Benchmarking the greening of business

Article Type: Guest editorial From: Benchmarking: An International Journal, Volume 17, Issue 3

In 2003, for Vol. 10, No. 2 of Benchmarking: An International Journal,I served as Editor for a special issue on corporate environmental benchmarking. This previous and related special issue was published over seven years ago. Enough time has passed to have another special issue to focus on that latest advances related to environmental benchmarking by industry that have been made since that period. The topic of this special issue, “Benchmarking the greening of business,” builds on this earlier emergent work.

There have been changes since that time, and but there are other aspects that remain the same. For example, the pressures from a variety of stakeholders including regulators, communities, shareholders, customers, employees,non-governmental organizations, and competitors on various natural environmental issues, still exist. The difference is that many aspects of these pressures have become even more pronounced. Part of these changes and increased awareness arose from economic and geopolitical forces that have caused organizations to further consider the importance of greening their industries. For example, Al Gore,along with the Intergovernmental Panel on Climate Change, won a Nobel Peace prize for their work on raising consciousness on the issue of global climate change. There has been a major turnover in the federal political administration and regime in the USA that has arguably become a more environmentally sensitive administration and congress. Numerous considerations for climate change bills are now being introduced by both houses of the US Congress.

A number of emergent economies, Brazil, Russia, India, and China countries,have started to play a larger role in the global economy. China, for example,has seen tremendous growth of over 9 percent per year during this time. Much of this growth has come after China’s entry into the World Trade Organization,and with this growth has come commensurate growth in environmental burden (Zhu and Sarkis, 2007). They have become the largest emitter of greenhouse gases and have seen environmental burdens ranging from acid rain and smog to polluted rivers whose water supplies are hazardous to humans.

Also, during this period, we have seen the introduction and maturity of various green certifications and greening opportunities for business in industries ranging from the seafood industry to the built environment and construction industry with its leadership in energy and environmental design(LEED) requirements (Sarkis, 2006). The advent and growth of sustainable supply chains has become an important feature within the study of greening of businesses (Seuring et al., 2008).

Also, during this period, there has been a major financial crisis that countries and industries are still trying to manage. In some ways, this crisis has actually aided the environmental situation with lessened consumption of resources and energy by industry. Yet, it may also mean that many environmental programs, which have been viewed as costly and a determinant to economic sustainability will be ignored by policy makers and organizations. Many stimulus packages from nations throughout the world have incorporated elements on “green jobs” and “green innovations” such as renewable energy. There is a growth in industrial clusters that focus either on green technology or have as their foundation environmentally sound relationships, such as eco-industrial parks.

This greater awareness means that progress in managing organizational greening is even more pertinent today than it has ever been. Organizational environmental performance is at a historical pinnacle of transparency. This transparency has evolved from mandatory reporting as set forth by governments to voluntary efforts to share information with stakeholders. Also, there are numerous agencies that evaluate the performance of organizations for socially responsible investment. Included amongst these groups are KLD, the Dow Jones Sustainability Index, and Innovest. Internal environmental management systems have also matured such that internal measures and metrics related to environmental performance are more readily available. This overall availability of information supports the capabilities of researchers and practitioners to more effectively benchmark organizational environmental performance.

Corporate greening has taken a more obvious turn towards proactive competitive concerns. That is not to say that regulatory enforcement has weakened, but that organizations have added green competitiveness to their arsenal for their economic and social well-being. To determine how well organizations are competing, objectives, and goals at multiple levels of management are needed to determine their relative positioning. That is benchmarking, internally, competitively, and strategically are all needed. To manage in a competitive situation where the environment plays an ever-increasingly important role, benchmarking the greening of corporations is even more necessary.

Management and researchers can benefit greatly from exposure to the state-of-the-art practices and research in benchmarking green business. With this special issue, we are seeking to provide a single source of information on some of the latest practices and issues related to benchmarking corporate greening. We have a variety of possibilities for investigating this topic. Many examples of topics that could have been addressed in such a special issue topic can be included such as:

• 1.

  Strategic benchmarking – how organizations use environmental benchmarking to guide organizational long-term development of competitive advantage based on environmental issues. Integration of environmental with other corporate goals, including other sustainability and social goals is especially encouraged. Using strategic environmental benchmarking data for research and evaluation of corporate financial and market performance may also fall within this category.

• 2.

  Environmental benchmarking’s role in decreased governmental oversight of corporate environmental performance and as a voluntary tool.

• 3.

  The impact of the global reporting initiative and environmental reporting on corporate environmental performance. This issue may include the roles of internal and external benchmarking for managing environmental performance of organizations.

• 4.

  Tools and models for corporate environmental benchmarking including:

  • life cycle analysis’s role;

  • performance analysis (gap analysis tools), e.g. eco-efficiency ratios and measure;

  • econometric models to evaluate the relative performance of environmental programs;

  • frameworks for planning, design, implementation, and maintenance of environmental benchmarking data and practices;

  • industrial ecology and supply chain linkages;

  • the determination, selection, and application of appropriate performance measures and metrics; and

  • valuation and accounting of benchmarking measures.

• 5.

  The role of benchmarking and performance measurement across the supply chain, and the role of ISO 14001/14031 standards and certification, including continuous improvement analysis to moderate the influence of industrial greening performance.

• 6.

  Using the internet and other pervasive information technologies to aid in benchmarking.

• 7.

  The role of various governmental sources and programs to aid in benchmarking and monitoring corporate environmental behavior.

• 8.

  Environmental benchmarking practices across and within various industrial sectors including manufacturing, service, agricultural, and construction sectors.

The breadth of possible research themes may not have been completely covered in this special issue, but there are currently many possibilities for future research on these and other emergent topics. Let me now introduce the various papers in this special issue.

The special issue papers

We were fortunate to get eight quality papers from researchers throughout the world. Two papers are from Asia, two from North America, and four from Europe. These papers range from modeling approaches to practical case studies with insightful developments and some broader industry evaluations.

The papers are not necessarily presented in any specific order, but some groupings do fall out. For example, we have three papers focused on the early stages of product design and flow within organizations. The first of these papers by Sarah Shaw, David B. Grant, and John Mangan titled “Developing environmental supply chain performance measures,” focuses on the development of performance measurements and system for environmental supply chains. Performance measures are part of the necessary elements for effective benchmarking. Benchmarking the supply chain is one of the most difficult activities for organizations since they need to have access to data and information from across organizational boundaries. Thus, the study, much less the actual selection and design of such systems is not a trivial task. An evaluation of popular performance systems including the balanced scorecard and the performance prism are used to establish a baseline framework for monitoring environmental supply chain performance. The approach is relatively conceptual with a possible framework, using carbon-emissions performance as an example,provided.

Related to the supply chain performance concept is Maria Björklund’s paper “Benchmarking tool for improved corporate social responsibility in purchasing.” This paper expands the concept of greening to be closer to a broader corporate social responsibility focus. The other aspect is a focus on the purchasing function within supply chain management. The development of a tool for benchmarking corporate social responsibility is the first unique contribution of this paper. The validation of the model in two practical applications provides additional insights that contribute to the development of this and other models for corporate social responsibility benchmarking. The tool does not necessarily rely on quantitative benchmarks, but is more oriented to process and activity benchmarking. That is, a series of best practices for corporate socially responsible purchasing are first identified from the literature, then this listing is populated with specific aspects that can be observed. These aspects are then compared amongst two major companies in Sweden. The many non-quantitative “soft” criteria are the core items in these evaluations by the tool. These criteria are shown to be important and go beyond the typical business measures such as quality, cost, time, and flexibility. We shall see similar, but more broadly defined frameworks (beyond just purchasing)that are utilized to evaluate corporate social responsibility reports in later papers by both Jennifer L. Schneider, Anna Wilson, Joseph M. Rosenbeck, and Breno Nunes and David Bennett.

Before we begin discussion of the development of additional frameworks and industry evaluations, we introduce another example of an “early”organizational benchmarking practice. One of the earliest steps in an organization’s product life cycle is its design. Effective eco-design of a product is necessary to more fully evaluate the greening of business processes and the products manufactured on those processes. In an interesting “internal”benchmarking exercise, Qinghua Zhu and Qing Liu, “Eco-design planning in a Chinese telecommunication network company: benchmarking its parent company,”consider an international knowledge diffusion benchmarking exercise. With a focus on a large telecommunications company (Alcatel), they provide an interesting case study of how an internationally focused merger and acquisition has led to a benchmarking of the eco-design practices between a transnational parent company and its Chinese subsidiary company. They describe some of the evolving greening issues facing Chinese companies and why the eco-design activities may require adjustment due to variations in competitive and regulatory environments. There are also issues of intra-organizational learning that can be achieved in this context and shows the value of internal green benchmarking to help diffuse knowledge within organizations. This situation is especially pertinent providing some insights into how organizational restructuring (through, for example, mergers and acquisitions) can be made more effective through internal benchmarking exercises. Both learning opportunities and barriers were identified in this relatively practical green benchmarking exercise.

The next three papers, expand on the single industry focus of Qinghua Zhu and Qing Liu, but expand beyond a single case to a number of cases in a variety of industries. Whereas, Qinghua Zhu and Qing Liu focused on a telecommunications industry, the next three papers in the special issue focus the steel,automotive, and pharmaceutical industries. Each has unique characteristics which are further exemplified. We first begin with the steel industry within India in a paper by M. Ruhul Amin and Sharmistha Banerjee titled “Benchmarking environmental performance: five leading steel mills in India.” Using a variety of data sources, the authors of this paper develop an environmental benchmarking index applied to five major steel manufacturing companies in India. The initial purpose of this study is to develop the index and its applications. More importantly are findings associated with the second purpose, which is to benchmark the relative performance of these companies and compare them on whether they have or have not implemented ISO 14001. ISO 14001 environmental certification standards are typically sought after for organizations to help improve their environmental performance. It has been observed by many that the adoption of ISO 14001 does not necessarily guarantee better environmental performance. In this study, albeit a very limited number of companies, it was found that the steel manufacturer without ISO 14001 certification actually performed better than those that were certified. The authors warn on relying only on ISO 14001 certification as a signal of good environmental performance. Actual data and transparent indexing are strongly recommended for effective benchmarking and true environmental performance evaluation.

M. Ruhul Amin and Sharmistha Banerjee relied on both company and publicly available data to complete their evaluation. The next two papers utilize environmental and sustainability reports from a given industry to complete benchmarking studies. Breno Nunes and David Bennett’s paper “Green operations initiatives in the automotive industry: an environmental reports analysis and benchmarking study,” focuses on the automotive industry. The environmental implications of the automotive industry set the stage on whether their practices can indeed be considered sustainable. As argued by Breno Nunes and David Bennett, the automobile industry has contributed greatly to the mobility of populations throughout the world, but this benefit was not without the large environmental costs that have been observed for decades. They complete a benchmarking exercise in this paper based on their general framework using various life cycle stages to evaluate environmental impacts of automobiles. They then make a secondary data comparison amongst three major brand-name companies from three different continents. Using their broadly defined framework, an evaluation of various environmental practices (process benchmarking) is completed. Even though similarities amongst the various companies exist,significant differences are also observed. These results show that there must be various pressures or barriers that do not allow a complete diffusion of greening practices, even when there are significant resources available to each of these very large multinational organizations.

Jennifer L. Schneider, Anna Wilson, Joseph M. Rosenbeck authored the sixth paper of this special issue titled “Pharmaceutical companies and sustainability: an analysis of corporate reporting.” Similar to Breno Nunes and David Bennett’s paper, this one utilizes publicly available sustainability reports from 11 companies within the pharmaceutical industry for development and application of a benchmarking framework. This study is closely related to that of Veleva et al. (2003), which also focused on the pharmaceutical industry and appeared in our first special issue in 2003. A comparative analysis between the two papers shows the expansion of greening across a larger group of pharmaceutical companies and also expansion of the greening issues covered. In this paper, both a quantitative and qualitative competitive and strategic sustainability (broader corporate social responsibility) benchmarking of the industry is provided. One observation made is that these companies, in an industry with green legitimacy issues, are more completely and fully utilizing the use of corporate social responsibility reports and measures to grasp control of these problematic legitimacy issues. Thus, there is a question on whether these reported initiatives that were evaluated in this paper are new or just better marketed and more transparent. Greater greening information availability, whether directly from the companies or from other sources, provides increased opportunities for benchmarking. We clearly see that the previous three papers took advantage of this publicly available data for benchmarking purposes with interesting insights. Many of these insights we cannot touch upon in this introductory paper and thus the reader is encouraged to carefully read over these papers.

Our last two papers take a different turn than the descriptive benchmarking observations of the previous papers and provide a prescriptive set of tools to help in green benchmarking. The first of these last two papers authored by Adrien Presley and Laura Meade, take us into another industry with significant environmental influence, the construction or built environment industry. In their paper, “Benchmarking for sustainability: an application to the sustainable construction industry,” Adrien Presley and Laura Meade provide a general overview of the various life cycle functions, aspects, and stakeholders within this industry. They expand the greening term to incorporate social sustainability into the evaluation tool presented in their paper. Unlike the Sarah Shaw, David B. Grant, and John Mangan, and Maria Björklund papers that appeared earlier in this issue, this paper introduces a new performance measurement approach, the enterprise performance management methodology, that uses a strategic performance measurement system that utilizes and aggregates/integrates various strategic and operational matrices. Even though they carefully develop the necessary metrics and activities, it is an activity-based performance measurement tool, from the construction industry, the generalizability of the tool is relatively clear. To address issues in construction, they utilize standard business and social measures, but also integrate the LEED requirements into the environmental analysis. They also recommend consideration of a number of other certification categories, which although focus on the construction industry at this time, can be generalizable to other industries with environmental and sustainability certifications.

Roberto Sarmiento and Andrew Thomas’s paper takes us full circle with their paper “Identifying improvement areas when implementing green initiatives using a multitier analytic hierarchy process (AHP) approach.”In this paper, Roberto Sarmiento and Andrew Thomas present a conceptual model and framework that helps to evaluate the greening of supply chains, a similar topic as that of our first paper in this special issue by Sarah Shaw, David B. Grant, and John Mangan. Adrien Presley and Laura Meade recommend that use of AHP to help in the application of their performance measurement model, where as Roberto Sarmiento and Andrew Thomas explicitly develop a benchmarking model around the AHP approach. This paper also may be linked to that of Qinghua Zhu and Qing Liu, because the example model they propose for the multi-tier company benchmarking evaluation is an eco-design example. The primary purpose of this approach is to help identify various gaps and resources in greening amongst a variety of factors for multiple partners in a supply chain.

Overall, we see that a number of methodological approaches and techniques were used by these papers. Yet, as noted earlier, there are still numerous topics that should and could be investigated. Each of the papers in this special issue have also identified various extensions to their work, which further sets the foundation for a more complete set of investigations into benchmarking the greening of organizations. These papers help to describe some of the more innovative practices and tools, as well as managerial and research implications for green benchmarking. Even though we present a variety of ideas and issues in this special issue, benchmarking, performance measurement, continuous improvement, and other related management practices still need further investigation and development. This special issue adds to the growing literature in this area, an area that we believe will continue to grow in importance.

Finally, this special issue would not be possible without the contributions and efforts of the researchers in this special issue and other researchers who submitted works that did not appear. Also, the invaluable help of over 30 anonymous reviewers who provided the feedback to our authors needs to be mentioned. I would also like to thank the Editor-in-Chief Angappa Gunasekaran for his support and agreement to publish a second special issue on this important topic.

Joseph SarkisGuest Editor