Expectational gaps and China’s green business drivers
Bridging gaps in expectations
“Natural and human capital form the invisible arm that drives the invisible hand.” So said US mathematician and ethicist Donald Adolphson in a landmark paper in 2004. The idea diverges from those of Thomas Friedman and other free-market acolytes of Adam Smith, who maintain that the invisible hand drives itself just fine thank you very much. To this latter way of thinking, business’s delivery of societal benefits is an accident (albeit a welcome one) of profit-seeking neoliberalism.
As social expectations change, so is Adolphson’s position becoming more mainstream. Like it or not, businesses are increasingly required to integrate their profit goals with commitments to social and environmental wellbeing, the authors acknowledge. Yet few do so perfectly. Hence, the knotty problem of so-called “expectational gaps”. These gaps are essentially discrepancies between societal expectations and business performance. Typically, they appear in one of three main guises: factual (what the public thinks a company is doing and what it is doing in reality), idealist (what the public thinks a company “ought” to be doing, and what a company thinks it should be doing), and “conformance” (what managers see that a company is doing, and what they think it ought to be doing).
This fascinating paper introduces the notion of legitimacy into the equation. The authors maintain that the pursuit of corporate social legitimacy lies in shrinking the respective expectational gaps as and where they occur. The key here is managers’ expectations and perceptions, which need to be assessed alongside those of society (or, more specifically, to those of interested parties or “stakeholders”). Once gaps have been identified, managers need to modify their expectations and/or actions accordingly – or, at least, make a strategic show of doing so.
As a conceptual framework, inserting notions of legitimacy into issue management (based on the taxonomy of expectational gaps) not only helps companies better understand the nature of their clashes with stakeholders, but it also provides a tangible means of resolving them.
Panwar R, Hansen E and Kozak R (October 2014) “Evaluating Social and Environmental Issues by Integrating the Legitimacy Gap With Expectational Gaps”, Business Society, 53 (6): 853–875.
Red dragon, green dragon
China is the world’s second largest economy and the largest emitter of carbon dioxide, yet an understanding of corporate attempts to mitigate companies’ environmental footprints is partial at best. This timely analysis seeks to correct this. Based on a survey of 161 Chinese companies, the authors set out to identify the antecedents and consequences of “environmental proactivity” (defined as environmental actions, such as operational improvements and disclosure, not mandated by law) in China’s private sector.
Some of the findings are unsurprising, such as the importance of pressure from “regulatory stakeholders” (meaning company managers and public officials that influence them). Others are less so, such as pressure from external campaigners that Chinese business leaders appear to brush off without too much concern.
The most interesting aspect of the paper is the focus on manager motivations. Ecological-mindedness, it transpires, is all important. If employees see that management’s environmental efforts are derived from something other than cost savings (which is part and parcel of Chinese business culture), then they are more likely to respond positively. Paradoxically, this enthusiasm often results in additional cost savings.
Competitive motivations are not without their benefits, either. If a company is constantly upstaging its rivals on environmental issues, then it is likely to earn a reputational advantage over its peers. Such reputational credits often come through symbolic gesture rather than substantive impacts, however (i.e. firms win out by appearing to be green, without necessarily doing much in practice). Hence, environmental efforts pursued for reasons of competitiveness are shown to rarely lead to the same cost savings as moral or ethically driven policies.
Odd though it may sound, therefore, it would seem that Chinese managers need to be ecologically, not competitively, motivated to gain competitive advantage.
Walker K, Ni N, and Huo W, “Is the Red Dragon Green? An Examination of the Antecedents and Consequences of Environmental Proactivity in China”, Journal of Business Ethics, 125: 27–43.
From campus
Bren School of Environmental Science and Management at the University of California, Santa Barbara, tops NetImpact’s annual list of the best environmental sustainability postgraduate courses. Close runners-up in the Business as Unusual report are Presidio Graduate School in San Francisco, Pinchot at Seattle’s Bainbridge Graduate Institute and the Ross School of Business at the University of Michigan.
https://netimpact.org/business-as-unusual
The Australian Society of Engineering is organising the 2014 International Conference on Energy, Environment and Sustainable Economics on 5-6 December. The event, which will be held in Bangkok, Thailand, is primarily designed to discuss options for sustainable development growth in Asia.