barriers!andopportunities/motivators!! … · 2013-06-24 · ! 2! acknowledgements.!...

1

Barriers and Opportunities/Motivators to Pro-‐Environmental Behaviour

in Small and Medium Enterprises in Canada

ERS 411 Thesis By: Bailey Schneider

20302351 Advisor: Bob Gibson

Assistant Advisor: Kyrke Gaudreau April 17, 2013

2

Acknowledgements I would like to thank D. Kroeker, Robert Gibson, Kyrke Gaudreau, I. Rowlands, S. Brown, J. Lynes, and three additional individuals for their assistance in the development of this thesis.

3

Table of Contents Acknowledgements .................................................................................................................................. 2

Abstract ........................................................................................................................................................ 5

Part 1 – Introduction .................................................................................................................................... 5

1.1 Introduction ........................................................................................................................................ 5

1.2 Purpose of Research ........................................................................................................................... 6

1.3 Research Question ............................................................................................................................. 7

1.4 Research Boundaries .......................................................................................................................... 7

1.4.1 Conceptual Framework ............................................................................................................... 7

1.4.2 Corporation Size .......................................................................................................................... 7

1.4.3 Study Boundaries ......................................................................................................................... 8

1.5 Methodology ...................................................................................................................................... 8

Part 2 – Literature Review – General Issues, Barriers, and Opportunities/Motivators ................................ 8

2.1 Interconnectedness of Action (Driving Forces as a Package) ............................................................. 8

2.2 Aspects to Consider Regarding SME Pro-‐Environmental Behaviour .................................................. 9

2.3 What are Issues, Barriers, Opportunities, and Motivators? ............................................................... 9

2.4 General Barriers and Opportunities/Motivators for SMEs ............................................................... 10

2.4.1 Logistics ..................................................................................................................................... 10

2.4.2 Stakeholders .............................................................................................................................. 11

2.4.3 Economics .................................................................................................................................. 12

2.5 Summary of Barriers and Opportunities/Motivators to Pro-‐Environmental Behaviour in SMEs ..... 14

Part 3 – Literature Review – Barriers and Opportunities/Motivators Specific to Some SMEs ................... 16

3.1 Significance to Different Sectors ...................................................................................................... 16

3.2 Micro, Small, and Medium ............................................................................................................... 16

3.3 Specific Barriers and Opportunities/Motivators for SMEs ............................................................... 16

3.3.1 Stakeholders .............................................................................................................................. 17

3.3.2 Knowledge and Risk ................................................................................................................... 19

3.3.3 Other ......................................................................................................................................... 20

3.4 Academics and Business Professionals ............................................................................................. 21

3.5 Summary of Specific Barriers and Opportunities/Motivators Identified in the Literature ............... 22

Part 4-‐ Case Studies .................................................................................................................................... 22

4.1 Case Study/Literature Review Discrepancies ................................................................................... 22

4

4.1.1 Methodology ............................................................................................................................. 23

4.2 Case Study 1: Micro .......................................................................................................................... 23

4.3 Case Study 2: Small ........................................................................................................................... 25

4.4 Case Study 3: Medium ...................................................................................................................... 28

4.5 Summary of Case Studies ................................................................................................................. 31

4.6 Findings of Differences Between Literature and Case Studies ......................................................... 35

Part 5 –Actions That Can be Taken to Foster Pro-‐Environmental Behaviour ............................................. 36

5.1 Pro-‐Environmental Behaviour Recognition ...................................................................................... 36

5.2 Individual Attitude/Ethic .................................................................................................................. 37

5.3 Integration and Innovation ............................................................................................................... 37

5.4 Success Stories and Knowledge Sharing ........................................................................................... 37

5.5 Economic Incentives ......................................................................................................................... 38

5.6 Develop Tools for SMEs and Educate About Them .......................................................................... 38

5.7 Encourage SMEs to Track Information ............................................................................................. 39

5.8 Use Pro-‐Environmental Behaviour as a Business Improvement Tool .............................................. 39

5.9 Employee Sharing ............................................................................................................................. 39

5.10 Decrease Regulation Costs ............................................................................................................. 39

Part 6-‐ Conclusion of Findings .................................................................................................................... 40

References .................................................................................................................................................. 41

5

Abstract Businesses have a significant impact on the environment through the lifecycle of consuming goods and services from the consumption of natural resources and disposal of waste and pollution. Small and medium enterprises (SMEs) are a unique group of businesses within the corporate world. These companies face many barriers to the adoption of pro-‐environmental behaviour but also have many opportunities and motivators to act responsibly. The literature identifies five main areas where barriers and opportunities exist: logistics, stakeholders, economics, knowledge and risk, and other. This paper compares what the literature states to the experience of real SMEs as revealed through primary research. For the research, academics and environmental business professionals were consulted on their opinions about considerations identified in the literature. Three case study SMEs were examined within the manufacturing industry: one company from each of the size categories: micro, small and medium. The findings from these case studies were compared to the findings reported in the literature and an examination was done of the differences in barriers and opportunities/motivations among the three company sizes. Findings were that overall, there were differences among the micro, small, and medium companies, especially concerning the effects of regulation, payback periods, leasing, general capacity and overcoming knowledge barriers. The smaller companies faced larger barriers related to lack of capacity, length of acceptable payback periods, being affected by leasing their building, and overcoming knowledge barriers. Differences among the case studies that were present but not due to size included influences of stakeholders, manager attitude and employee engagement. The main differences between the case studies and the literature were that stakeholders did not have as significant an impact as the literature noted and various other barriers and opportunities/motivators not identified in the literature affected SMEs. The paper ends with recommendations about how SMEs can overcome the barriers to pro-‐environmental behaviour and about methods and support that can be provided by various actors to encourage this behaviour adoption.

Part 1 – Introduction 1.1 Introduction Between 40 and 50 percent of all solid waste generated in Canada in 2002 was generated by corporations (Statistics Canada, 2005). Corporations play an equally significant role in other areas of environmental impact including energy, resource consumption, and pollution. In this paper, “corporation” (also known as company or business) refers to “a body formed and authorized by law to act as a single person although constituted by one or more persons and legally endowed with various rights and duties including the capacity of succession” (Corporation, 2013) (the terms business and company will be interchanged with corporation throughout this paper). Within this, there are many different types and sizes of corporations that have significantly different types of, severity, and duration of environmental impacts. For example, a farm, an independent bakery, a regional municipality, and a large chemical company are all businesses but, their interactions with the environment vary greatly, almost to a point where they cannot be compared because they are so different. In these examples,

6

environmental damage could include (but is not limited to) natural habitat destruction, soil degradation, pesticide impact, eutrophication, energy consumption, waste production, unsustainable use of resources, chemical dumping, and toxic fumes. All of these effects have the potential to occur from these four industries alone and there are thousands of other industries with additional environmental impacts that exist. Because corporations have the potential to have such significant effects, it is important that they proactively try to prevent environmental harm through their business practices.

Pro-‐environmental behaviours, or environmental initiatives, require corporations to take actions to mitigate these environmental harms and protect and preserve the environment. There are many barriers that prevent companies from adopting pro-‐environmental behaviour, but there are also many opportunities or motivators that help companies overcome these barriers or push companies towards adopting pro-‐environmental behaviour. Because of the diversity of companies, a variety of barriers and opportunities/motivators influence these companies very differently. To help narrow down the barriers and opportunities/motivators to adopting pro-‐environmental behaviour, companies can be broken down into SMEs (small and medium enterprises) and large corporations. This report will focus on the barriers to and opportunities/motivators for pro-‐environmental behaviour for SMEs. SMEs face unique barriers that large corporations do not face and sometimes have different opportunities to overcome barriers (Brammer, 2012). Corporate pro-‐environmental behaviour is a fairly new concept in the history of corporate practices. Only in the 1960s did Canadians become more conscious of the effects that businesses have on the physical environment (Haden, 2009). Over the decades this acknowledgment of the environment transferred to regulation to protect the environment and has recently been more widely accepted as an individual decision that goes beyond compliance and considers the environment as an integrated part of business (Haden, 2009). Although business culture is moving towards adopting pro-‐environmental behaviour because it is the right thing to do, many corporations are still far from integrating environmental practices into the fabric of their business behaviour (Sandhu, 2010). Although there is still significant room for more pro-‐environmental behaviour within SMEs, Brammer says that SMEs are increasingly seeing environmental issues as a business problem that they need to address (2012). 1.2 Purpose of Research The purpose of this thesis is to identify the barriers to biophysical pro-‐environmental behaviour in SMEs, and how to overcome these barriers using opportunities evident in companies that have adopted pro-‐environmental behaviour. This study also focuses on determining other motivators for businesses to adopt pro-‐environmental behaviour, even if there are currently no barriers associated with them.

I was interested in finding out why people decide to be (or not be) environmentally sustainable and how we can influence their behaviour. Environmentally sustainable choices are often made in two places: businesses and individually/personally. Because businesses are large and often creating items or services, they have more impact on the environment than the individual citizen at home or in their daily, non-‐work related actions (Statistics Canada, 2005). Corporations interact on a larger scale than residents and are an active part of their employee’s daily actions, cumulating not only their business actions but

7

also the energy consumed and waste produced of their employees throughout the work week. The integration of corporations with other businesses, consumers, and their more flexible economic funds, often make them more able to respond to environmental pressures than individual citizens and it is more necessary for them to respond to external pressures in order to remain successful. Businesses also have many drives for sustainability that can be used to encourage positive environmental behaviour, whereas individuals typically make sustainable choices due to personal choice and attitude towards environmental sustainability. Because corporate sustainability is such a large topic it had to be narrowed down for this paper. Narrowing to certain sectors seemed too limiting, so it was narrowed down to SMEs within Canada. Canada was chosen since that is where the study is being conducted, and SMEs were chosen over large corporations because they have a unique perspective on sustainability that is not as often explored in the literature as large corporations.

1.3 Research Question What are the barriers to and opportunities/motivators for pro-‐environmental behaviour in Canadian SMEs? What can be learned from this to encourage adoption of pro-‐environmental behaviour in Canadian SMEs?

1.4 Research Boundaries

1.4.1 Conceptual Framework The conceptual framework for this thesis is centred on a list of key barriers and opportunities/motivators for SMEs’ adoption of pro-‐environmental behaviour drawn from literature.

1.4.2 Corporation Size Studies have shown that SMEs and large corporations’ environmental significance, environmental impact, and their general awareness of pro-‐environmental initiatives are very different. Studies have also shown that SMEs often find environmental management to be a challenge, and because of this are less likely to be engaged with pro-‐environmental behavior. Correlations exist between company size and perceived benefits by owner/managers (the smaller the company, the less benefits are perceived). SMEs typically have informal organizational structures and are managed by the owner of the company. Due to this small, very connected nature of the owner to the company and its everyday actions, personal choices and attitude can greatly affect actions taken within the business, including actions towards pro-‐environmental behaviour. These companies have greater levels of flexibility, ability to devote greater attention to external stakeholders, and deeper relationships with their stakeholders and where their resources come from. Individual SMEs may have very little impact on the environment; however, SMEs account for more than 90 percent of all businesses and 60 percent of all employment showing that they collectively have a large impact (Brammer, 2012).

8

1.4.3 Study Boundaries There are some boundaries that confine the expansiveness of this study. This study has been limited to the size of businesses that it will address, and the scope of issues that it will address. Only for profit SMEs will be examined. Although issues will be addressed in different sectors, issues concerning many different sectors will be excluded because there are simply too many variations with all of the different sectors that exist. Information will be generalized to apply to a variety of businesses but will continue to not be applicable to all businesses in all aspects. Some barriers and opportunities may be mentioned but will not be focused on such as consumer influence because they are often irrelevant to SMEs. The number of case studies will also be limited due to study size.

1.5 Methodology

Basic steps were taken throughout this study to determine barriers and opportunities/motivators to pro-‐environmental behaviour, their relevance to the real world, and how they can be used to encourage pro-‐environmental behaviour. This was started with a literature review in peer reviewed and business related literature about SME environmental behaviour. A summary of the findings in the literature review was then used to develop a framework to assess what the general and more specific barriers and opportunities/motivators are for SME’s adoption of pro-‐environmental behaviour. These findings were then be compared to the barriers and opportunities/motivators identified in interviews by academics and professionals in the environmental business field and case studies of Canadian SMEs to determine the accuracy of what the literature says to real SMEs and to provide insights on the relevance of the framework. These insights were then used to determine the major barriers and opportunities/motivators for SME pro-‐environmental behaviour and how these discovered opportunities can be used to overcome discovered barriers.

Part 2 – Literature Review – General Issues, Barriers, and Opportunities/Motivators

2.1 Interconnectedness of Action (Driving Forces as a Package) As in most complex systems, aspects of pro-‐environmental behaviour are rarely if ever independent of each other. Because of this, it is difficult to analyze specific barriers and their solutions. For example, lack of knowledge by customers has been identified as a barrier to pro-‐environmental behaviour (Pinkse, 2009). The solution to this would be simple – educate customers. But educating customers costs time and resources which equates to money. There are many examples where this is the case, and sometimes one barrier prevents owners and managers from moving forward with the other benefits. In many cases, there is often a psychological aspect of accepting change towards more pro-‐environmental behaviour that effects perceptions that influence the way business owners understand facts on economic cost savings or stakeholder engagement (Hoffman, 2008). Business owners do not always

9

believe that stakeholders care about sustainability, or that they will really save as much money as they are told they will. When business owners are asked why they are hesitant to adopt sustainable practices they will almost always give an answer that shows there are multiple factors interconnected in their decision to not pursue sustainability, while when asking business owners what pushed them to adopt pro-‐environmental behaviour, they often see multiple benefits to one action.

2.2 Aspects to Consider Regarding SME Pro-‐Environmental Behaviour There are a few aspects that should be considered when considering SME pro-‐environmental behaviour. There are two types of pro-‐environmental investments SMEs can make: 1) material impacts (such as air pollution or waste production) and 2) non-‐material impacts (such as assessing eco-‐efficiency, making sustainability benchmarks). Both are important to a company’s goals to sustainability, but with material effect you physically see changes, and this is often where the cost savings are clearest. Non-‐material changes are important because they help make changes effective, and are a way to measure profits (or losses) being made but are more difficult to see the direct payback. These are similar to long-‐term versus up-‐front action. Many pro-‐environmental initiatives are up-‐front – they have a significant up-‐front cost to implement the program but have little maintenance costs after. An example of this would be completing an energy audit and finding areas to decrease energy consumption and starting to do them. A long-‐term action is an action that is worked on over time and often has dispersed cost during the program. An example of this would be working on employee education about pro-‐environmental behaviour which occurs over years. Typically, most pro-‐environmental initiatives are up-‐front programs that require a lot of money in the original investment but very minimal costs in upkeep. This should be kept in mind when considering owner/manager’s willingness to adopt pro-‐environmental behaviour. Questions that should be considered when examining the barriers and opportunities/motivators to pro-‐environmental behaviour include: What is the problem and why is it a problem? What improvements need to be made generally (environmental, economic, social, jobs, education)? What needs to be accomplished and why is it not being accomplished broadly? How do we accomplish these goals? Who are the major players?

2.3 What are Issues, Barriers, Opportunities, and Motivators? Issues and barriers are the problems associated with and the “things” that stand in the way of or prevent SMEs adopting pro-‐environmental behaviour. Barriers can also be expressed as a lack of pressure, opportunity or motivation; when there is no pot of gold to rush towards nor anyone pushing with a stick from the other side (I. Rowlands, Personal Communication, January 22, 2013). Opportunities and motivators are the channel or reason why benefits are found from adopting pro-‐environmental behaviour. Opportunities are openings for gaining benefits from the adoption of pro-‐environmental behaviour (example, by saving money). Motivators are drivers that push a company to adopt pro-‐environmental behaviour even if an explicit benefit for the company is not produced (example, meeting regulation or environmental ethic). The distinction between opportunities and motivators is difficult to identify since the two often overlap, so opportunities and motivators will be discussed together.

10

Barriers and opportunities/motivators were identified through a literature review as well as interviews with academics and professionals in the sustainable business sector. Literature sources were from scholarly journals and environmental business related journals and organizations. Literature was explored that discussed corporate sustainability broadly, SME literature regarding environmental sustainability, and literature that was specifically focused on SME environmental barriers and opportunities/motivators. Interviews with three academics and professionals were used to validate information or act as an additional source of academic information.

2.4 General Barriers and Opportunities/Motivators for SMEs The following are barriers and opportunities/motivators that are experienced by nearly all SMEs, regardless of their size or sector. Many of these barriers often cannot be overcome without a loss to the company. Many different authors in the literature agree on these topics.

2.4.1 Logistics

2.4.1.1 Lack of Capacity: Employee Availability, Knowledge, and Time SMEs lack of resources (or capacity) is a significant barrier to adoption of pro-‐environmental behaviour. This lack of capacity can be found in many connected areas of business practice revolving around employees – their physical presence, their availability to work on environmental programs, and their knowledge of environmental initiatives. In most cases there are a very defined number of employees in a company, assigned to a set of duties that take up the full time of their weekly employment and leave no time for environmental initiatives (Brammer, 2012). A solution to this would be to hire an additional employee who could be dedicated to environmental sustainability improvements and monitoring. However, most SMEs do not have the economic capital to hire an additional employee and pay weekly salary to (Pinkse, 2009). Even if they did have the money to hire a staff member dedicated to environmental initiatives, SMEs can be too small to have enough work for an employee solely dedicated to environmental initiatives. Another element of employee capacity is employee knowledge. In some cases employees are interested in taking pro-‐environmental behaviour but they do not have the background or technical knowledge to turn their interest into actions (S. Brown, Personal Communication, March 5, 2013). Nor do they fully understand the return on investment or other beneficial features to environmental behaviour to convince owner/managers that it is a profitable investment. Environmental programs often also heavily rely on participation from employees, and when they lack knowledge it can be difficult to have them participate (Pinkse, 2009). There are opportunities for SMEs to overcome the barrier of few staff by hiring part time or short term contract employees. In the case of part time employees, partnerships could be developed among companies where an environmental manager could be shared amongst multiple SMEs within the same sector (J. Lynes, Personal Communication, February 27, 2013). An example of where this is being implemented is an incentive program advisor for school boards who informs school boards about energy related programs, retrofits, applications, etcetera that they do not have the resources to look into (J. Lynes, Personal Communication, February 27, 2013). The idea of an advisor (or for SMEs more likely a

11

program coordinator) would be to set up and monitor environmental programs and initiatives within SMEs. Short term contracts to engage co-‐op students or interns are also often used as an alternative in many SMEs to start up programs which enables full time staff to carry out the program when the contract ends (S. Brown, Personal Communication, March 5, 2013). Even though these alternatives are available, this is still a very difficult barrier for many SMEs to overcome, especially when money is not available to hire a part time or short term employee.

2.4.1.2 Short Term Business Focus and Time SMEs are typically strongly oriented towards day to day or week to week activities rather than annual terms (Brammer, 2012). This is due to many factors but the two primary reasons are a lack of long term business security and the significance of responding to immediate daily issues. If initiatives are to be integrated into daily actions by employees, often a significant amount of micro-‐management is required, where the owner/manager is required to monitor the overall effectiveness of environmental sustainability and assign tasks to individual employees (Brammer, 2012). This is also due to most SMEs being private companies with customers which require specific, quick deadlines, meaning companies must always be working at their highest level of productivity. Even if SMEs do have the time to think about long term actions, SMEs find it difficult to put money from their limited capital into long term investments, especially investments that are not a necessity to keep business strong (Brammer, 2012). The higher priority would be purchasing new equipment or expanding the business by hiring new employees or moving to a larger building. This short term business focus often prevents company owners from considering environmental initiatives and is a problem underlying many of the barriers seen in the next section that have nothing to do with the actions themselves, but rather the lack of easy integration between general business management and the nature of environmental management.

2.4.2 Stakeholders

2.4.2.1 Stakeholder Engagement Large corporations typically find pro-‐environmental behaviour to be a benefit to their company due to the perception it creates with their stakeholders; however SMEs have difficultly reaping this same benefit (Rodriguez-‐Melo, 2011). To educate stakeholders of their positive behaviour, companies typically use marketing to publically announce their pro-‐environmental behaviour but most SMEs cannot afford to do this, resulting in their admirable actions often going unnoticed (Brammer, 2012). Even within SMEs, micro and small companies tend to have especially small networks which they are responsible to, so often they are even less likely than medium sized companies to be influenced by stakeholders (S. Brown, Personal Communication, March 5, 2013). Opportunities for stakeholder engagement are discussed in section 3.3.1 – Stakeholders.

In contrast, SMEs work more closely with their stakeholders that they do have than larger corporations. When a company can work closely with its stakeholder, it can both shape the situation to meet that stakeholder’s needs and may create some level of understanding from a stakeholder that would not be gained without a close relationship. This relationship that is developed can make stakeholders more

12

loyal and more engaged with a company, and willing to share investment in pro-‐environmental activities or pay more for the premium service/product (Rodriguez-‐Melo, 2011). This opportunity typically applies equally to all SMEs but may become less effective for very large medium companies, who begin to have more streamlined work with less flexibility.

2.4.3 Economics Many SMEs identify economics as the most influential aspect when making decisions regarding pro-‐environmental behaviour (Rodriguez-‐Melo, 2011). The bottom line of most businesses is to make money, so costs associated with environmental initiatives are an important element when deciding whether or not to pursue pro-‐environmental behaviour. Both in the literature and in the business sector, there is no agreed upon statement whether pro-‐environmental behaviour will increase net revenue in the end (Busch, 2012). Whether there are net costs or benefits, and how long it takes for the gains to emerge, depend heavily on the specifics of the action taken. For these reasons, economics can be seen as a barrier or an opportunity depending on the situation and the business being examined. Because economics affect every SME they will be discussed here, but certain barriers and opportunities discussed in this section may vary among specific SMEs. Economic factors are also complex because they often closely relate to other elements of barriers and opportunities. Rarely is the issue simply a company has zero funds – it is often an issue of the company has limited capital, how will they use it, can they get additional funding, and will it pay back quickly enough to make further investments. A significant aspect of economic spending in SMEs is also due to environmental awareness, perception and commitment of the owner/manager.

2.4.3.1 Lack of Capital and Payback Periods The largest barrier when considering economics is lack of economic capital. Many SMEs do not have more money than what is needed for payroll and to pay business related monthly bills so they physically cannot invest (Brammer, 2012). Ways to overcome this problem are to obtain more capital through government grants, banks, personal investment (which has likely already occurred) or to wait until more money is available through business profit. In some cases, particularly with energy conservation, energy service companies will make the initial payment for a company to invest in environmental initiatives and as revenue savings are generated the energy service company will take back its initial investment with interest (Energy Services, no date). This creates an opportunity for SMEs to take environmental initiatives without paying any costs; however, this is only an opportunity when there are guaranteed cost savings for the energy service company to make a profit. See section 2.4.3.2-‐ Loans for other ways to overcome this barrier.

Even when companies do have the capital to invest, payback periods may be longer than SMEs want to wait to see their investment pay off (most SMEs are looking for a payback period of 1-‐2 years maximum)

Research compared 90 companies that had sustainable core practices with 90 companies that had low core sustainability values. Over the long term, high sustainability companies significantly outperformed low companies through metrics such as Return on Assets, Return on Equity, and stock price volatility. -‐Eccles, 2011

13

(S. Brown, Personal Communication, March 5, 2013). This money could be seeing a faster payback by being invested in something else in the company. Psychologically, paying high upfront costs with a long payback period may be difficult for owner/managers to accept even if money will not be invested in something else.

2.4.3.2 Loans Using loans from banks, energy service companies, or from non-‐government organizations is a way for companies to access additional funds to pursue pro-‐environmental behaviour. Financing instruments offered by utilities and municipalities may be another option for accessing loans at low interest rates (S. Brown, Personal Communication, March 5, 2013).

2.4.3.3 Owner Willingness Some owners have the perception (or the knowledge) that pro-‐environmental behaviour is going to be expensive. They have available money but are not willing to invest because the return on investment is too long, they do not believe there will be a return on investment and these initiatives will be a sunk cost, or they believe that investing their money in other parts of the company, or keeping it as company profit, will be more beneficial to them (Kollmuss, 2002) (Ambec, 2010) (Tan, no date). On the other hand, research reveals that companies who integrate sustainability into their business strategy and take pro-‐environmental initiatives outperform companies that do not (Eccles, 2011)(NBS 10 Things, 2011) (Hoffman, 2008) (Rodriguez-‐Melo, 2011). Business owners who are encouraged by these studies are more likely to invest, believing that investing in pro-‐environmental behaviour will be the best decision for themselves and the business in the long run. Owner/managers are the individuals who are in charge of where money is distributed within a company. According to Brown, “Buy-‐in and commitment from owner/managers is necessary in order to successfully make investments into pro-‐environmental behaviour” (Personal Communication, March 5, 2013). There is also the consideration of how these costs are viewed. Investing money into anything is costly (such as buying a new machine, paying to have the office cleaned or hiring another employee) but these are actions that are vital to the survival of the business and have traditionally been looked at as a business expense even if there is no obvious economic profit. The environment can be viewed the same way. It will definitely be a cost, but over time hopefully it pays itself off and if it does not then you just know that it was an expense to being in business. There is also the consideration of trade off in costs. In some ways money may be saved such as through decreased energy consumption, while money is lost on safely disposing of toxic waste. Although one item may be costly, savings made from eco-‐efficiency can be applied to pay for actions that do not pay for themselves.

2.4.3.4 Eco-‐efficiency

According to survey responses, SMEs that conducted proactive corporate social responsibility (CSR) are more financially successful than SMEs that did not -‐Torugsa, 2012

14

A significant opportunity for pro-‐environmental behaviour is tied to the concept of eco-‐efficiency (the idea that taking environmental initiatives will find parallel economic benefits) (WBCSD, no date). It is almost undeniable that taking some environmental initiatives will save a company money, such as recycling waste materials like metal, and decreasing energy usage. For example, replacing old lighting fixtures alone can reduce a company’s energy use by 25-‐30 percent, creating an equal 25-‐30 percent economic savings as well (NBS Engaging, 2011). There are typically two arguments against eco-‐efficiency. One is, how far will eco-‐efficiency take a company? The second is, a business’s goal is make money, if this could save a company money, they would already be doing it (Walley, 1994). This may be true for companies that are already using energy efficient lighting, producing minimal waste, etcetera, and have already saved all that they can, but many companies likely have not tapped all areas for eco-‐efficiency. For SMEs that have taken advantage of eco-‐efficiency it may end when some initiatives become too costly to pay themselves off or payback periods may be longer than a business is willing to wait (Walley, 1994).

2.5 Summary of Barriers and Opportunities/Motivators to Pro-‐Environmental Behaviour in SMEs This section has identified that logistics, stakeholders, and economics are the primary categories of barriers and opportunities/motivators found generally amongst all SMEs. Of these categories, most were found to be barriers to pro-‐environmental behaviour. The following tables summarize the barriers and opportunities/motivators to pro-‐environmental behaviour in SMEs. The tables summarize the general barriers and opportunities/motivators discussed in section 2.4. The tables also summarize the barriers and opportunities/motivators which are more specific to some SMEs which are discussed in section 3.3.

15

Barriers for SMEs General Barriers for all SMEs -‐ Lack of capacity -‐ Few employees available for environmental tasks -‐ Employees knowledge about environmental initiatives is limited -‐Short term business focus/tied up in daily activities (e.g. essential needs must be met daily and business thinks about the now rather than the future, so environmental concerns are outside of their scope of thought) -‐ Stakeholders may be unaware of initiatives taken, therefore are not beneficial to their full capacity and it is too costly to market information to them -‐ Lack of capital to invest in environmental initiatives -‐ Perception that payback periods are too long Barriers for some SMEs -‐ Lack of owner/manager and employee knowledge regarding environmental opportunities/issues -‐ Resources are unavailable in manufacturing and construction industries -‐ Information tracking may not exist (particularly with utility consumption) -‐ Regulation creates frustration and develops limitations -‐ Stakeholders -‐ Product/service may become more costly and customers are not willing to pay -‐ Owner/ manager attitude can prevent the company from taking pro-‐environmental actions -‐ Owner/manager unwilling to pay for pro-‐environmental actions

Table 2.5.1 -‐ Barriers for SMEs Opportunities/Motivators for SMEs

General Opportunities/Motivators for all SMEs -‐ Hire part time or short term employees to work on environmental programs -‐ Ability to work closely with stakeholders such as customers/other businesses -‐ Potential for eco-‐efficiency gains Opportunities/Motivators for some SMEs -‐ Stakeholder engagement -‐ Customer desire for environmental product/service -‐ Employees are more engaged -‐ Community connections and pressure -‐ Shareholders are more likely to invest -‐ Owner/manager awareness of and commitment to pro-‐environmental actions -‐ Joining peer to peer knowledge sharing consortiums -‐ Regulation forces some SMEs to take pro-‐environmental behaviour -‐ Products may be innovative and different Opportunities/Motivators for large corporations, but not SMEs -‐ Large business partnerships such as industrial ecology -‐ Consumer lobbying -‐ NGOs and activist groups -‐ Lobbying pressure -‐ Partnerships -‐ Certifications -‐ Investors Table 2.5.2 – Opportunities/Motivators for SMEs

16

Part 3 – Literature Review – Barriers and Opportunities/Motivators Specific to Some SMEs

3.1 Significance to Different Sectors The wide variety of different sectors amongst SMEs include health, manufacturing, retail, and administration. These sectors all have very different daily activities, which have significantly different environmental effects. Hazardous wastes are typically produced in health and manufacturing, while retail and administrative would typically use less energy and produce less waste. Different sectors also have different types of employees (academics versus tradespeople for example) and certain sectors are sometimes more likely to fit a certain size category of SMEs. Because SMEs vary greatly based on their sector, there are many barriers that will only be present in certain companies and opportunities may only exist for certain sectors. Due to this complexity it is too difficult to break down how barriers and opportunities affect each sector.

3.2 Micro, Small, and Medium There are three size categories within SMEs: micro, small and medium. The exact value of what defines each category is not consistent amongst the literature, as it changes among countries and can be based on either number of employees or annual economic activity. Based on the analysis of multiple sources, the following is the decided definition of what defines micro, small and medium sized SMEs for this paper. Micro companies are defined as 1-‐15 employees, small is 16-‐200 employees, and medium is 201-‐499 employees. Anything larger than 499 employees is considered large (Industry Canada, 2012) (Brammer, 2012). These three sizes together comprise 98 percent of Canadian companies (NBS SME Sustainability, 2012).

The size of a company greatly influences the significance of barriers and opportunities/motivators, even within SMEs. Although the literature only briefly distinguishes the differences, it is expected that some barriers and opportunities/motivators will be much more relevant than others (these will be explored in case studies in section 4).

3.3 Specific Barriers and Opportunities/Motivators for SMEs Unlike general barriers and opportunities/motivators, which most SMEs face because they are applicable to all sizes and sectors of SMEs, there are barriers and opportunities/motivators that are more specific to individual businesses. These barriers and opportunities/motivators are also often spoken of in the literature with more controversy on how significant they are as barriers and opportunities/motivators. This section will explore the various barriers and opportunities/motivators that are less consistently supported by the literature, and may only be barriers and opportunities/motivators to specific SMEs.

17

3.3.1 Stakeholders There are a wide variety of stakeholders that can influence a business, as described below. Many of these stakeholders are often seen as a very influential opportunity for large business, however they are not always as successful at being beneficial to SMEs. The following explores how different stakeholders may have the potential to create opportunity or act as a motivator for SMEs.

3.3.1.1 Customers For the purpose of this paper, a customer is defined as someone who purchases a product or service from an SME. For many SMEs, especially in the manufacturing industry, a customer is another business. A consumer, on the other hand, purchases goods and services for personal consumption (Merriam Webster Consumer, 2013). In some cases, SMEs have customers who are consumers, but often this is not the case. Some authors such as Brammer, argue that most customers of SMEs are not willing to pay more money for a product or service because a company has adopted pro-‐environmental behaviour (2012) (Pinkse, 2009). In these cases it is expected that if customers can receive the product or service at another location for a lower cost, even though it may involve unsustainable practices, they will take their business there to save money. It is not determined whether this is because customers do not care about the environment or if it is that customers do care, but care more about money. In contrast, literature also says that customers want to know their purchase is sustainable and are willing to pay more for a product from a sustainable company (NBS 10 Things, 2012) (Cotte, 2010). For SMEs that have customers who are interested in sustainable business behaviour, this is an opportunity for them to widen their customer base and sell more products and services. These companies are seen as exposing a niche market, and are viewed as innovative by offering a product and service that is different and not easy for customers to find (Esty, 2006).

3.3.1.2 Partnerships and Other Businesses Adopting pro-‐environmental behaviour can build partnerships in two ways: with suppliers and customers, or with other organizations in the same industry. Partnerships with suppliers and customers tend to arise because SMEs want to align themselves with other companies that have similar values imbedded into their work (S. Brown, Personal Communication, March 5, 2013), which can develop new business relations or strengthen current relationships. Partnerships can be found in working with other businesses to create a peer to peer learning environment, where ideas and methods for adopting pro-‐environmental behaviour can be shared. See section 3.3.2.1-‐ Knowledge for examples of peer to peer partnerships through knowledge sharing consortia. Businesses adopting pro-‐environmental behaviour may also be a motivator for other companies to adopt pro-‐environmental behaviour to remain competitive (S. Brown, Personal Communication, March 5, 2013).

18

3.3.1.3 Employees Employee engagement and participation are essential to the success of many pro-‐environmental initiatives since they are the people who take actions that effect the environment such as energy usage and waste disposal. Having employees engaged in a company’s pro-‐environmental behaviour can make programs more successful, and having engaged employees may also make more loyal employees (Rodriguez-‐Melo, 2011) (Esty, 2006). It is also important to have employees engaged to keep employees working for a business because losing one of these key players can undermine an SME’s ability to be successful (I. Rowlands, Personal Communication, January 22, 2013). Some employees may see businesses as a leader in sustainability and take pride in working for a company that exhibits pro-‐environmental behaviour (Grolleau, 2012). When employees are able to help make decisions about the goals of their company’s sustainability they are more engaged and are invested in contributing to pro-‐environmental behaviour, feeling that they are also partially responsible for what happens to the company (Renaud, 2011) (Chun, 2011). When citizenship behaviour develops where employees are engaged with their company there is more team effort, completing tasks for the company rather than for individual career furthering which increases load sharing and open communication making a more productive and therefore more profitable business (Chun, 2011). Often businesses that have pro-‐environmental behaviour have increased sunlight and more appealing working conditions, both physically and through business mentality which increases worker happiness and efficiency (NBS Engaging, 2012).

3.3.1.4 Community Every SME is situated in some type of a community. A business can both feel pressure from the surrounding community to be sustainable, or can feel an internal attachment to a community and feel a duty to contribute to a healthier, more sustainable community. For some SMEs, community members may pressure the business to be sustainable to prevent damaging the environment of their communities (Esty, 2006). Although there may not be a direct benefit from the community, taking pro-‐environmental behaviour can act as a mitigation strategy to prevent negative feedback, boycotts, protests, and other negative imagery. Companies in which the owner is integrated into the community may have an attachment to their community where they want to preserve its environmental health. They feel the responsibility to adopt pro-‐environmental behaviour because they have a connection to the community such as a sense of place from childhood memories (I. Rowlands, Personal Communication, 2013). In cases like this, company owners will have pro-‐environmental behaviour for the sake of preserving what they are attached to.

3.3.1.5 Company Owner or Manager The company owner or manager is the person in a business that makes the big decisions regarding finances and the way a SME is operated. If the business owner does not want actions to be taken, they

19

likely will not be taken. In some cases this is because SMEs may feel that they are so small that they hardly have any impact therefore, they conclude it is not worth being concerned about (Brammer, 2012). On the other hand, an owner who strongly believes in pro-‐environmental behaviour will likely be the driving force behind initiating and implementing this behaviour (Brammer, 2012). Business owners that think of business as holistic rather than hierarchical and top down, often think about sustainability’s role in business rather than just as business as a money making machine (Hutchins, 2012). Those owners/managers who follow the old hierarchical business paradigms can have difficulty shifting to the mindset of how to understand the benefits of sustainability for the sake of the environment (Hutchins, 2012).

3.3.1.6 Institutions It has been theorized that insurance companies and banks may be stakeholders in influencing pro-‐environmental behaviour in SMEs but the literature did not confirm nor deny this factor. Literature did indicate that shareholder’s may influence an SME’s decision to adopt pro-‐environmental behaviour though. According to Vasi and King, shareholders associate environmental risk with financial risk and are less likely to invest in an SME if they feel that there is an environmental risk due to negligence of pro-‐environmental behaviour (2012).

3.3.2 Knowledge and Risk

3.3.2.1 Knowledge It is difficult to accomplish change without knowledge. SMEs often lack knowledge of what is wrong, how to change what is wrong, and/or what opportunities pro-‐environmental behaviour can create (Brammer, 2012). Unless an SME has a staff member who has had experience with pro-‐environmental initiatives they likely will not know what needs to be done (J. Lynes, Personal Communication, February 27, 2013). Overcoming lack of knowledge can be done by developing consortia where SMEs meet with other SMEs and participate in knowledge sharing programs. Examples of this could include organizations like Sustainable Waterloo Region, which provides a community of support to meet with other SMEs that are members and to share knowledge about environmental initiatives they have taken and how they have gotten their programs started (S. Brown, Personal Communication, March 5, 2013). Another community knowledge sharing example is Communitech, an industry organization where businesses have memberships that allow them to network and share information peer to peer (J. Lynes, Personal Communication, February 27, 2013). These communities create a space for SMEs in the same industry to share information with each other about what has and has not worked for their companies on a variety of initiatives, in this case, pro-‐environmental behaviour.

3.3.2.2 Business Risk Another theory that was proposed but not found in the literature was the attitude that changing business practices may put a company at risk due to changing already effective practices. What the literature did support was that SMEs can feel that taking pro-‐environmental behaviour puts them at a

20

disadvantage in comparison to their competitors (Brammer, 2012). The literature also suggests that SMEs are better able to survive shocks like global recessions, worker strikes, manager scandals, and boycotts than larger corporations (NBS Innovating, 2012).

3.3.3 Other

3.3.3.1 Resource Availability (Sources) Resources include the materials needed in most industrial, construction and manufacturing industries where items are being manufactured or used to build structures. In both cases, companies use raw or already manufactured products to create their product. In many cases it can be difficult or even impossible to find materials that are sustainable to go into their process (Pinkse, 2009). If sustainable sources can be found, they are often expensive to purchase (Pinkse, 2009).

3.3.3.2 Resource Availability (Logistics and Data) Resources also include the ability to collect data on previous resource consumption/disposal. In some cases, obtaining information and data about energy and water usage can be difficult such as when renting a building (S. Brown, Personal Communication, March 5, 2013) which makes it difficult to identify where usage can be more efficient and less wasteful (NBS Small Business, 2012). Without this knowledge, it also makes it difficult to track improvements made when initiatives are implemented and without seeing improvements in volume or through cost savings, taking pro-‐environmental action may seem like less of a positive option. Resource availability can also be when there are structural barriers. These may include physical barriers that prevent SMEs from adopting features that are incompatible with their building such as retrofits which do not meet building code (S. Brown, Personal Communication, March 5, 2013). There is also a lack of resource availability in the presence and knowledge or skills of employees as discussed in section 2.4.1.1 -‐ Lack of Capacity: Employee Availability, Knowledge, and Time.

3.3.3.3 Regulation Environment regulations are law-‐based and enforceable environmental requirements for businesses to meet how environmental matters are handled within a company. These are often regarding the disposal of waste and quality of air and water. Regulation can be seen as both an opportunity for and a barrier to pro-‐environmental behaviour. Regulation is viewed as an opportunity by many citizens because it causes businesses to take environmental action; however it is often not considered an opportunity from the perspective of a SME. Regulation forces companies to take certain actions that they may not have otherwise taken regarding pro-‐environmental behaviour. Regulations are often viewed as a barrier because they can be inflexible and can impose inefficient use of resources when making decisions regarding pro-‐environmental behaviour. For companies that will

21

take action towards pro-‐environmental behaviour regardless of whether regulation is in place or not, regulations have been found to decrease overall business sustainability and benefits gained by SMEs (Brammer, 2012). Regulation can also be a challenge for SMEs because they often do not have lobbyists or large voices in the legislation making process. Because of this, regulations may be developed in ways that fit the needs of large corporations but may be unattainable by SMEs due to limited resources (I. Rowlands, Personal Communication, January 22, 2013). Ambec argues that regulations can create unneeded barriers to companies by having to follow certain rules that do not make sense with the way their business is run, which can put SMEs out of business (2010). When businesses are heavily regulated they may feel that there is no need to go above and beyond, which decreases the potential pro-‐environmental behaviour and decreases innovation within a company that may have led to more positive environmental behaviour than the regulations requirements (Ambec, 2010).

3.3.3.4 Innovation/ Product Differentiation Innovation can be found in developing new environmental programs. A shared vision of environmentally sustainable development encourages employee creation and creates motivations and pressure from within that continues to keep employees thinking and engaged (Torugsa, 2012). In many cases this may produce an innovative way to run a company, or create a product, and that during that innovation companies find innovative ways to cut costs and increase sales (NBS Innovating, 2012). This innovation carries beyond making a product or service sustainable, to making a product or service better for the final customer. This better product may be unique, which can put an SME ahead of its competitors (Torugsta, 2012). SMEs also have better entrepreneurial alertness that large corporations do not have, which allows SMEs to shape certain projects and environmental concerns specific to the stakeholders they are working with (Torugsta, 2012).

3.4 Academics and Business Professionals Two academics and one environmental business professional working for a not for profit were consulted about their perspective on barriers and opportunities/motivators for pro-‐environmental behaviour in SMEs. The following were the major insights beyond what the literature stated.

• Stakeholders expect less from SMEs than they do from larger corporations.

• Because most SMEs are privately held, they are not open to shareholder activism and have less

responsibility of reporting outside of regulation.

• Although SMEs may focus more on the short term than many large corporations, any successful SME will have some sort of strategic planning beyond the coming year.

• Just like individuals who have both day to day foci as well as long term foci, SMEs do think in the future in the broader business plan but are constantly focusing on what is needed to be done today or tomorrow.

22

• Of micro, small, and medium SMEs, medium enterprises typically have more capacity than micro

or small enterprises.

• When SMEs are absent from lists that acknowledge businesses within a certain area for having pro-‐environmental behaviour, stakeholders identify that they are missing and question why they are not on the list.

• In micro companies there are few people to take the initiative of driving pro-‐environmental behaviour if the owner/manager does not; in small or medium enterprises there are more options for others in the company to initiate pro-‐environmental behaviour.

• Medium companies have a competitive advantage over micro and small companies since there is much greater opportunity for brand establishment.

3.5 Summary of Specific Barriers and Opportunities/Motivators Identified in the Literature

This section has identified that stakeholders, knowledge and risk, and other factors such as regulation are the main barriers and opportunities/motivators that are more specific to individual SMEs. Unlike the general barriers and opportunities/motivators for SMEs which were mostly identified as being barriers, many of the specific elements identified in this section were opportunities. It was also found that there are some barriers and opportunities/motivators that exist that were not identified in the literature but were mentioned by academics and sustainable business professionals through interviews.

Part 4-‐ Case Studies

4.1 Case Study/Literature Review Discrepancies Although much of the literature is well researched, experience has shown that literature sources do not always capture the practicalities of what happens in real business. Some of the literature is based upon case studies, but no two case studies are alike, meaning there is a wide variety of pro-‐environmental behaviour for various SMEs that is likely not captured in the literature. Much of the literature is also very optimistic about how businesses can integrate pro-‐environmental behaviour successfully, and sometimes pro-‐environmental behaviour is easier to implement conceptually than it is in reality which is not at the fault of the literature, but more that the world does not always work the way we expect it to. An example of this may be the development of machinery that uses less energy consumption but takes longer to complete a job meaning two machines must be purchased, using twice the amount of energy to do the same job, resulting in greater overall energy consumption. This difference may be difficult to

23

identify without implementation and consultation of businesses. For these reasons it is worthwhile to examine some non-‐literature case studies to get a different perspective on the barriers and opportunities/motivators faced by SMEs. These case studies can be used to help validate or dispute the information found in the literature review. It is expected that case studies will reveal barriers and opportunities/motivators similar to and different from those that were identified in the literature. The second purpose of the case studies is to determine whether there are differences among micro, small, and medium sized businesses. The literature often combines all sizes of SMEs together, yet there are significant differences between a micro company operated independently by two owners and a medium sized company with over 400 employees. These case studies have been examined to help explore these differences that the literature often does not discuss.

4.1.1 Methodology Three case studies were chosen from Southern Ontario in the manufacturing industry. Case studies were chosen locally because they were easily accessible to conduct interviews from the study base and because key informants for case studies were willing to participate because they were recommended through personal and academic peers. Three case studies were chosen to have a representative from each micro, small and medium sized businesses. Only three were chosen to represent the population due to time constraints. Case studies were chosen within the manufacturing industry for multiple reasons: case studies must be within the same sector to easily compare differences and similarities among micro, small, and medium; manufacturing is an industry that faces a variety of barriers and opportunities including regulation, use of hazardous materials, high use of resources, intensive energy consumption, and potential for significant pollution (air, water, waste); and connections to interview companies were available. Four SMEs were contacted, only three were willing to participate. In each company one interview took place with the primary person (or two primary people) that are involved in the company’s pro-‐environmental behaviour. In one case this was an owner, one was an environmental manager, while one was two staff members without environmental or owner titles. Some of the SMEs will remain anonymous due to personal preference while some would prefer to be identified. Those unidentified will instead be identified by the case study size. All research is approved through the University of Waterloo Office of Research Ethics, and all participants participated on their own free will. Interviews were conducted between the researcher and a representative from the SME that is an operation owner or leader of environmental programs within the company, discussing the barriers and opportunities/motivators that each company individually faces regarding pro-‐environmental behaviour, and the pro-‐environmental initiatives that have been affected within their company regarding these barriers and opportunities/motivators.

4.2 Case Study 1: Micro The micro case study has 10 employees and is located in a small town in Southern Ontario. The company is independently run with one owner and a floor manager and has been in business since 1997. The micro case study is a tool and die company which manufactures metal stamping dies mostly for the automobile industry and machine production. This production uses energy, water, raw materials, and outputs waste, dirty water (water contaminated with environmentally hazardous materials such as oil

24

and coolant), and manufactured materials. Stakeholders are primarily other businesses that are customers. There is a limited or non-‐existent relationship with consumers or the general public.

The micro company does not recognize itself as a pro-‐environmental company, yet they take many environmentally responsible initiatives. The owner does not say that they take any more initiatives than what makes sense for the business. The company does not have a green manager, and there is no environmental education for employees. Environmental programs are typically adopted when they are cost neutral such as government grants for upgrading energy efficiency but initiatives beyond this are rarely taken

A reason for this, and barrier to pro-‐environmental behaviour, is that the building is not owned, and the landlord is not willing to pay for the upgrades because the tenant pays the energy bills. If the company was to move, the investment is lost. Looking back, the owner wishes that he would have paid for the changes himself because he figures they would have been paid off by now. Similar aspects that are out of his control due to renting include the installation of heating vents, installing more water efficient toilets, and the way the property outside of the building is managed.

Another area of pro-‐environmental behaviour is the disposal of waste. The micro company has three main waste disposal categories: oil, metal, and general waste (similar to household waste) which are all disposed of safely but for different reasons. Recycling bins are provided for free, so they are used around the shop because it is the “right thing to do”1; although there are no savings, there are no losses either. Metal disposal/recycling is a cost savings. The owner said that if they did not make profit he would likely still take the metal in, since the metal must be disposed of somehow outside of residential garbage pick up, it should be disposed of responsibly. Oil (mixed with other chemicals such as coolant) is the only waste stream that costs money to dispose of for the company. Legally, oil must be safely disposed of, although the owner cited examples of two SMEs he is familiar with who illegally disposed of their waste oil directly into the natural environment but were caught by the ministry (both from being reported by a community member and through back tracing from a contaminated site). The owner also said he would safely dispose of his oil even it was not required by law.

Other examples of pro-‐environmental behaviour for the company include re-‐using heat from machines to heat the building (which many other companies do not do), use natural cooling from outdoors in the summer rather than an air conditioner, turning off computers at night, using recycled paper, and recycling florescent light bulbs. These initiatives are taken not for one reason alone, but because they save energy, are the “right thing to do”, and they “just make sense”2. In some cases, materials such as brass and steel are often sustainably sourced because most of what is available for purchase is made from recycled materials. The owner did indicate that although he does not mind doing many of these

1 I put “right thing to do” in quotations because this is a common term that comes up when speaking with individuals regarding pro-‐environmental behaviour. It is not a formal term, yet many people to use it to describe that the action is the ethically correct choice. 2 “Just make(s) sense” is another phrase that many interviewees in case studies used. The term insinuates that making the decision is the logical decision for the business due to various different factors.

25

small initiatives (which he does primarily himself), they often entail a minimal amount of additional work.

Although the micro company has taken some positive actions towards pro-‐environmental behaviour and seen opportunities in doing so, some barriers are just too great and have prevented them from adopting environmental initiatives. For example, some of the machinery the company uses has the capability to run on power saving mode but runs slower, as a result producing less quickly. The company does not use this mode because if the machine were to run on power saving mode another machine would have to be purchased to compensate for this and purchasing an additional machine seems counter productive. Another barrier is the lack of services provided. The company uses deionizing pellets in the manufacturing process which can contain harmful environmental materials in large quantities; however, companies that safely dispose of these materials do not service SMEs because it is not cost effective for them to do so.

For this micro business stakeholders did not appear to provide many incentives to take pro-‐environmental actions. Customers typically do not show any concern regarding environmental behaviour, the local community is not involved, and employees do not seem concerned either. The owner indicated that he finds the lack of environmental initiative put forth by the employees frustrating such as leaving lights and computers running over night; however, he does not provide any environmental education to them. It is hoped that through osmosis the employees will begin to reciprocate his environmental habits. The owner indicated that employees seem more likely to be loyal employees when their working conditions improve (which may be a result of environmental actions, but the reason they stay is not because they are environmentally based). When considering his relations with other companies, if he has two suppliers who provide equal price and quality but one has pro-‐environmental behaviour he will choose that company, but when it comes down to it, economics are important and he would typically choose the company that provides the lower price even if it is a less environmentally responsible company. He believes that other companies are the same way, and that like him will do the small things that are easy but will not tackle the larger problems. When asked how he felt about certifications, he said that very few people ever question whether or not he meets any certifications for pro-‐environmental behaviour. Other people in the industry who have completed certifications complain that they involve a lot of paperwork and stakeholders do not care if they have the certification.

(Anonymous, Personal Communication, 2013).

4.3 Case Study 2: Small The small case study company has a manufacturing plant with roughly 100 to 140 employees. This company manufactures vinyl materials for infrastructure and has been in operation for over 50 years. The company has adopted pro-‐environmental behaviour within roughly the last five years. The case study does not have an environmental manager, but environmental duties have been taken on by employees in various departments including human resources and purchasing. Their manufacturing takes raw materials and processes them into usable products, which are sold mainly to distributors

26

(other businesses). These processes use inputs of energy, water, raw materials, and outputs general waste, dirty water, and environmentally harmful wastes. Stakeholders are primarily other businesses as customers.

Pro-‐environmental programs are heavily driven from within, from just a few employees and not from a broader company goal. The company’s largest pro-‐environmental project is the adoption of a waste management program. This program began with government regulations requiring that they safely dispose of their environmentally harmful materials, which later developed into a cost savings program on other waste. Originally any waste that was not regulated went into the garbage. In 2008 the company did their own waste audit to determine what could be eliminated from the waste stream. It began with cardboard due to its poor ability to compact well for disposal, but it grew to include the removal of steel, light bulbs, plastics, strapping, pop cans, batteries, ink cartridges, electronics, wooden skids, and glass bottles. This program then further developed through monitoring of their waste audit reports and waste disposal costs. Since monitoring of the waste audits began in the past two to three years, significant cost savings have been made, and not by changing the essential business practices but by being more aware, and smarter about the way the system is managed. The program has also been approached from waste production as well as waste disposal. Reductions in paper use have been made through double sided printing, electronic purchasing catalogues, online training, and there has been discussion of beginning online employee files. This not only saves paper for the environment but also saves money in paper purchasing, printing, and disposal costs. While this proposed filing system may save on paper, it would involve purchasing and learning how to use the system. This is an example of an opportunity that creates another barrier to overcome.

Although environmentally responsible waste disposal has been a benefit to the company in some ways, in other ways it is negative. Regulation involves significant amounts of paperwork to document compliance and receive approval to use certain materials. Going through these approval and disposal processes can be expensive. Time and money spent working on meeting government regulations takes time and money away from work on other pro-‐environmental initiatives in the company. Interviewee A indicated that the company would still safely dispose of the majority of their environmentally harmful materials even without regulation; however they would be less thorough in ensuring that materials such as light bulbs and batteries are disposed of in an environmentally conscious way if they were not faced with heavy fines.

The second large pro-‐environmental program the company has adopted is the use of energy efficient lighting. The main motivation for this has come from energy cost savings, which has been supplemented with rebates through the local power authority. Although these rebates have been helpful, Interviewee A expressed interest in having larger and upfront rebates to help decrease the cost further and sees this as a more powerful incentive to the program currently being offered. For this initiative the company is expecting a five year payback period.

Because there is not a company push for pro-‐environmental behaviour from the top or an employee strictly dedicated to environmental initiatives as part of their job description, a significant motivator for pro-‐environmental behaviour comes from the individual motivation of these few employees who run

27

the green initiatives for the company. However, they still need support from management which Interviewee A indicated as being key to delivering pro-‐environmental behaviour.

Interviewee A expressed interest in the company being acknowledged for their pro-‐environmental behaviour. They would like for there to be a recognition program in place that would acknowledge their company and what they have done. This could also drive competition among companies and will likely make employees proud of their company and product. Interviewee B suggested another effective motivator for companies is belonging to a larger environmental organization where they report what their company has been doing to other companies. This motivates the company to continue improving so that they look good to other participants as well.

The motivations to taking these actions are a combination of meeting regulation, saving money, and because, according Interviewee A, “It [just] makes sense”.

Although the company has taken many pro-‐environmental initiatives and seen some significant benefits from doing so, there are many barriers to their pro-‐environmental behaviour as well. According to Interviewee B, “the biggest obstacle would be money”. Extended payback period presented a barrier for the company in adopting pro-‐environmental behaviour regarding energy savings in some situations. Money was also a barrier when considering geothermal heating, using environmentally friendly de-‐icing products in the driveway, and making the building structure more energy efficient. Money typically has a significantly quicker payback in business production rather than environmental sustainability. For example, Interviewee A said “If you tell me you need a million dollars to get a recycling program going, I can add two more lines for that and make the company that much more money and not have to do the recycling right away. And that payback is [within six months].” There is a general concern that because technology is always evolving and policy is always changing, that by the time environmental initiatives are paid off new technology is available and the old technology can then be upgraded. Because of this, the company would always be investing money back into the program as soon as it is paid off, never seeing any profit.

Lack of time and other logistical situations create barriers as well. Because all employees working on these programs are not hired as environmental program coordinators they have a full time job with other responsibilities that must be met first while initiatives to adopt pro-‐environmental activities must be made on their spare time. Another time related example is that the facility initially used kerosene to wash machine parts but now they are using a less harmful cleaner, which takes significantly longer to clean the machines. Logistically, environmental initiatives are also sometimes just not appropriate. For example, tools such as tow motors that have lower emissions were rented but they became a safety hazard in the workspace because their speed allowances cannot be changed. Barriers of infrastructure constraints also exist, such as when considering a green roof, the current infrastructure was not able to support the weight.

Employee engagement can be difficult to obtain. The case study took the initiative of purchasing re-‐usable water bottles for employees. Today, some employees still have them, some have brought their own, while some use neither. In some cases employees are reluctant to adopt pro-‐environmental

28

behaviour because they view it as complicating their job and making more work with no personal benefit. Interviewee B indicated that employee culture functions as a whole, most employees will do what the other employees are doing, especially when new employees are introduced to the company. In order for these practices to be seen on the floor consistently they must come from an overall employee culture, and in some aspects the culture in the company has been changing, it is just not completely there yet. Interviewee B indicated that a way to overcome this lack of employee environmental culture is with more communication and education with employees. If employees better understood the impact they were having on the company and the environment they may be more willing to change. In some cases employees do not have waste separation programs in their house and without being educated they cannot be expected to walk into the workplace and just know how these programs work.

Although the company faces many barriers they have found some opportunities for adopting pro-‐environmental behaviour. As Interviewee A explains, “It’s something that I’m happy that we do. Could we do more, definitely.”

(Anonymous, Personal Communication, 2013)

4.4 Case Study 3: Medium The medium case study is Waterloo Furniture Components (WFC) which is located in urban Southern Ontario. The facility was established in 1967 and currently has roughly 240 employees. As of December 2012, WFC is part of Knape & Vogt, but has independent facility operations and environmental programs separate from Knape & Vogt’s other facilities. WFC manufactures ergonomic devices and drawer slides for the ergonomic and furniture industry. This involves inputs of raw materials such as steel, heavy metals, water, and energy, and outputs heavy metals, contaminated water, hazardous wastes, and general waste. Stakeholders are primarily other businesses as customers that sell to the public but WFC does not sell directly to consumers.

WFC has taken pro-‐environmental behaviour as an integrated part of their business. They have a full time staff member who is an environmental supervisor. The company has received both business gold and platinum awards from the Recycling Council of Ontario as well as an Energy Excellence award. So far, most of the environmental initiatives taken by WFC have been viewed as opportunities rather than barriers. In 2008, an environmental supervisor was assigned to taking on environmental concerns such as air, water usage, water discharge, and hazardous wastes. Prior to this, meeting environmental regulations fell under a broader environmental, health and safety manager. In 2007 the operations manager said the company was spending $1.4 million in utilities and wanted this cost cut by ten percent. David Kroeker, WFC’s Environmental Supervisor, and Lorne Seip, Skilled Trades Manager, looked for obvious areas of inefficiencies and began looking for ways to use less energy. In the first two years, utilities had been decreased by 50 percent. Now there are 4 employees working on environmental projects and nearly all employees are on board with what the team is doing.

In 2012, the company partnered with a customer who was already displaying pro-‐environmental behaviour and had their help in developing the company’s 2020 Perfect Vision Plan. This plan aims to

29

have zero process waste produced in the plant, eliminate the use of volatile organic compounds (VOCs), eliminate the use of water consumption, to use all renewable energy, and to become carbon neutral by the year 2020. Compared to base line data, the company has reduced hazardous waste generation from 13 waste categories to 4, decreased water consumption by 37% (spending has increased by 19% due to rate increases), decreased gas consumption by 49% (saving 74% in costs), and decreased electricity use by 32% (increasing by 54% in costs). Even though the company has accomplished significant tasks, Kroeker says “We’re not even half way to where we should be.”

WFC has adopted Toyota’s model of lean manufacturing. This program looks at the whole process of manufacturing and aims to remove all forms of waste – wasted time, wasted energy, wasted resources, etcetera. Although the program is not environmentally based, many pro-‐environmental actions result in a decrease in the inefficient use of resources tying directly into the program’s goals. For example, before lean, the company’s mentality was to have larger machines and stronger fans to ensure that they would meet capacity but this means more unnecessary energy consumption and higher upfront material costs. Since the adoption of lean and energy awareness, when making purchasing decisions smaller options are chosen, more efficient is considered better and the company purchases and uses only what is needed to complete the job.

Kroeker said that safely disposing of hazardous waste is expensive, and that for the company to be economically profitable alternatives to these hazardous wastes must be found. An intriguing example of a hazardous waste alternative is using bio-‐remediation as an alternative to costly hazardous surfactant cleaning processes (which use iron phosphate). When using the iron phosphate, tens of thousands of dollars each year would be spent removing and processing the chemicals. For 90 percent less cost, bio-‐remediation was introduced which cleans the grease on parts in a self maintaining environment with 100 percent less environmental risk. Of course, this process took time to research, test, and troubleshoot, but now it is an effective 9 year old system which saves the company money and preserves the environment. Money is also gained in some of the recycling initiatives. Often these cost savings are made in decreased domestic waste fees due to diversion, such as diverting cigarette butts to a compositing company, free of charge or recycling pens.

Kroeker stated that “Typically the persona is that green products are more expensive and don’t work as well, but I beg to differ.” 95 percent of the company’s environmental projects have saved them money. Another example of pro-‐environmental behaviour has been the upgrading of flow meters on the plating line. Historically, they used manual flow control valve that were set to estimate flow to prevent tank contamination, resulting in a total release of 80 gallons a minute going to be treated in wastewater disposal. A water assessment determined that 80 percent of their water consumption was coming from these lines. In 2011 WFC installed couplings that control the exact minimal flow required. This cost the company less than $400 while reducing water consumption by 30 percent. Water consumption was decreased in automatic flushing urinals by installing motion sensors, which deactivate the flushing devices when motion is not sensed. Upgrading the urinals to energy efficient models would have cost $10,000, while motion sensors do the job just as well but only cost $250. This example shows that simple research and innovation can make environmental actions feasible for companies.

30

Company mentality has changed quickly over the years. When the environmental program was developed mentality seemed to be to reduce waste through lean manufacturing, and only in more recent years has that focus become about the environment and how it meets lean rather than thinking about lean and how it meets the environment. Although employees were initially reluctant to change, the mentality regarding pro-‐environmental has also changed throughout the business as well. Originally employees were reluctant to energy conservation because it changed what they were used to even though it did not change the quality of their jobs, but over time they became comfortable with their new work environment. When WFC decided to discontinue the use of Styrofoam cups they purchased biodegradable reusable mugs for employees. As these mugs have degraded or new employees have joined the company individuals have brought mugs from home, changing practices with every employee in the facility. Employee morale has increased because they are proud to be with a company that is “doing the right thing”. Part of this engagement is also likely due to education provided to employees regarding pro-‐environmental behaviour. WFC has environmental boards in the shop as well as conducting annual environmental presentations.

WFC also has a very community based approach to solving environmental problems and coming up with innovative solutions. When developing programs or activities the employees are highly involved. Examples include re-‐usable mug design and the placement of recycling boxes in the shop. Although there is no empirical evidence, it is likely that this involvement has contributed to employee support of pro-‐environmental company behaviour. In some programs, taking environmental initiatives has led to a better work environment. For example, the shop had a complete air exchange every six minutes to ensure exceptional air quality, but to reduce the amount of air being heated they reduced the rate of flow, and now less energy is used and it is physically more comfortable.

WFC’s supply chain is questioning whether or not their products are environmentally sustainable. These inquires have only begun in the last couple years though. Kroeker believes that the company’s pro-‐environmental behaviour is “what sets us apart” from other companies in the industry. At WFC, having pro-‐environmental behaviour typically does not bring in new customers, but it definitely strengthens relationships and loyalty from companies that they already interact with. One of WFCs’ customers is Herman Miller, which is a company that has significant pro-‐environmental behaviour. Originally they were not even in WFC’s top 40 customers, but today they are one of their top customers and this is due to their similar values in pro-‐environmental behaviour. This partnership has allowed them to be showcased as a positive example for Herman Miller’s other suppliers, which now gives WFC a higher profile in the industry. Kroeker also sees benefit in being in good communication with local agencies such as local law enforcement.

One of the few barriers the company has experienced from pro-‐ environmental behaviour is that when customers hear about the savings made they expect a decrease in the cost of the product they purchase. Although costs are being decreased, overall cost of business continues to rise due to economic inflation and increases in the prices of non-‐ renewable fuels. An obstacle that WFC faces is reaching perfection. Kroeker questioned “We’re diverting 99.3 percent of our waste from

“Usually its tough and costly to implement a project but when looking forward to being sustainable you’re looking 10-‐20 years down the road, not just today.” – Kroeker, 2013

31

landfill, [but] how do we get to that hundred percent? The first 80 percent was easy, but it’s that last little bit, how do we get to perfection?”. Another challenge faced is the complete engagement of employees. Even though work culture has changed, there are still some employees who are not engaged with the company’s pro-‐environmental behaviour. Sharing information about pro-‐environmental behaviour within the company is also a challenge. Although many of the employees on the floor know what is happening, many sales and administrative staff do not.

Another barrier is government regulation. Government regulations require that WFC must report their use of materials classified as hazardous to provincial government. The reporting costs nearly $20,000 per substance. If time spent completing regulatory requirements were reduced for going through the compliance process, this time and money could be put towards other environmental programs. Although regulation requires that in some cases companies protect the environment in ways they normally may not, in some cases it prevents companies from decreasing environmental impacts as well. WFC has their own waste water treatment system before it enters the municipal waste water system. The company looked at treating other companies’ waste water as well but it was so costly to receive the compliance approvals that they decided not to pursue the initiative. Similarly, external certification such as ISO 14001 or belonging to groups such as Sustainable Waterloo Region are programs that are not worth the cost of participating in. Both programs cost a lot of money to be registered with and customers do not demand the certification so there is no perceived benefit of belonging at this point.

WFC has shown that there are big wins to be made in adopting pro-‐environmental behaviour in companies, not only for the environment but also for the profitability of the company. But for Kroeker it does not stop here; “There is so much opportunity for the environment. Even though we have already done so much, there is so much more that we can do.” (D. Kroeker, Personal Communication, January 30, 2013).

4.5 Summary of Case Studies There were many themes to barriers and opportunities/motivators to pro-‐environmental behaviour that were expressed in the various case studies. Although similar barriers and opportunities/motivators were found amongst the case studies the degree that these were a barrier or opportunity/motivator was different in the individual case studies. For example, employee influence was present in each case study but was viewed as a very different opportunity in each. The following is a summary of the themes in barriers and opportunities/motivators for the case studies. Capacity: There was a significant trend with the relationship between the size of a company and the way its capacity affected its pro-‐environmental behaviour. Smaller companies had significantly less capacity with available money and fewer employees for environmental initiatives. The micro company did not have any employees dedicated to pro-‐environmental behaviour; everything came from the owner. The small company had employees who worked on the programs but were not designated as environmental

32

employees, while the medium company had multiple employees dedicated to working on environmental projects. Even in the medium case study lack of capacity was still an issue. Kroeker stated, “There is still so much opportunity, I could easily justify an energy manager, having someone working full time just to manage utilities, and possibly waste management too…” (D. Kroeker, Personal Communication, January 30, 2013). The smaller the company was the less impact they felt that they had as well. They physically produced less waste and dealt with fewer hazardous chemicals than larger businesses and this sometimes made them feel as though they did not have any projects that they could take environmental actions towards improving.

Knowledge: All of the individuals managing the environmental initiatives in the case studies were skilled trades people or HR staff rather than people with environmental backgrounds. In some cases this acted as a barrier but its ability to be overcome was paired with the capacity and the fostering of innovation. Companies which invested in research and development for overcoming environmental barriers were much more successful at compensating for a lack of knowledge than companies that did not invest in research and development. This lack of investment may have been due to a combination of available capacity, economic resources, and manager attitude. As companies became larger they were more likely to hire consultants external to the company to provide them with knowledge. Research and development was also highly connected to innovation. Companies that invested in research and development often found innovative ways to overcome barriers in ways that were economically beneficial as well. Part of this innovation came from resources but part of the innovation also came from innovative employees within the company who dealt with day to day actions and were skilled trades people who knew how to mechanically alter utility consuming systems. In some cases, lack of knowledge resulted in not only a lack of knowledge in how to overcome barriers that prevented them from adopting pro-‐environmental behaviour but lack of knowledge also led to a lack of knowing that something was even having an environmental impact. This was particularly true about elements such as natural landscaping. For example, it appeared that the companies overall were unaware that having a naturalized lawn on the property would help absorb runoff and promote biodiversity with native plants rather than grass and asphalt.

Owner/manager attitude: The owner attitude played a significant role in the capabilities of pursuing pro-‐environmental behaviour. If the owner was not willing to invest money into environmental initiatives then there was no way of pursuing them. When owners or managers were willing to pursue pro-‐environmental behaviour they were the main driving force for how much was done based on how much money was invested, how much employee education occurred, and how much work was put towards looking for environmental issues and changing them. In all case studies, the person pursing pro-‐environmental behaviour had an ethic that protecting the environment was the “right thing to do”. How far this ethic took them in pursuing environmental initiatives based on the individual. Some managers were very optimistic about what could be done and how easy it could be to overcome barriers while some were not. In some cases managers were also distrusting of information that was provided to them that said cost savings could be found in environmental program development.

Employees: Typically the more optimistic owners/managers were the more efforts they put towards engaging employees. The companies that showed greater amounts of pro-‐environmental behaviour

33

typically had more engaged employees who were actively participating in the initiatives being taken. There was significantly more training to engage employees in companies where they were engaged, indicating a strong connection between employee attitude and the amount of environmental education and inclusion in environmental programs. The amount of employee education that occurred overall depended on the owner/manager. In the medium company more focus was spent on educating employees than the small or micro companies. Part of this may have been due to capacity of the company (not having the time in a micro or small company) but also may have had to do with owner/manager attitude. It was indicated that taking on environmental initiatives and engaging employees created more work for the owner/manager and the owner/manager’s concern or willingness to handle this additional work contributes to their employee education, or even more broadly their pro-‐environmental adoption. In all cases, companies had indicated that employees were reluctant to participate in environmental activities at some point. In companies where employees are currently engaged, they said that when environmental programs were being initiated there was reluctance to adopt environmental actions but over time with education and the acceptance of change, the work culture changed until employees overall become more engaged.

Utility and waste tracking: Tracking is an essential part to making pro-‐environmental behaviour a significant win for a company. In the case studies, energy and waste tracking was identified as a big eye opener to what was happening in the companies. Owner/managers were unaware of the costs of some of their usage/disposal fees, and when they began tracking this usage they began to realize the inefficiencies and costs of using energy and disposing of waste. Tracking not only shows a company inefficiencies but also allows a company to see the benefits of what they have done in real numbers when they begin decreasing these values and also shows a company where it can take programs further to save more. Owning versus leasing: Companies that rent their buildings faced significant barriers that were not faced by companies that owned their own building (it appeared that micro businesses were more likely to lease rather than small or medium companies). When leasing a building, owners can be reluctant to invest money into structural elements of the building because unless it is reflected in their utility bills, they will not see the return on investment. They may also believe that it is the responsibility of the landlord and not themselves. There is also the case where the landlord may not physically allow the company to change the structure of the building even if the business is willing to pay of the changes themselves. Economics: Economics were likely the most significant factor overall. Economics were considered a barrier when the payback period was too long. Depending on the company and the initiative, accepted payback periods varied from one to twenty years. Typically, the larger the company the more willing they were to invest in longer payback periods. If the payback period was longer than their determined threshold, companies were not willing to invest. If savings could be made, economics were also often a motivator to pro-‐environmental behaviour. Nearly any case where money was to be saved, environmental initiatives were taken. The belief that pro-‐environmental behaviour can often also be economically profitable varied based on the company. In companies where owner/managers were

34

optimistic about making pro-‐environmental behaviour profitable, innovative solutions were often found to do so. Companies that were not as optimistic tended to believe that in most cases adopting pro-‐ environmental behaviour would cost money and solutions were not likely to be found. It is difficult to tell whether fears about expenses are due to attitude or if attitude stems from a lack of possibility of cost savings. Small roadblocks: There are many small roadblocks associated with pro-‐environmental behaviour, that when one barrier is overcome another barrier is faced before reaching the end goal. An example of this could be putting blue boxes in the shop floor. Not only do you have to set up the program (pick-‐up, physical blue boxes, employee education) but you then have to assign someone to maintain and empty the boxes. Once again, attitude is a significant factor in whether this is perceived as another opportunity to find a solution or if it is a reason to not pursue pro-‐environmental behaviour. Stakeholders: Some stakeholders appeared to affect the case studies while others did not. Overall, institutions, other businesses (except businesses as customers) and community did not influence any of the case studies. Customers influenced some of the case studies but not all. Case study companies that were close to the end of the supply chain felt pressure from consumers who purchase from the case study’s customers to have sustainable products. Most of the time case study’s customers were not concerned about the company’s pro-‐environmental behaviour unless it was due to consumer demand down the supply chain. Although customers did not require pro-‐environmental behaviour, in some situations pro-‐environmental behaviour helped better develop relationships with customers increasing their sales with these customers and developing partnerships based on similar values. Regulation: Regulation was a significant motivator for companies to adopt pro-‐environmental behaviour, but most of the companies found aspects of regulation to be costly and time consuming which took away from capacity to invest in other environmental initiatives. Companies said that they would safely dispose of the hazardous materials regardless of whether there was regulation or not (at least most of the time). Regulation did affect companies of different sizes differently. The larger the business, the more hazardous waste they typically produced, and the more heavily regulated they were. In the case of the micro, they had to meet regulation but were audited for compliance less often and had less to report due to using smaller quantities than the small and medium company. Short term business focus: The smaller the company is the more focus there appears to be on day to day actions rather than long term; however, in all cases there was some sort of long term focus as well. Overall, there were similarities but also many differences found among the micro, small, and medium companies. Differences were especially found when it came to the effects of regulation, payback periods, leasing, general capacity and overcoming knowledge barriers. The smaller the company was the larger the barriers were of lack of capacity, length of acceptable payback periods, being affected by leasing their building, and overcoming knowledge barriers. The smaller the company was (the less hazardous waste they produced) and the less they were impacted by regulation. Differences among the case studies that were present but likely not due to size were stakeholders, manager attitude and

35

employee engagement. This often had to do with individuals within the company as well as the placement of the company on the supply chain.

4.6 Findings of Differences Between Literature and Case Studies The following chart is an altered version from the one found in section 2.5 – Summary of Barriers and Opportunities/Motivators to Pro-‐Environmental Behaviour for SMEs. Black points were identified as being barriers or opportunities/motivators in the literature and case studies. Red was identified as being barriers or opportunities/motivators in the literature, but were not confirmed in the case studies. Green was identified as being barriers or opportunities/motivators in the case studies but not the literature.

Barriers for SMEs General Barriers for all SMEs -‐ Lack of capacity -‐ Few employees available for environmental tasks -‐ Employees knowledge about environmental initiatives is limited -‐Short term business focus/tied up in daily activities (ex. essential needs must be met daily and business thinks about the now rather than the future, so environmental concerns are outside of their scope of thought) -‐ Stakeholders may be unaware of initiatives taken, therefore are not beneficial to their full capacity and it is too costly to market information to them -‐ Lack of capital to invest in environmental initiatives -‐ Payback periods are too long Barriers for some SMEs -‐Lack of owner/manager knowledge regarding environmental opportunities/issues -‐ Resources are unavailable in manufacturing and construction industries -‐ Information tracking may not exist (particularly with utility consumption) -‐Regulation creates frustration and develops limitations -‐ Stakeholders -‐ Product/service may become more costly and customers are not willing to pay -‐ Owner or manager attitude can prevent the company from taking pro-‐environmental actions -‐ Owner/manager unwilling to pay for pro-‐environmental actions -‐ Leasing their building prevents them from making structural changes -‐ Taking initiatives can be counter productive by being less or completely ineffective Table 4.6.1 -‐ Barriers for SMEs

Opportunities for SMEs General Opportunities for all SMEs -‐ Hire part time or short term employees to work on environmental programs -‐ Ability to work closely with stakeholders such as customers/other businesses -‐ Potential for eco-‐efficiency gains Opportunities for some SMEs -‐ Stakeholder engagement -‐ Customer desire for environmental product/service -‐ Employees are more engaged -‐ Community connections and pressures

36

-‐ Owner or manager attitude can push the company towards taking pro-‐environmental actions -‐ Joining peer to peer knowledge sharing consortiums -‐ Regulation forces some SMEs to take pro-‐environmental behaviour -‐ Products may be innovative and different -‐ Government incentives through economic assistance -‐ Fostering innovation creates new ways of solving problems -‐ Tracking utility and resource consumption and waste production Opportunities for large corporations, but not SMEs -‐ Large business partnerships such as industrial ecology -‐ Consumer lobbying -‐ NGOs and activist groups -‐ Lobbying pressure -‐ Partnerships -‐ Certifications -‐ Investors Table 4.6.2 – Opportunities/Motivators for SMEs To summarize, the main differences found between the literature and the case studies were that stakeholders were not a significant player as either a barrier or opportunity to pro-‐environmental behaviour in SMEs (except for a select few cases with the medium company) and that there are opportunities through government economic incentives and staff innovation. The main similarities between the literature and the case studies was that both economics and manager attitude play a significant factor either as a barrier or an opportunity/motivator for adopting pro-‐environmental behaviour and lack of capacity is a significant barrier.

Part 5 –Actions That Can be Taken to Foster Pro-‐Environmental Behaviour Analysis of the barriers and opportunities/motivators to pro-‐environmental behaviour reveals many ways that we as academics, regulators, and consultants can help SMEs move towards adopting pro-‐environmental behaviour by using opportunities and program development to assist in overcoming barriers. The following are the top ten ways in which we can help overcome barriers and encourage pro-‐environmental behaviour in SMEs.

5.1 Pro-‐Environmental Behaviour Recognition Having recognition for SMEs adoption of pro-‐environmental behaviour was recommended in the literature, by academics and professionals, and in the case studies. Recognition is important externally and internally because stakeholders are not a significant opportunity for SMEs. SMEs still need someone to be patting them on the back for their good work and if it is not going to be customers, then external sources are a good way to get this recognition. Literature and consultants suggest that non-‐profit organizations have a database or list of companies that have pro-‐environmental behaviour. In the case of SMEs, they would have to self register for the recognition program. When companies are on the list

37

they are acknowledged for their achievements, while those that are not on the list would be shamed by the business community for not being on the list. This will not only encourage businesses to adopt green practices but will create dialogue and keep encouraging integration and innovation regarding sustainability inside firms and markets (Corporate Knights, 2006). A case study recommended that recognition alternatively come from government, potentially through economic paybacks. In order to have companies join these lists, registration fees would have to remain low or free and registration would have to be easy so that companies did not feel that being acknowledged for pro-‐environmental behaviour was more costly or time consuming than the recognition is worth. Companies that have joined these recognition programs have seen great success in getting closer to their employees, clients, and communities, increasing their reputation with these stakeholders and making better business connections (NBS Small Business, 2012).

5.2 Individual Attitude/Ethic One of the most influential drivers to pro-‐environmental behaviour identified in the literature and the case studies was the ethic and attitude of individuals, especially owners/managers. Owners/managers were the primary driving force of pro-‐environmental behaviour in the case studies and their level of commitment and attitude correlated with the success and extent of pro-‐environmental behaviour that happened in their company. Employee attitude was also connected to these successes, where more pro-‐environmental behaviour and more active owners/managers existed, more employee engagement occurred. When individuals within a company feel that pro-‐environmental behaviour is important, a culture is developed which promotes this behaviour. It is important to find ways to engage individuals with the importance of pro-‐environmental behaviour, especially individuals with power and decision making positions with a company.

5.3 Integration and Innovation Pro-‐environmental behaviour should be thought of not as individual actions on their own that simply protect the environment but as an integrated part of business. They should be considered a part of business practice with expenses and benefits just like any other business aspect. Pro-‐environmental behaviour is often connected to many other elements such as economics and employee well being. Innovation is a key aspect to find the benefits to pro-‐environmental behaviour and use these innovative ways of thinking or adopting pro-‐environmental behaviour to integrate actions into the fabric of a company in a way in which it provides the most benefit across different dimensions.

5.4 Success Stories and Knowledge Sharing SMEs should be able to learn about how pro-‐environmental behaviour has been successful for other SMEs. In some case studies barriers to pro-‐environmental behaviour were overcome through a radical, innovative idea created by an employee within the company. When looking at the same barrier through a traditional lens of problem solving, the initiatives were very expensive. In many cases SMEs find ways to make pro-‐environmental behaviour profitable with the right teamwork and innovative ideas. I would argue that many SMEs do not see these benefits because they are unable to think innovatively to find

38

solutions and opportunities to certain barriers due to a lack of skill sets, not because the opportunities to overcoming barriers do not exist. Sharing these success stories not only shows SMEs that pro-‐environmental behaviour can be profitable in similar SMEs, but can also shows how they can make these actions profitable for them as well. Knowledge sharing programs should be developed as suggested in section 3.3.2.1-‐ Knowledge. These programs give SMEs the opportunity and space to meet and share ideas.

5.5 Economic Incentives Economic incentive programs should be developed. These could take a wide variety of forms. Traditionally they have been government established where rebates were given for taking environmental initiatives such as upgrading to energy efficient lighting or energy conserving retrofits. Rather than reimbursing companies for their expenses, tax reductions should be made for SMEs that are more environmentally responsible. This is a way of creating an economic incentive without having to give money to companies. Another option is to tax companies that are using environmentally damaging processes to help remediate the damage they contribute to through air, water, or waste pollution as well as encouraging companies to decrease harmful practices in order to reduce company cost. This was one of the motivators for some of the case studies. By replacing hazardous chemicals with environmentally safe materials they had fewer reporting fees, which saved the company money.

Economic incentives can also be delivered by helping companies with upfront costs when investing in pro-‐environmental behaviour. This can be done by providing low interest loans through bank programs committed to helping the environment, or through municipal programs. Energy service companies or similar companies are another option for helping companies invest in pro-‐environmental behaviour when they do not have the economic capital but do want to pursue pro-‐environmental behaviour.

5.6 Develop Tools for SMEs and Educate About Them In many cases SMEs do not have the knowledge about how to take on pro-‐environmental projects. Having tools available to help SMEs process data can be helpful in overcoming barriers regarding internal lack of knowledge in how to collect and interpret data to take next steps. An example of this is a carbon accounting tool which is software where companies input information about their resource and energy use (such as from their electricity bill) and it outputs energy usage trends, and reports on the organization’s total carbon footprint. This information can then be used to identify where and how to decrease energy consumption and overall carbon impact (S. Brown, Personal Communcation, 2013).

There are many documents that already exist about how to make your business more sustainable such as Queensland Government’s Business Sustainability Roadmap (2012) or the Network for Business Sustainability’s Guide for Small Businesses on Engaging Employees in “Going Green” (2012) but just because these exist does not mean that SMEs are accessing them. With all of the other barriers facing SMEs, especially those around lack of employee capacity, SMEs do not necessarily know these tools exist, know where to find them, or cannot spend time looking for them. To overcome this, this

39

information should be provided right to SMEs through mail. The tools are then brought to the attention of SMEs and they are aware that there are resources available and where to find them.

5.7 Encourage SMEs to Track Information Not only is information tracking and benchmarking useful at encouraging pro-‐environmental behaviour by being able to see change and savings within a company but it is also a good way of bringing attention to SMEs about the processes happening within their company and being able to pinpoint where savings can be made through areas of inefficiencies. SMEs should be encouraged to track their information to make pro-‐environmental behaviour more rewarding.

5.8 Use Pro-‐Environmental Behaviour as a Business Improvement Tool Development of and participation in pro-‐environmental programs can be used as a tool for improving a company’s overall engagement and performance by keeping employees informed, engaged, and involved in pro-‐environmental behaviour. Employee engagement and involvement on any level develops commitment and investment in the company which makes employees more loyal to a company’s success (NBS 10 Things, 2011). SMEs should use pro-‐environmental behaviour to make a more successful business with better employees.

5.9 Employee Sharing The concept of employee sharing is a possible way of overcoming the barrier of lack of employee capacity for SMEs. As stated earlier, the idea is that a program coordinator would be shared amongst multiple different SMEs within an industry. The staff would work part time among different SMEs throughout the week, providing the services of an environmental program coordinator to work on the company’s pro-‐environmental behaviour through program development, program monitoring/maintenance, and updates on opportunities regarding pro-‐environmental behaviour such as regulation and rebates. Being shared amongst multiple SMEs part time in each business, full time overall among all SMEs, they would cost less to a company than hiring a full time employee but would provide the knowledge necessary for pro-‐environmental behaviour. Governments, NGOs, or career offices could coordinate having these positions available and informing SMEs about the opportunity until the concept of employee sharing amongst SMEs gains traction.

5.10 Decrease Regulation Costs Reducing the amount of cost and time associated with regulation would be attractive to SMEs. If regulation processes consumed less time and money these resources could go towards other environmental initiatives or other business development and reduce negative connotations of environmental regulation.

40

Part 6-‐ Conclusion of Findings The barriers and opportunities/motivators to pro-‐environmental behaviour are complex and highly integrated, often finding opportunities within barriers and barriers within opportunities. The literature highlighted five main dimensions to barriers and opportunities/motivators to pro-‐environmental behaviour. They were: logistics, economics, shareholders, knowledge and risk, and other. Although academics agreed with many of these barriers and opportunities they highlighted some additional barriers and opportunities/motivators. Case study examinations concluded that there is a difference among micro, small and medium sized companies and that there are many similarities between the literature and case studies, but also differences. The main differences found among micro, small and medium companies were in the areas of regulation, payback periods, leasing, general capacity and overcoming knowledge barriers.

Smaller companies faced larger barriers of lack of capacity, length of acceptable payback periods, being affected by leasing their building, and overcoming knowledge barriers. Smaller companies with less hazardous waste production were less impacted by regulation. Differences among the case studies that were present, but not due to size, involved stakeholders, manager attitude and employee engagement. The main differences found between the literature and the case studies was that stakeholders were not a significant player as either a barrier or opportunity to pro-‐environmental behaviour in most cases for SMEs and that there are opportunities through government economic incentives and staff innovation. The main similarities between the literature and the case studies was that both economics and manager attitude play a significant factor either as a barrier or an opportunity/motivator for adopting pro-‐environmental behaviour and lack of capacity is a barrier faced by all SMEs.

Ten actions for future adoption of pro-‐environmental behaviour in SMEs were identified, mainly discussing knowledge, economics, and ways of thinking about pro-‐environmental behaviour. In conclusion, there are many barriers that face SMEs adoption of pro-‐environmental behaviour, some of which are very challenging to find ways to overcome. But there are also many opportunities to be found to overcome these barriers and find other opportunities when company ethic and employee innovation work together to find solutions in an optimistic manner.

41

References Ambec, S. et al. (2010). The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness? Chairs’ Paper. Sustainable Prosperity and Resources for the Future: Montreal.

Brammer, S., Hoejmose, S., and Marchant, K. (2012). Environmental Management in SMEs in the UK: Practices, Pressures and Perceived Benefits. Business Strategy and the Environment. 21: 423-‐ 434.

Buhr, N., and Gray, R. (November 23, 2012). 5 Steps for Building Sustainability into Corporate Budgeting and Planning. Network for Business Sustainability. Retrieved December 1, 2012, from nbs.net/

Busch, T., and Hoffmann, V. (September, 2012). How Hot is Your Bottom Line? Linking Carbon and Financial Performance. Business and Society. 50(2): 233-‐265.

Chun, Jinseok, Yuhyung Shin, Jin Nam Choi, and Min Soo Kim. (2011.) How Does Corporate Ethics Contribute to Firm Performance? The Mediating Role of Collective Organizational Commitment and Organizational Citizenship Behavior. Journal of Management. 20: 1-‐25. Cotte, J., and Trudel, R. (July 30, 2010). Socially Conscious Consumerism: executive Briefing on the Body of Knowledge. Network for Business Sustainability. London, Canada: Network for Business Sustainability. Corporate Knights. (2006). Toward the Holy Grail: Putting a number on corporate sustainability. Toronto: Corporate Knights Inc.

Eccles, R.D., Ioannou, I., & Serafelm, G. (2011). The impact of a Culture of Corporate Sustainability on Corporate Behaviour and Performance. Working paper 12-‐035. Harvard Business School.

Energy Services Association of Canada. (n.d.). The Energy Services Industry. Retrieved February 10, 2013, from www.energyserviceassociation.ca/

Esty, D., and Winston, A. (2006). Green to Gold. New Haven, CT: Yale University Press.

Grolleau, G. (2012). Green not (only) for profit: An empirical examination of the effect of environmental-‐ related standards on employees’ recruitment. Resource and Energy Economics. 34; 74-‐92.

Haden, S., Oyler, D., and Humphreys, J. (2009). Historical, practical and theoretical perspectives on green management: An exploratory analysis. Management Decision. 47(7): 1041-‐1055.

Hoffman, A. (September, 2008). Overcoming the social and psychological barriers to green building. University of Michigan, Ross School of Business.

42

Hutchins, G. (March 2, 2012). Transforming Towards the Firm of the Future. Network for Business Sustainability. London, Canada: Network for Business Sustainability. Industry Canada. (August 3, 2012). SME Research and Statistics. Retrieved October 21, 2013, from www.ic.gc.ca/ Kollmuss, A., & Agyeman, J. (2002). Mind the Gap: why do people act environmentally and what are the barriers to pro-‐environmental behaviour? Environmental Education Research. 8(3): 239-‐261. Merriam-‐Webster Online. (2013). Consumer. Retrieved February 2, 2013, from www.merriam-‐ webster.com/

Merriam-‐Webster Online. (2013). Corporate. Retrieved February 2, 2013, from www.merriam-‐ webster.com/

Network for Business Sustainability (NBS). (2012). Innovating for sustainability: A guide for executives. London, Canada: Network for Business Sustainability. Network for Business Sustainability (NBS). (August 22, 2011). 10 Things New Sustainability Managers Need to Know. London, Canada: Network for Business Sustainability. Network for Business Sustainability (NBS). (December 5, 2012). Small business, sustainability reporting: It can be done. London, Canada: Network for Business Sustainability. Network for Business Sustainability (NBS). (November 2, 2012). Engaging Employees in “Going Green”. London, Canada: Network for Business Sustainability. Network for Business Sustainability (NBS). (October 11, 2012). SME Sustainability Challenges 2012. London, Canada: Network for Business Sustainability. Pinkse, J., & Dommisee, M. (2009). Overcoming Barriers to Sustainability: An Explanation of Residential Builders’ Reluctance to Adopt Clean Technologies. Business Strategy and the Environment. 18: 515-‐527.

Queensland Government. (2012). Business Sustainability Roadmap. Retrieved April 12, 2013, from www.ehp.qld.gov.au/

Renaud, A. (2011). Promouvoir un management environnemental participatif. Revue Gestion. 36(3): 80-‐ 89.

Rodriguez-‐Melo, A., and Mansouri, S. (2011). Stakeholder Engagement: Defining Strategic Advantage for Sustainable Construction. Business Strategy and the Environment. 20: 539-‐552.

Sandhu, S. (2010). Shifting Paradigms in Corporate Environmentalism: From Poachers to Gamekeepers. Business and Society Review. 115(3): 285-‐310.

Statistics Canada. (2005). Solid waste management activities and impacts. Catalogue no. 16-‐201.

43

Tan, Y., Shen, L., & Yao, H. (n.d.). Sustainable construction practice and contractors’ competitiveness: A preliminary study. Department of Building and Real Estate, The Hong Kong Polytechnic University. Kowloon, Hong Kong.

Torugsa, N., O’Donohue, W. (2012). Capabilities, Proactive CSR and Financial Performance in SMEs: Empirical Evidence from an Australian Manufacturing Industry Sector. Journal of Business Ethics. 109: 483-‐500.

Vasi, I.B., and King, B. (2012). Social Movements, Risk Perceptions, and Economic Outcomes: The Effect of Primary and Secondary Stakeholder Activism on Firms’ Perceived Environmental Risk and Financial Performance. American Sociological Review. 77(4): 1–24.

Walley, N., and Whitehead, B. (1994). It’s Not Easy Being Green. Harvard Business Review. May-‐June.

World Business Council for Sustainable Development (WBCSD). (n.d.). Eco-‐Efficiency Learning Model. Retrieved April 12, 2013, from www.wbcsd.org/

barriers!andopportunities/motivators!! … · 2013-06-24 · ! 2! acknowledgements.!...

Documents