharma, 2000; Sharma, et al., 1999). Whileeach has provided a piece of the puzzle, thereis still a lack of understanding of the conditionsunder which these various rationales matter to explain the adoption of practices beyondregulatory compliance at the plant level. In arare exception, Gunningham, Kagan, andThornton (2003) examined the external andinternal pressures that drive firms to improvetheir environmental performance beyond reg-ulatory compliance in the pulp and paperindustry. As recently pointed out, ‘our under-standing of factors that foster strong environ-mental management practices within a firm,particularly with operations at the plant level,still remains limited’ (Klassen, 2001, p. 257).This paper offers a perspective that not onlyevaluates the relative influences of externalstakeholders exerting institutional pressureson firms, but also depicts how firm character-istics and organizational structure as well asindustry effects moderate these pressures.Beyond providing a framework of how insti-tutional pressures influence a plant’s envi-ronmental management practices, variousmeasures are proposed to quantify institu-tional pressures, key plant-level and parent-company-level characteristics and plant-levelenvironmental management practices.

The institutional sociology framework em-phasizes the importance of regulatory, norma-tive and cognitive factors that affect firms’

decisions to adopt a specific organizationalpractice, above and beyond the practice’s tech-nical efficiency. Institutional theory empha-sizes legitimation processes and the tendencyfor institutionalized organizational structuresand procedures to be taken for granted, regard-less of their efficiency implications (Hoffmanand Ventresca, 2002). However, the institu-tional perspective does not address the funda-mental issue of business strategy: why doorganizations subject to the same level of insti-tutional pressure pursue different strategies?Building on the institutional framework, weargue that firms adopt heterogeneous sets ofenvironmental management practices becausethey interpret these pressures differently dueto plant and parent company characteristics. Inour model, managers of different plants aresubject to the same level of institutional pres-sures but they are expected to perceive thesepressures differently due to disparities in theirparent companies’ organizational structure,strategic position and financial and environ-mental performance. This difference between‘objective’ and ‘perceived’ pressure leads todifferent calculations and responses. The adop-tion of environmental management practicesby firms varies therefore not only due to dif-ferent levels of institutional pressures but alsobecause of the organizational process thattransforms objective pressures into perceivedpressures.

To be tested empirically, this comprehensiveframework of the drivers of the adoption ofenvironmental management practices necessi-tates an empirical approach that combines bothexisting publicly available databases, as well asoriginal data from a survey questionnaire at theplant level. Publicly available databases canprovide information on ‘objective pressures’while the survey questionnaire can give infor-mation about the perception of pressure andthe actions taken in response. The combinationof these sources of information allows the eval-uation of the difference between objective andperceived pressures and the resulting adoptionof environmental management practices.

M. DELMAS AND M. W. TOFFEL

Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment Bus. Strat. Env. 13, 209–222 (2004)

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INSTITUTIONAL THEORY

Institutional theory emphasizes the role ofsocial and cultural pressures imposed on organizations that influence organizationalpractices and structures (Scott, 1992). DiMag-gio and Powell (1983) argue that managerialdecisions are strongly influenced by three institutional mechanisms – coercive, mimeticand normative isomorphism – that create anddiffuse a common set of values, norms andrules to produce similar practices and struc-tures across organizations that share acommon organizational field (DiMaggio andPowell, 1983). An organizational field isdefined as ‘those organizations that . . . consti-tute a recognized area of institutional life: keysuppliers, resource and product consumers,regulatory agencies and other organizationsthat produce similar services or products(DiMaggio and Powell, 1983, p. 148).

Jennings and Zandbergen (1995) wereamongst the first to apply institutional theoryto explain firms’ adoption of environmentalmanagement practices. They argue thatbecause coercive forces – primarily in the formof regulations and regulatory enforcement –have been the main impetus of environmentalmanagement practices, firms throughout eachindustry have implemented similar practices.Consistent with most institutional theorists,Jennings and Zandbergen claim that firms thatshare the same organizational field are affectedin similar ways by institutional forces thatemanate from them. They cite the examples ofhow the Three Mile Island crisis underminedthe legitimacy of all firms in the US nuclearpower industry, and how the discovery thatchlorofluorocarbons (CFCs) depleted stratos-pheric ozone undermined the legitimacy ofmanufacturing and using those products, andquickly led to institutional coercive forces viathe establishment of the Montreal Protocol tophase out the manufacture of CFCs. Delmas(2002) proposed an institutional perspective toanalyse the drivers of the adoption of the ISO14001 environmental management system

(EMS) international standard in Europe and inthe United States. She described how the regulatory, normative and cognitive aspects ofthe institutional environment within a specificcountry affect the costs and potential benefitsof ISO 14001 adoption, and therefore explaindifferences in adoption rates across countries.Other researchers have explored how compa-nies operating in different organizational fieldsare subject to different institutional pressures.As a result, different practices become com-monplace. For example, distinct levels of coercive pressures are exerted upon differentindustries, which may lead to different envi-ronmental strategies (Milstein et al., 2002).

While such studies examine dynamic andcross-industry institutional forces, they avoidthe question more fundamental to strategicmanagement: why do organizations within thesame organizational field pursue differentstrategies, despite experiencing isomorphicinstitutional pressures? In other words, howmight institutional forces lead to heterogeneity,rather than homogeneity, within an industry?Hoffman (2001) argues that while organiza-tions do not simply react to the pressures dictated by the organizational field, they alsodo not act completely autonomously withoutthe influence of external bounds. Institutionaland organizational dynamics are tightlylinked. A few researchers have begun to inves-tigate this question empirically (D’Aunno et al.,2000; Levy and Rothenberg, 2002).

Levy and Rothenberg (2002) describe severalmechanisms by which institutionalism canencourage heterogeneity. First, they argue that institutional forces are transformed as they permeate an organization’s boundariesbecause they are filtered and interpreted bymanagers according to the firm’s uniquehistory and culture. Second, they describe howan institutional field may contain conflictinginstitutional pressures that require prioritiza-tion by managers. Third, they describe howmultinational and diversified organizationsoperate within several institutional fields – atboth the societal and organizational levels –

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which expose them to different sets of institu-tionalized practices and norms.

D’Aunno et al. (2000) explore the circum-stances under which organizations are morelikely to abandon institutionalized structuresor practices in favour of new ones, such as by diversifying into new services. They findthat market forces (proximity to competitors),institutional forces (poor compliance with government regulations, being a member of amultidivisional firm) and mimicry of changesobserved in other organizational fields eachencourage strategic change that diverges frominstitutional norms.

We hypothesize that organizational struc-ture, strategic positioning and performancewill affect how firms perceive institutionalpressures and how they decide to respond.Individuals in organizations focus on differentaspects of the firm’s external and internal envi-ronments, depending on the cognitive framethrough which they view the world (Hoffman,2001). Cognitive frames are mental representa-

tions individuals use to interpret and makesense of their world. Frames can come to becollectively held within organizations, espe-cially through the influence of the organiza-tional leader (Barr et al., 1992; Weick andRoberts, 1993).

Institutional pressures

In this section, we describe a model that linksinstitutional pressures to organizational char-acteristics to explain the adoption of environ-mental management practices at the plantlevel. Figure 1 illustrates our model.

This figure shows that plant-level managers’perceptions of institutional pressures are afunction of stakeholders’ actions but are mod-erated by the organizational characteristics of the plant and the parent company as well as the strategic positioning of the parentcompany. We describe how these coercive andnormative pressures can affect the adoption of environmental management practices by



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Organization characteristics

Parent company

• Firm size• Firm competitive position• L evel of internationalization• Corporate Environmental Health and Safety

organization

Plant• Plant size• Sources of information on environmental mgt

practices (industry associations, regulators, non-governmental organizations, customers, suppliers)

• Historical environmental performance (regulatory compliance, pollution levels relative to neighbours and competitors

Plant’s adoption of environmental

management practices

• Environmental management system (EMS) comprehensiveness

• Management of stakeholder relations

Institutional fields

Parent company

• Shareholders• Competitors• Industry associations• Government • Consumers• Activists

Plant

• Government• Consumers• Community

Influence

Influence

Affect

Affect

Pressure

Pressure

Figure 1. A model of institutional pressures moderated by parent company and plant characteristics

plants. We focus on a subset of the institutionalactors identified by Hoffman (2001) whom webelieve are most likely to directly influenceenvironmental practices at the plant level: gov-ernments, customers, competitors, communityand environmental interest groups, and indus-try associations. The actors we focus upon areimportant to consider when assessing a firm’senvironmental performance (Lober, 1996).

Government pressures

Perhaps the most obvious stakeholders thatinfluence firms’ adoption of environmentalpractices are various government bodies. Leg-islation authorizes agencies to promulgate andenforce regulations, a form of coercive power.Many researchers have focused on the influ-ence of enforced legislation and regulations onfirms’ environmental practices (Carraro et al.,1996; Delmas, 2002; Majumdar and Marcus,2001; Rugman and Verbeke, 1998). In particu-lar, Delmas (2002) found that governmentsplay an important role in firms’ decision toadopt ISO 14001. First, governments can act as a coercive force by sending a clear signal of their endorsement of ISO 14001 by, forexample, enhancing the reputation ofadopters. Second, government can facilitateadoption by reducing information and searchcosts linked to the adoption of the standard byproviding technical assistance to potentialadopters. In this paper, we refer to politicalpressure as the level of political support forbroader or more stringent regulations. Regula-tory pressure represents the extent to whichregulators threaten to or actually impede acompany’s operations based on their environ-mental performance.

Customer and competitive pressures

In addition to government actors, firms mayfacilitate coercive and mimetic isomorphism.For example, multinationals are widely recog-nized as key agents in the diffusion of practicesacross national borders by transmitting orga-

nizational techniques to subsidiaries and otherorganizations in the host country (Arias andGuillen, 1998). Firms may also mimic practicesthat successful leading firms have adopted. Inaddition, firms respond to customer require-ments. The customer–supplier relationship isperhaps the primary mechanism throughwhich quality management standards havediffused (Anderson et al., 1999). Several studieshave found that firms that adopted environ-mental management practices were motivatedby customer concerns. A survey of the largestCanadian firms showed that customer pres-sure was the second most cited source of pres-sure to adopt an environmental managementplan, after government pressure (Henriquesand Sadorsky, 1996). Khanna and Anton (2002)found that US companies that sell final goodsadopt more comprehensive EMSs than compa-nies that sell intermediate goods. This suggeststhat retail consumers exert more pressure oncompanies to adopt environmental manage-ment practices than commercial and industrialcustomers. Christmann and Taylor (2001)showed that customers in developed countrieshave influenced companies in China toimprove their environmental compliance andadopt the ISO 14001 EMS standard.

Community and environmental interest group pressures

Local communities can also impose coercivepressure on companies through their vote inlocal and national elections, via environ-mental activism within environmental non-government organizations (NGOs) and byfiling citizen lawsuits. Several studies havefound that company decisions to adopt envi-ronmental management practices are influ-enced by the desire to improve or maintainrelations with their communities. Henriquesand Sadorsky (1996) surveyed 700 firms in1992. These firms indicated that communitygroup pressure influenced them to adopt anenvironmental plan. Florida and Davison(2001) investigated why facilities had adopted



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EMSs and instituted pollution prevention pro-grammes. They found that the adoption ofthese programmes was positively correlatedwith firms’ active engagement with commu-nity stakeholders (Florida and Davison, 2001).Another study based on a survey of ISO 14001certified companies across 15 countries foundthat one of the strongest motivating factors topursue certification was the desire to be a goodneighbour (Raines, 2002).

Some communities may be better able thanothers to encourage plants to adopt environ-mental practices. Communities with largerminority populations, lower incomes and lesseducation have greater exposure to toxic emis-sions (Arora and Cason, 1999; Brooks andSethi, 1997; Khanna and Vidovic, 2001). Someresearchers have begun examining whethersocioeconomic community characteristics areassociated with plants’ decisions to adopt envi-ronmental management practices. One studyexamined facility-level adoption of a UnitedStates Environmental Protection Agency (USEPA) voluntary programme, and found thatadoption was more likely in communities withhigher median household income (Khanna andVidovic, 2001).

Greater declines in toxic emissions havebeen observed among plants located in com-munities with higher voting rates (Hamilton,1999) and in states with higher membership in environmental interest groups (Maxwell et al., 2000). Maxwell et al. (2000) assert thathigher environmental interest group member-ship levels indicate a community’s pro-environmental stance and greater propensityto use these organizations to lobby for morestringent regulation. As such, the authors con-clude that higher membership rates provide acredible threat of increased regulation, whichin turn drives firms to self-regulate.

Many of the firms studied by Lawrence andMorell (1995), especially the larger ones, weremotivated to improve their environmental performance by their concern over ‘environ-mental organizations that had aggressivelypublicized firms’ lapses in environmental

responsibility’ (Lawrence and Morell, 1995, p. 111). There are many examples where com-panies have amended their environmentalpractices in response to environmental grouppressures (Baron, 2003). For instance, after Mit-subishi Corporation was subject to a protractedconsumer boycott led by the Rainforest ActionNetwork (RAN), Mitsubishi announced itwould no longer use old-growth forest prod-ucts (World Rainforest Movement, 1998).

Industry pressure

Institutional researchers have argued thatorganizations are more likely to mimic thebehaviour of other organizations that are tiedto them through networks (Guler et al., 2002).Several studies have found that industry asso-ciations have motivated firms to adopt envi-ronmental management practices. Kollmanand Prakash (2002) examined why the UnitedKingdom, Germany and the United Stateshave such different rates of EMS certification.They found that the decision of whether topursue certification, and which standard tocertify against (ISO 14001 or the EuropeanUnion’s Eco-Audit and Management Scheme),was strongly influenced by stakeholder pres-sures from industry associations in addition toregional chambers of commerce, suppliers andregulators.

Market concentration within an industrymay also affect the rate of diffusion of envi-ronmental management practices. If an indus-try is dominated by a few big players thatrequire their suppliers to adopt particular envi-ronmental management practices, this is likelyto lead to a greater diffusion of these practicesthan if the industry were more fragmented.This is a major reason why automotive suppli-ers in the United States have adopted similarquality and environmental practices.

Interactions

The interaction between these institutionalpressures is likely to moderate their individualinfluence on company practices. For example,



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the pressure from environmental groups mayencourage the formulation of more stringentregulations. This, in turn, can induce industryleaders to encourage laggard firms to adoptenvironmental practices. Similarly, followingits chemical disaster in Bhopal in 1984, UnionCarbide along with other large chemical com-panies faced mounting public pressure for morestringent safety and environmental regulations.In response, the chemical industry developedand promoted a set of environment, health andsafety (EHS) management practices – theResponsible Care programme – to chemicalindustry associations in Canada and the UnitedStates (King and Lenox, 2000; Prakash, 2000).

The moderating effects of firm characteristics

Within the same industry, firms may be sub-jected to different levels of institutional pres-sures. For example, multinational corporationsare often held to higher standards for socialand environmental responsibility than nationalcompanies because they are subject to the addi-tional pressure of stakeholders from foreigncountries (Zyglidopoulos, 2002). Furthermore,the visibility of leading firms often subjectsthem to more pressure. For example, social andenvironmental activists have targeted Nike,McDonald’s, Starbucks and Home Depot inpart because of their market leadership posi-tion (Roberts, 2003; Rowley and Berman, 2000).Furthermore, firms with historically poor envi-ronmental records are often subjected to morescrutiny by their local communities and regu-lators. Thus, multinational companies, marketleaders and firms with poor environmentalrecords may have more to gain by developingsophisticated mechanisms to anticipate andmanage external pressures.

PERCEPTION OF PRESSURE

Firm and plant characteristics can affect notonly the level of institutional pressure exertedon a plant, but also how plant managers per-

ceive institutional pressures. This is importantbecause, even if institutional pressures wereexerted at the same level on two plants, thesetwo plants might well perceive and responddifferently.

First, institutional pressures are exerted atvarious levels of a firm. For example, commu-nity pressures are often directly targeted at aparticular plant, while shareholder pressurestarget the corporate level. Second, organiza-tions channel these institutional pressures todifferent subunits, each of which frames thesepressures according to their typical functionalroutines (Hoffman, 2001). For example, legaldepartments interpret pressures in terms ofrisk and liability, public affairs does so in termsof company reputation, environmental affairsin terms of ecosystem damage and regulatorycompliance and sales departments in terms of potential lost revenues. Consequently, thepressure is managed according to the culturalframe of the unit that receives it: as an issue ofeither regulatory compliance, human resourcemanagement, operational efficiency, risk man-agement, market demand or social responsi-bility (Hoffman, 2001). One implication of thisprocess is that the internal organization of thefirm matters because it influences how institu-tional pressures are perceived. Plant managersmay perceive these external pressures moreintensively (and respond to them accordingly)in firms where they have more open channelsof communications with the immediate recep-tor of pressures (corporate functional areasresponsible for finance, law, strategy, commu-nication and the environment).

Information sources may also play a role in cultural framing. Environmental managersmay learn about management practices from avariety of sources. For example, a plant maylearn in an industry association meeting abouta pending boycott of a competitor because ofits environmental performance. The sourcefrom which managers obtain their informationon existing environmental management prac-tices can also influence their decisions to adoptenvironmental management practices.



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A firm’s historical environmental perfor-mance may also influence both how managersperceive stakeholder pressures and how theyrespond to them. Managers in firms whosereputations have suffered from pollution acci-dents may be more sensitive to environmentalissues than those in other companies (Prakash,2000). After major accidents, firms mayrearrange their organizational structure toprevent recurrences and to facilitate morerapid responses. Such reorganizations mayalso begin actively engaging with those stake-holders from whom the firm expects morescrutiny (e.g. regulators, environmental activi-ties). These reorganizations may also occurwithin competing firms if heightened institu-tional pressures spill beyond the firm thatexperienced the accident. For example, the disclosure of environmental information in the annual reports of oil companies increasedsignificantly in the years following the ExxonValdez oil spill (Patten, 1992).

FIRM RESPONSES TOINSTITUTIONAL PRESSURES

Firms can adopt various types of environmen-tal management practice in response to institutional pressures. These can be based on(i) environmental strategies of conformancethat focus on complying with regulations andadopting standard industry practices or (ii)voluntary environmental strategies that seek to reduce the environmental impacts of operations beyond regulatory requirements(Sharma, 2000). Voluntary strategies involvecreative problem solving and collaborativeinteractions with stakeholders (Sharma andVredenburg, 1998). For example, firms adopt-ing voluntary approaches can implement EMSelements by creating an environmental policy,developing a formal training programme orinstigating routine environmental auditing. Inaddition, management can choose to have thecomprehensiveness of their EMS validated bya third party by pursuing ISO 14001 certifica-

tion. Management can also convey the impor-tance of environmental management byincluding it as a criterion in employee perfor-mance evaluations (Nelson, 2002).

Companies can also seek to improve rela-tions with regulators and signal a proactiveenvironmental stance by participating in gov-ernment or industry sponsored voluntary pro-grammes. Indeed, the US EPA, some industryassociations and several NGOs have recentlycreated voluntary standards to provide incen-tives for firms to go beyond minimal regula-tory requirements. For example, the US EPAhas developed several voluntary agreementsbetween governmental agencies and firms toencourage technological innovation or reducepollution while providing relief from particu-lar procedural requirements (Delmas andTerlaak, 2001). Industry programmes includeResponsible Care and Sustainable Slopes (Kingand Lenox, 2000; Rivera and de Leon, 2003).NGO programmes include the Natural Stepand the Global Reporting Initiative Guidelines(Bradbury and Clair, 1999; Hedberg and vonMalmborg, 2003).

Companies can also work directly with customers and suppliers to improve their environmental performance. Furthermore,they may engage in ‘systematic communica-tion, consultation and collaboration with theirkey stakeholders . . . [and] host stakeholderforums and establish permanent stakeholderadvisory panels at either the corporate level,the plant level, or to address a specific issue’(Nelson, 2002, p. 18).

MEASURES OF STAKEHOLDERPRESSURES AND FIRM ANDINDUSTRY CHARACTERISTICS

The first step toward empirically testing theframework presented in this article is develop-ing measures of the framework’s constructs.This section proposes many such measures,grounded in the literature whenever possible.Many stakeholder pressures can be measured



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through publicly available data sources,though in a few cases internal company information may be significantly more accu-rate (e.g. customer pressure). The perception ofstakeholder pressure can also be assessedthrough a survey questionnaire addressed tomanagers (Henriques and Sadorsky, 1996). Wesuggest that relying on both publicly availabledatabases and a survey would enableresearchers to assess differences between‘objective pressures’ (measured by the former)and ‘perceived pressures’ (measured by thelatter). In addition, data on plant-level envi-ronmental management practices are not pub-licly available, suggesting the need for asurvey approach to capture this information.

Measuring political and regulatory pressure

Regulatory pressure could be measured usingthe number of regulatory inspections con-ducted at a plant and firm over the past severalyears, the number of compliance violationsfound and enforcement actions taken againstthe plant and firm over the past several years(Kassinis and Vafeas, 2002; Khanna and Anton,2002). The firm’s historic compliance recordcould also be measured using the number of itssites that are on the National Priority List(Freedman and Stagliano, 2002). Political pres-sure could be measured based on interestgroup ratings of politicians such as Con-gressional members’ ‘National EnvironmentalScorecard’ values published annually by theLeague of Conservation Voters (Hamilton,1997; Kassinis and Vafeas, 2002; Viscusi andHamilton, 1999; Welch, et al., 2000) and by thenumber of state-level environmental policy ini-tiatives (Hall and Kerr, 1991; Welch et al., 2000).

Measuring customer and competitive pressure

As described above, customer demands maystimulate coercive isomorphism, while com-petitor actions may be a source of mimetic iso-morphism. Coercive pressures from customerscould be measured based on the extent to

which the facility’s customers consider envi-ronmental management or performance inselecting suppliers. Pressure toward mimeticisomorphism exerted on a plant could be mea-sured by the extent to which the plant perceivesthat its competitors have adopted an EMS.

Measuring community and environmentalinterest group pressure

Community pressure can be measured usingseveral indicators, including propensity forcollective action, environmental attitudes,demographics and complaints. Because com-munities with a higher propensity for collec-tive action are likely to be capable of exertinggreater institutional pressure on local plants,various proxies for a community’s propensityfor collective action could be employed. First,voter turnout in a recent election cycle could beused to indicate the likelihood that a com-munity expresses its interests to politicians(Arora and Cason, 1999; Hamilton, 1993, 1999).Second, community environmental activismcould be measured using the proportion of thepopulation proximate to each plant (Andrews,1998; Kassinis and Vafeas, 2002) or within theplant’s state (Maxwell et al., 2000; Welch et al.,2000; Wikle, 1995) who are members of majorenvironmental and conservation organiza-tions. Third, a community’s propensity to filelawsuits against plants based on environmen-tal issues could be estimated based on the pro-portion of a plant’s proximate community whoare environmental lawyers (Delmas, 2003).Public attitudes towards the environmentcould be assessed using large-scale surveysthat include sufficiently narrow geographicdetail about the respondents, such as theGeneral Social Survey (Mazur and Welch, 1999;Welch et al., 2000), or surveys of opinionsregarding a trade-off between environmentand jobs, or whether environmental regula-tions are too stringent or too lenient (Burns et al., 2002).

Community demographics may also matter.The fact that communities with lower income,



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less education and greater proportions ofminorities are often exposed to more pollutionmay be due to plants’ perceiving such com-munities as possessing less institutional power.Community demographics data includingincome, race, education and populationdensity in the United States are available fromthe US Census Bureau and have been used inseveral studies to examine the influence ofcommunities on organizations’ environmentalpractices (see, e.g., Arora and Cason, 1999;Hamilton, 1993).

Finally, one could measure community pres-sure directly via the number of complaints theylodge about a plant’s environmental perfor-mance (e.g. odours, noise, air or water pollu-tion) or aesthetic appearance. Such complaintsmay be registered either with regulators ordirectly with the plant.

Measuring industry pressure

Two relevant dimensions of industry pressurethat could be measured are the industry’sposture toward the environment and a plant’srelative position within its industry. To assessthe former, one could use the proportion offirms within an industry that have adoptedenvironmental management programmesabout which there is publicly available infor-mation, such as ISO 14001. One could alsoexamine the market share of each industry rep-resented by companies touted on various ‘bestcompany’ lists such as Fortune magazine’s‘America’s most admired companies’ and ‘100best companies to work for’, Harris Interac-tive’s ‘Harris–Fombrun reputation quotient’,or Business Ethics magazine’s ‘Best corporatecitizens’ (Brown and Perry, 1994; Fombrun andShanley, 1990; Fryxell and Wang, 1994; Kim,2000; Rowe et al., 2003).

In addition to using ‘objective measures ofthese stakeholder pressures, one could alsoassess directly how these pressures were per-ceived by managers. Through a survey ques-tionnaire, Henriques and Sadorsky (1996)asked firms to rank the impact of various

stakeholder pressures on their adoption of anenvironmental plan. Their list of stakeholdersincluded customers, suppliers, shareholders,government’s regulations and neighbourhoodcommunity.

Measuring the moderating effects of firm characteristics

Market leadership could be measured by themarket share, revenues or brand reputation ofthe plant’ parent company. The latter could be assessed using various published ratingsystems described above. A firm’s historicalenvironmental record could be measuredusing the sum of environmental complianceviolations and resulting penalties accrued overthe preceding years at all of its plants (Kassinis and Vafeas, 2002; Khanna and Anton,2002; Russo and Fouts, 1997).

Measuring environmental management practices

Some environmental management practicescan be obtained from government and com-mercial databases. For example, the US EPAcan provide listings of participants in its vol-untary programmes such as Green Lights,Climate Wise, Waste Wise and Energy Star. Adatabase of organizations in the US that havebeen certified to the ISO 14001 EnvironmentalManagement System is commercially availablefrom QSU Publishing Company. A list of orga-nizations registered to the Eco-Managementand Audit Scheme is available from the European Union.

Additional firm-level characteristics aboutlarge US companies’ environmental organiza-tion, programmes, policies and indicators areavailable from various surveys and analyses inthe Investor Responsibility Research Center’sCorporate Environmental Profiles Databaseand KLD Research and Analytics’ SOCRATESdatabase. However, detailed environmentalmanagement practices at the plant level areseldom available from the aforementionedsources, suggesting that a survey of plants may



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be the only way to obtain data at this morerefined level.

CONCLUSIONS

This paper provides a model that describeshow stakeholders, including regulators, cus-tomers, activists, local communities and indus-try associations, impose institutional pressureson plants and their parent companies. We alsosuggest how a variety of plant and parentcompany factors moderate how managers per-ceive and act upon these pressures. Moderat-ing factors include historical environmentalperformance, the competitive position of theparent company and the organizational struc-ture of the plant.

Our approach complements institutionaltheory as it suggests that both institutionalpressures and organizational characteristicsinfluence organizations to adopt environmen-tal management practices. Firm and plant char-acteristics are viewed as moderating factorsbecause they are expected to magnify or dimin-ish the influence of institutional pressures.While testing our model in both the Americanand international contexts presents an oppor-tunity for future research, we have proposednumerous measures to facilitate this. Althoughthere are empirical studies analysing theimpact of coercive pressures (such as govern-ment pressure) on firm strategies, the field isopen to empirical studies investigating the roleof normative pressures on firm strategies.

ACKNOWLEDGEMENTS

We thank Andrew Hoffman for his useful comments.Research funded by the US EPA Star Grant.

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BIOGRAPHY

Magali Delmas is Assistant Professor at the Donald Bren School of EnvironmentalScience and Management at the University of



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California Santa Barbara. Her research exam-ines the interaction between business strategyand public policy, and is published in numer-ous academic reviews, such as Policy Sciences,the Journal of Policy Analysis and Management,the California Management Review, Productionand Operations Management, Industrial and Corporate Change, the Journal of High TechnologyManagement Research and the Journal of Comparative Policy Analysis. She can be con-tacted at Donald Bren School of Environmen-tal Science and Management, Bren Hall 3422,University of California, Santa Barbara, CA93106-5131, USA.Tel.: +1.805. 893-7185E-mail address: [email protected]

Michael W. Toffel is a doctoral candidate atthe University of California – Berkeley’s HaasSchool of Business. A former industrial envi-ronment, health and safety manager, hisresearch interests focus on corporate environ-mental strategy and environmental policy. Hisarticles have been published in the CaliforniaManagement Review, The Journal of IndustrialEcology, Corporate Environmental Strategy andEnvironmental Science and Technology. He can becontacted at Haas School of Business, Univer-sity of California at Berkeley, 545 Student Services Building No. 1900, Berkeley, CA94720-1900, USA.Tel.: +1.510.643.1402E-mail address: [email protected]



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