Companies are well-served to think harder about how they deal with environmental issues because investing in green management can improve financial performance.
Research co-authored by Robert Klassen, professor of Operations Management at the Richard Ivey School of Business, explored the possibility of firms being “leaner and greener at the same time.”
Using Statistics Canada data from the manufacturing sector, Klassen’s research examined green investment and its impact on the bottom line. Green investments were divided into three categories: pollution control, pollution prevention and management practices.
Perhaps counter-intuitively, the study showed investments in pollution prevention and/or control had no impact, either positive or negative, on the firm’s bottom line. However, investments in environmental management practices resulted in significant financial returns.
“We were surprised to see such strong results on the management practice side,” Klassen says. “We had expected management practices to be somewhat ambiguous because there are so many practices being explored. Yet the strong evidence across different industries was that investing in training, monitoring and auditing made significant difference.
“Existing research suggests that the difference between average and great organizations is the way they use their people. Our results reinforce that general observation.”
The research was authored with Markus Biehl at the Schulich School of Business.
In another stream of sustainability research, Klassen looked at how manufacturing organizations handle the growing complexity of social issues in their supply chain. As firms struggle to better understand how social practices (such as workplace safety, diversity and supplier working conditions) are linked to the bottom line, Klassen examined how firms identified and managed social issues across their supply chains. This research used a combination of field interviews with managers in Canada and Europe, and a large-scale survey in Canada.
He found firms fared best when dealing with the internal workforce and customers.
“Companies have worked very hard in Canada to develop good wellness and health and safety practices for employees, and workforce diversity,” he says. “They also are taking care of their customers, particularly in areas like package integrity and product tracking.”
Social issues in the community garnered less attention, and suppliers ranked as the most neglected of the four groups. Most firms were lax in monitoring supplier practices and working conditions, and rarely audited suppliers.
“This is an area that needs further development,” he says. “Firms tend to just hope that things will turn out.”
Klassen developed a self-assessment tool managers can apply at either the corporate or plant level. This tool enables firms to evaluate how well they manage social issues across the supply chain, and compares the results against industry benchmarks.
Details of the research were released in the July edition of impact, an online monthly publication featuring research from faculty at the Richard Ivey School of Business. To read the full article, click here.
Ivey Professor Chris Higgins also discusses why people are experiencing a time crunch and what they can do about it in the Faculty Focus feature. To listen to the interview or read a transcript, click here.