Freidman argued that the main responsibility of corporation was towards their shareholders instead of the society. This may be regarded as the business mentality of the last century, if we look at the current trends in company’s responsibility towards the environment. Environmental responsibility first started with the concept of corporate social responsibility in 1980s and 1990s, and today, the concept of is not a luxury but mandatory in most organizations. The relationship between companies and the environment has become the modern competitive benchmark under which many companies are basing their marketing strategies. What could be the factors that have forced corporation to rethink their environmental responsibility?
Factors driving companies to take care for the environment
The increased involvement of the companies with environmental matters can be traced to the environmental awareness campaigns since the 1980s. With the changing climatic patterns, scientist have pointed out our daily activities as responsible for increased pollution of the environment and therefore contributing to environmental changes (Mallenbaker.net, 2008). In particular, business processes in many companies were singled out as leading to increased emission of green house gases.
The first factor that has forced companies to take care of the environment is consumer reaction towards the climatic changes and the perceived contribution of companies to these changes. For example, in the late years of last century, the American auto industry suffered low sales and increased competition from Japanese cars which were seen as more friendly to environment. This means that there was increased consumer awareness in the relationship between consumption and environmental pollution. This gave birth to the concept of green production and many companies have since then strived to appear green in their operation.
Salls (2005) assert that apart from wanting to appear green, caring for the environment was seen as a part of business ethics. As business ethics were entrenched more in business operation, many companies considered it their mandate to ensure minimal pollution to the environment since they are also a part of the environment. Many companies have also found out that the more y harmful their environment, the more their cost of operation. For example, their employees are likely to get sick more often due to unhealthy environment which means more sick off days.
In addition, negative environmental impact is harming the health of their consumer which means, the unhealthier they are, the more unproductive and therefore low purchasing power. There are also increased government legislations and mandatory environment requirements for companies with environmental authorities enforcing conformity. Most companies would not like to be on the wrong side of the law and therefore they are better conforming.
We can look into this in three perspectives. First, companies want to please their consumers by going green and make a good market. Second, they want to reduce their cost in term of energy waste, wasted water, potential environmental accidents and many others. Third, they have to conform to the laid down environmental legislations.
Marketing functions played by environmental responsibility
Based on the factors we have reviewed above, it is clear that business voluntarism or the commitment to solving issues in the environment is likely to lead to profitability. According to Nauman (2006) most companies have embraced the concept of corporate social responsibility as a marketing strategy. Corporate social responsibility on environmental issues means that a company is likely to commit its revenues to address the environmental problems in collaboration with the community.
First, through collaboration with the community, the company will get a chance to market itself to the customers. Even before the consumers know about brands from a company, the name of the company can give it a competitive advantage in the market. Any marketing strategy aims at taking a product close to the customers. Therefore it means that if a company engage in corporate environmental responsibility, it will be taking its products as close to the consumers as possible. In most cases, marketing is all about how the consumer identify with the company.
A firm concern for the welfare of the environment is likely to attract consumer attention and therefore they are likely to work together with the company in solving the common problem that they are facing. This creates a spirit of togetherness and consumers are more likely to identify with that company which takes care of their concerns than its competitors.
A firm is seen more interested in resolving the immediate environmental matters rather than making profit. Most firms have found that the high amount of revenues that is used in advertisement campaign could be channeled towards environmental issues as a part of firm’s corporate social responsibility activity. This means that the firm will be playing two key roles with the same amount of money that was previously used marketing alone. (EBRD, 2004)
Therefore it is not the act of environmental responsibility but it is its context and motivation that is likely to elicit a positive consumer response. Maignan (2004, p. 10) argues that a firm responsibility towards the environment is likely to lead to a higher firm credibility, raising its competitive edge in the market. The more proactive a firm is towards the social concern of the consumers, the more they are likely to buy from the company.
For example, Japanese cars were more appealing to the consumers because they were seen as more friendly to the environment. Most consumers regarded these cars as identifying with their immediate concern on environment pollution. Even with heavy expenditure in marketing, most American companies found it difficult to roll over the Japanese auto company’s performance in the market.
Friedman assertion that firms had the responsibility towards their stakeholders has been proved otherwise by the current trend towards environmental responsibility that many firms have taken. Most firms have embraced the concept of corporate social responsibility with more concerns towards the environment as a result of increased consumer awareness of the relation between production, consumption and the environment. There have also been government regulations that have many companies to carry out measures that conform to these regulations. Companies have also adopted environmental responsibilities as a part of their marketing strategy. Environmental responsibility raises the credibility of the firm in the face of the consumers raising its competitive edge in the market.
EBRD, 2004, Corporate social responsibility: Is it ethics or just marketing? Retrieved on 17th November 2008 from http://www.ebrd.com/new/stories/2004/040419b.htm
Nauman, M 2006, Corporate social responsibility and marketing, Retrieved on 17th November 2008 from http://www.gather.com/viewArticle.jsp?articleId=281474976804975
Maignan, I 2004, Corporate social responsibility and marketing: An integrative framework, Journal of the Academy of Marketing Science, Vol. 32, No. 1, 3-19
Salls, M 2005, Corporate responsibility and the environment: What is right thing to do? Retrieved on 17th November 2008 from http://hbswk.hbs.edu/item/5036.html
Mallenbaker.net 2008, Corporate social responsibility: Environment, Retrieved on 17th November 2008 from http://www.mallenbaker.net/csr/CSRfiles/Environment.html