Green Stuff: Value, Risk, and Environmental Management

Environmental issues increasingly influence companies in their approach to fundamental business concerns. How these matters play out in terms of corporate behavior is the subject of a working paper, "Environmental Quality and Economic Advantage: A Framework for Understanding Corporate Environmental Management," by HBS associate professor Forest Reinhardt.

"Does it pay firms to be Œenvironmentally friendly?'" Reinhardt writes. "It makes more sense...to ask when it pays, not whether it pays." Accordingly, Reinhardt examines the circumstances under which companies can, in terms of the environment, most successfully create value or lessen business risk. (An example of value created and risk reduced might be found with a newly developed, disease-resistant plant strain: it both enhances yields, creating value, and diminishes the need for herbicides, reducing risk.)

In general, Reinhardt asserts, it is market leaders who, by virtue of their power to shape the nature of competition in their industries, can force other firms to follow. Flexing similar muscle are firms with technological leadership, especially those in rapidly changing businesses. Such companies gain advantage because regulators tend to look to the most technologically advanced operations when setting industry standards.

On the whole, larger and more prominent firms are most likely to need, want, and be able to derive economic advantage from a focus on environmental management. Reinhardt argues that in order to manage the environmental challenge successfully, firms should improve their cost management, reduce risk, create and capture value, and help develop new approaches to complicated economic and social problems.

These goals, Reinhardt notes, have motivated and characterized successful firms for decades, in the environmental arena and elsewhere. Thus, he concludes, "The way to situate business in the context of the natural environment is to integrate the natural environment into the mainstream of business."

Making It Work: Understanding Race Relations in Organizations

The workplace remains the primary locus of racial interaction in American society; as such, it is a valuable, albeit neglected area for research, write HBS associate professor David A. Thomas and Karen L. Proudford of Morgan State University in a working paper titled "Making Sense of Race Relations in Organizations: Theories for Practice."

The authors study race relations in the organization using the conceptual frameworks of intergroup and psychoanalytic theory. Intergroup theory holds that individuals in organizations belong to two types of groups that shape their experiences: identity groups (i.e., race, cultural background, gender, age) and organization groups (defined by shared task roles and hierarchical position). From psychoana-lytic theory, the authors draw on elements that particularly help elucidate individual and group behavior in racially mixed organizational settings. (One such useful psychoanalytic concept is "splitting," a defense mechanism against anxiety in which the individual ascribes positive attributes to one entity—usually one's own group—while imbuing another group with negative associations.)

The authors apply these theories and concepts to several common organizational problems. For example, they examine how a majority group's perception that a minority group or individual is performing poorly can mushroom into a self-fulfilling cycle of negativity. Discouraged at being deemed incompetent or not worthy of advancement, the minority person or group often tends to underperform, thus reinforcing diminished expectations all around.

Examining such a situation with both intergroup and psychoanalytic tools, Thomas and Proudford help reveal the dynamics at the heart of the matter. Intergroup theory highlights the power of the many organizational pressures and relationships that may be affecting the individual's performance. Psychoanalytic theory focuses on the individual's anxiety, beliefs, and values, underscoring their enduring importance as determinants of a person's behavior in any setting, irrespective of race.

With greater understanding of such dynamics, the authors conclude, organizations will do a better job of managing across races, thus contributing to a more positive workplace and a healthier society.

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