Abstract
The objective of this chapter is to deepen into the association between corporate governance and the adoption of environmentally proactive strategies. The theoretical approach used is the knowledge-based view. This chapter explains how the environmentally proactive strategies could be enhanced by the director interlocks, who help the company to acquire environmental knowledge. The concept of the environmental absorptive capacity is used to inquire how the knowledge from the director interlocks is utilized to improve the company's environmental responsiveness. The results of the analysis conducted indicates that the main contribution of the director interlocks is to help companies to acquire resources and environmental knowledge, useful to deploy environmentally proactive strategies. This study is of particular importance for firms, establishing environmentally proactive strategies. The study invites investors, CEOs, and managers to consider the director interlocks to renew the environmental capacities and comply the most stringent requirement of stakeholders.
TopEnvironmentally Proactive Strategies And Corporate Governance: An Approach From Knowledge Management
The Natural-Resource-Based View of the Firm was born as a response to the growing concern for environmental problems, their limitations and the challenges that companies face in this matter (Hart, 1995).
Hart (1995) carries the principles of the resource-based view1, to a new scenario, that of the progressive environmental concern, both for the company and for society. Consequently, it develops the Natural-Resource-Based View, where it affirms that there is an opportunity for competitive advantage, to the extent that companies identify, develop, and accumulate resources and capacities oriented to the environment.
The Natural-Resource-Based View and its three interconnected strategies (pollution prevention, product stewardships and sustainable development) offer the theoretical support necessary for the analysis of companies' environmental strategies and their evolution, understanding by environmental strategy those patterns of corporate practices aimed to managing the interaction between companies and the natural environment over the time (Sharma, 2000).
The Natural-Resource-Based View is based on the accumulation of resources and capacities that are mostly intangible, which allow progressively improving the environmental performance. The evolution of the environmentally proactive strategy begins with the prevention of pollution, focusing on productive efficiency and reducing costs (Christmann, 2000) until reaching more complete approaches, oriented to the product life cycle related to differentiation (Reinhardt, 1998), or even with the redefinition of the business models (Prahalad and Hart, 2002).
Key Terms in this Chapter
Knowledge Management: Dynamic process that guide the activities for acquiring, organizing, and communicating tacit and explicit knowledge with the purpose of increase innovativeness, responsiveness, and competitive advantage.
Proactive Environmental Strategy: Response to the greening of the corporate strategy, associating with a corporate environmental orientation that goes beyond current legislation.
Corporate Governance: It is an organ, which includes owners, board of directors, and top management. Its main mission is to help the company to achieve or promote its strategic objective.
Director Interlocks: Director, who affiliated with one organization, sits on the board of directors of another organization.
Stakeholders: Individual or collective, market, network, public, or society who can affect positive or negative by the performance of a corporation.
Board of Directors: The link between the shareholders and the management, that runs the company; it is a decision-making group facing complex tasks pertaining to strategic-issue processing. Furthermore, boards are responsible for the standing of their firm in the community.
Environmental Absorptive Capacity: Expression that allows converting the knowledge into new environmentally responsible products, services, or processes.