Identify, Prioritize Powerful Environmental Stakeholders

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Community stakeholders have substantial control over corporate resources and decisions companies make about the environment. Three groups often drive improvements in firm environmental performance: those who are wealthy, those who care about the environment, and those who live in densely populated areas. Applying these findings can help companies understand how stakeholders influence environmental policies.


Reduce Pollution to Save Money

Companies in certain industries incur large costs related to pollution. These companies can improve financial performance and competitiveness by improving their environmental performance. This study analyzes how large stakeholder groups pressure firms for better environmental performance.

The study finds companies respond to environmental pressures from key stakeholders by reducing toxic emissions. These include: the wealthy, politically active groups that care about the environment, and groups in densely populated areas.

  • Wealthy groups use power to demand better environmental performance from companies who depend on them for resources.

  • Small actions by politically active groups that care about the environment reduce toxic emissions. For example, 16 people out of every 1000 state residents being part of an environmental organization significantly reduced plant toxic emissions.

  • Groups in densely populated areas exert stronger pressures because they are more at risk from the negative effects of pollution.

Implications for Managers

  • Monitor stakeholder groups to determine how much power they have to control company resources.

  • Pay attention to groups with power to influence environmental decisions, such as: the wealthy, politically active groups who care about the environment, and groups in densely populated areas.

  • Prioritize which pressures to respond to immediately and anticipate future concerns by adapting environmental policies to pressures of those who have the most influence over decisions.

Implications for Researchers

This study helps build a richer understanding of the relationship between stakeholders and environmental performance by analyzing stakeholder pressures and the relation to resource dependencies in three of the most polluting U.S industries. Future research could explore the relationship between emissions and regulatory stakeholders. It could also examine the financial costs and benefits related to stakeholder pressures, such as cost efficiency through technologies that reduce environmental impacts.

Methods

Hierarchical linear modeling (HLM) is used to test the relationship between toxic releases and stakeholder pressure. Environmental performance, measured by toxin levels released by 5,033 plants, is the dependent variable and is based on the EPA's Toxics Release Inventory (TRI) database. The independent variable, stakeholder pressure, is collected from sources including: U.S. Census, the League of Conservation Voters, the U.S. Department of the Interior, and the COMPUSTAT financial database.

Kassinis, George, & Vafeas, Nikos. (2006). Stakeholder Pressures and Environmental Performance. Academy of Management Journal, 49(1): 145-159.


 

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