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December 12, 2003
Book Review--How Does it Pay to Be Green?
    by William Baue

An empirical study finds a positive relationship between environmental and economic performance when environmental strategies are factored into business decisions.


How Does it Pay to Be Green? brings the business case for corporate environmental responsibility a step closer to the tipping point. However, the book is not likely to push it over the edge into widespread acceptance for a number of reasons. A glance at the subtitle suggests the first reason: An Analysis of the Relationship between Environmental and Economic Performance at the Firm Level and the Influence of Corporate Environmental Strategy Choice. This alone will scare off readers, and when they discover the book is a revised dissertation written for a German doctorate, they may run and hide. The fact that it is only available from German publisher Tectum-Verlag does not help.

Readers interested in socially responsible investing (SRI) and corporate social responsibility (CSR) should not shy away from the book, though, for several reasons. First, the book is in very readable English, and employs academic jargon only when necessary. Most importantly, the book presents very thorough arguments for companies to develop environmental strategies and for investors to consider the positive relationship between a firm’s environmental strategies and its economic performance. If not required reading, the study at the very least warrants SRI and CSR advocates’ familiarity with its conclusions.

“The objective of this research is to establish the relationship between the environmental performance and economic performance at the firm level in the European Union (EU), and to analyse the influence of corporate environmental strategy choice on the environmental competitiveness of firms,” writes author Marcus Wagner.

Dr. Wagner conducts research on environmental management strategies under the Chair of Corporate Environmental Management at the University of Lueneburg in Germany and the Centre for Environmental Strategy at the University of Surrey in the UK.

The empirical research proceeds in a two-step approach. First, the study examines the physical environmental performance indicators of companies in the pulp and paper industry in four EU countries (Germany, Italy, the Netherlands, and Great Britain) in relationship to their short-term profitability.

This research finds that pulp and paper firms’ environmental performance do not seem to influence the tracked economic measures much, which is consistent with the theoretical proposition outlined in the excellent literature review section of the book. (This literature review alone is worth the price of admission, as it summarizes the “traditionalist” view that a negative relationship exists between economic and environmental performance and the “revisionist” view that a sometimes-positive relationship exists.)

The first phase findings do suggest, however, that corporate environmental strategies (CES) may have an important influence on economic performance, so this relationship is next examined.

“[F]irms that actively pursue a value-oriented CES seem to be most likely to achieve a positive relationship between environmental and economic performance,” writes Dr. Wagner. “Opposed to this, firms, which do not actively pursue such a strategy, seem to be less likely to bring about such a positive relationship.”

“One key factor for a positive relationship seems to be strategy choice by the firm,” he continues. “One key factor for a negative relationship seems to be sector membership of a firm.”

Namely, firms in environmentally intensive sectors may have trouble creating a positive relationship between environmental and economic performance. However, these companies can neutralize their predisposition to a negative relationship through environmental strategizing.

The book ends with some recommendations, though the public policy suggestions are rather generalized. The future research proposals, on the other hand, sketch a roadmap tipping the business case for corporate environmental responsibility into the mainstream.

 

 
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