THE FEASIBILITY OF ENVIRONMENTAL ENTREPRENEURSHIP
AMONG SMALL AND MEDIUM ENTERPRISES
Azilah Kasim, PhD
Tourism and Hospitality,
College of Arts and Sciences
Universiti Utara Malaysia, 06010 Sintok, Kedah, Malaysia
E-mail: [email protected]
Phone: 60 4 928 5984
Fax: 60 4 9285975
Nor Azila Mohd Nor
ABSTRACT
Changes in the environment as a consequence of pollution and human behaviour are increasingly
becoming a world wide issue. Both the manufacturing and service sector have contributed
towards environmental impacts such as depletion of natural resources, thus possibly reducing the
sustainability of the very economic system that supports them. To deal with this problem, an
increasing number of corporate managers and entrepreneurs have responded by adopting
environmental management practices such as recycling, water conservation and energy-efficient
management systems. It has been argued that most of these green initiatives have been adopted
by large corporations but not by the small and medium enterprises. This conceptual paper gives
an insight into the impacts of small and medium enterprises (SMEs) on the natural environment,
their role in protecting the environment and the feasibility of adopting green practices in their
operations. In doing so, the paper highlights theoretical drivers and barriers of implementing
such practices and concludes with recommendations on promoting environmental
entrepreneurship.
INTRODUCTION
The relationship between business and the environment is now well documented (cf. Fischer and
Schot, 1993; McDonagh and Prothero, 1977). Interests on environmental degradation began in
the 1960s in Western Europe and North America, prompted by incidents such as heavy smog
caused by industrial activities in London1. In the 1970s, civil society started to realize more
clearly the negative environmental consequences of business activities. However, the
predominant focus of civil movements (such as the ‘Greens’ in Germany) on conservationrelated issues at the time led business to disregard the environment as a threat to its operation and
reputation. Business’s traditional response towards environmental issues remained antagonistic
with little care about the costs of business activities towards the environment (Utting, 2000). In
1
This incident prompted the Clean Air Legislation in the 1970s.
fact, environmental protectionism was considered a nuisance to business enterprise for the most
part. Businesses tended to deny or avoid their environmental responsibilities and opposed those
developments designed to control performance (Tilley, 1999). Hence, business generally
remained in denial of its environmental responsibility, despite the development of increasingly
complex pollution control legislation in many parts of Western Europe, North America and
Japan.
However, over the last decade, environmental matters have become an increasingly important
issue in business decision-making, strategic planning and performance management.
Government regulation, for instance, has imposed greater environmental demands on businesses,
thus constraining managerial decision-making (Schaper, 2000). Other external factors such as
consumer demands and increasing public scrutiny have also pressured business organizations to
improve their environmental performance and to include environmental matters into their
corporate strategy. It is anticipated that business organizations that seize the opportunity to
improve their environmental performance will the gain the benefits of increased consumer base,
improved public image among the local community and even cost savings. While most research
in the area of environmental performance has concentrated on large corporate companies, this
paper focuses on the particular case of SMEs. The first part of this research discusses the concept
of environmental entrepreneurship, followed by the relationship between SMEs and the
environment and lastly, the feasibility of adopting green practices in SME operations.
ENVIRONMENTAL ENTREPRENEURSHIP
The need to reduce energy consumption, pollution and wastes have created new opportunities for
entrepreneurs to introduce products and services that can protect and preserve the environment.
According to Schaper (2002), both entrepreneurship and environmental business management
are comparatively new concepts. Compared to the concept of entrepreneurship, the greening of
management is even less well known, less researched and more poorly understood but by the late
1980s, this theme has become more prominent. There is now a small but growing body of
literature on the topic of environmental entrepreneurship.
Various terms are used to refer to the concept of environmental entrepreneurship. These include
‘green’ entrepreneurship (Taylor & Walley, 2003; Schaper, 2002), ethical entrepreneurship
(Taylor & Walley, 2003), enviropreneurship (Keogh & Polonsky, 1998) and ecopreneurship
(Schaper, 2002; Volery, 2002, Isaak, 2002). Previous researchers have defined environmental
entrepreneurship as:
‘the creation of new products, services or organizations to meet environmental
market opportunities’ (Lober, 26)
‘the innovation, the identification of opportunities and the exploration of
seemingly disparate globalist perspectives and the inter-relationships’ (Keogh &
Polonsky, 1998)
‘environmental responsibility in entrepreneurship’ (Volery, 2002)
1
‘an existential form of business behaviour committed to sustainability’ (Isaak,
2002)
‘financially oriented entrepreneurs who happen to identify a green niche’
(Taylor & Walley, 2003)
Basically, the concept of environmental entrepreneurship encompasses the adoption of
environmentally responsible business practices, also known as green practices, in
entrepreneurship activities. Examples of such practices include recycling waste materials,
donating to environmental groups, minimizing pollution and educating the public. Evidence from
recent reports suggest that the benefits gained from environmental entrepreneurship include cost
savings, staff involvement, training and well-being and improved outreach with society (Toyne,
2003).
Several researchers have attempted to come up with a typology of environmental entrepreneurs.
Volery (2002) distinguishes two categories of environmental entrepreneurs, the first one being
‘environment-conscious entrepreneurs’ and the second one ‘green entrepreneurs’. The first
category of environmental entrepreneurs are essentially those who are well aware of
environmental issues, but are not in the environmental marketplace. They are individuals who
develop any kind of innovation (product, service, process) that either reduces resource use and
impacts or improves cost efficiencies while moving towards a zero waste target. On the other
hand, the ‘green entrepreneurs’ are those that are both aware of environmental issues and whose
business venture is in the environmental marketplace. Such entrepreneurs pursue environmentalcentered opportunities which show good profit prospects. They are usually involved in the
business of recycling and disposal of solid waste, air pollution control and water treatment. The
common features between these two types of environmental entrepreneurs are that they both
strive for sustainable development and innovate to create marketable solutions to the demands of
consumers and environmentalists.
Another typology of environmental entrepreneurs has been suggested by Taylor & Walley
(2003). Four categories of environmental entrepreneurs have been identified based on the
motivations or orientations of the entrepreneurs. The four categories are ‘Innovative
Opportunist’, ‘Ethical Maverick’, ‘Ad hoc Entrepreneur’ and ‘Visionary Champion’. The
‘Innovative Opportunist’ type is described as a financially oriented entrepreneur who spots a
green niche or opportunity and is mainly influenced by hard structural drivers such as regulation.
The ‘Ethical Maverick’ is characterized by a sustainability orientation and soft structural
influences. The ‘Visionary Champion’ sets out to change the world, operates at the leading edge
and has a vision of a sustainable future that envisages hard structural change and the final
category, the ‘Ad hoc Entrepreneur’ is a kind of accidental entrepreneur whereby the motivation
is financial and not values-driven and personal networks, family and friends influence them the
most. The different motives of each type of environmental entrepreneurs could suggest ways in
which policy makers and educators can foster green businesses.
Although there are various categorizations of environmental entrepreneur, all of them
demonstrate the contribution that could be made towards creating a healthier environment.
2
Individuals that incorporate the concept of environmental entrepreneurship into their business
operations not only benefit from a range of marketing opportunities and cost savings, but also
make a positive contribution to society.
SMEs AND THE ENVIRONMENT
SMEs are an important part of most nation’s economies as they create jobs, build effective
networks and make a positive contribution towards social inclusion (Hitchens et al., 2005). In
Australia, SMEs are estimated to contribute over 40 per cent of Gross Domestic Products and
employ more than half the workforce (Gerrans & Hutchinson, 1998) whereas in Europe, SMEs
account for 99.8 per cent of total number of companies in the European Union and two thirds of
employment (Hitchens et. al, 2005). It has therefore become increasingly clear that SMEs as a
group have a significant environmental impact. Equipment purchase and use, packaging and
waste disposal are some of the ways small firms can affect the environment (Rajendran &
Barrett, 2003). The Marshall Report estimates that as much as 60 per cent carbon dioxide
emissions from businesses result from the activities of SMEs and the Environment Agency
estimates that 60 per cent of the commercial waste and 80 per cent of the pollution accidents
result from SMEs in the United Kingdom (Hitchens et. al, 2005).
Nevertheless, most of the research to date on businesses and the natural environment have
focused on larger corporations and multinationals. This is due to a number of reasons. Firstly, the
impact of larger firms on the environment tends to be more noticeable and secondly, larger firms
tend to have more experience in dealing with multiple stakeholder pressures (Schaper, 2002).
Larger firms also have greater access to financial and human resources and have more means at
their disposal for influencing administrative authorities when environmental standards are being
set (Roy & Boiral, 2003).
There is however a small but growing number of researchers working in the SME-environment
field. In recent years, studies in a variety of countries including Australia, Europe, the United
Kingdom and the USA, have identified several trends that seem common to most SMEs
(Schaper, 2002a). In general, most small business owners/managers believe that the environment
is an important issue and support protection of the environment per se. However, awareness of
formal environmental management systems, specific environmental laws and/or remediation
process is generally very poor and quite limited. Furthermore, where environmental programmes
are undertaken, they tend to be largely reactive in nature, one-off and focus on emission
reduction rather than pro-active pollution prevention measures.
Another study was carried out in Quebec manufacturing companies by Roy & Boiral (2003). Its
objectives were to examine what type of environmental initiatives and supporting management
systems SMEs are implementing to reduce their environmental impacts and what are some of the
internal factors driving a proactive environmental strategy. Their results revealed that SMEs are
definitely not implementing management systems that could drive environmental performance
throughout their organization and that employees’ participation in environmental management is
very low. These results also confirmed the considerable influence that owners/managers have
with all aspects of environmental formulation and implementation. In light of these results, Roy
3
& Boiral (2003) provided several recommendations. Firstly, organizations should take more
advantage of the synergies occurring between environmental management and managerial
practices and secondly, the involvement of all employees in the formulation and implementation
aspects of their environmental strategy should be encouraged.
In Schaper’s (2002b) investigation of the discrepancy between environmental attitudes and
practices in SMES, it was revealed that a number of different contingency factors seemed to be
linked to the discrepancy. The generally positive attitudes towards the environment do not appear
to be reflected in the business owners’ knowledge base or their actual business practice. The
depth of commitment to environmental concerns were due to variables of firm size, customer
demands, capital availability, information availability, time availability, owner age, owner
gender and the owner’s educational level.
Motivated by questions of management perceptions and awareness of their responsibilities,
challenges and opportunities in the environmental area, a survey of Western Australia SMEs was
conducted by Gerrans & Hutchinson (1998). Results of the survey revealed that SMEs see
environmental management systems as a cost to their business and the majority do not see it as a
tool for competitive advantage, a marketing angle or even a selling feature to their customer
base. The results also indicated that management had little appreciation of the impact of all
commercial enterprises on the environment.
In contrast to Gerrans & Hutchinson’s (1998) findings, Toyne’s (2003) research found that a
majority of SMEs being sampled in the UK recognized the competitive advantage through
business responsibility. To them, involvement in social and environmental issues promoted
improved services, reputation and integrity, which were all key for retaining and attracting
customers and staff. However, the research also revealed that SMEs have no idea what
sustainable development is and its relationship with corporate social responsibility. There is a
need for both the national and local government to improve the awareness of their sustainable
development agenda to SMEs and to the various bodies that advise and assist SMEs.
The studies being presented above have uncovered the relatively poor environmental
performance of SMEs. For the benefit of the environment, it is suggested that SMEs should play
a stronger role in fostering environmental entrepreneurship. Governments alone cannot achieve
the objective of integrating environmental sustainability and economic growth. On the other
hand, the SMEs can play a central role in resolving environmental problems as the need to
reduce pollution, resource consumption and wastes create the opportunities for owner/managers
of SMEs to introduce innovation and new technologies to overcome these problems. SMEs have
long displayed innovation capabilities which have been identified as critical success factors for
them (Roy & Boiral, 2003). The ever increasing consumer demand for environmentally-friendly
goods and services and the escalating costs of waste disposal have all triggered environmentrelated business opportunities for the SMEs. SMEs that respond to market forces and are
innovative enough to reduce waste generation will definitely enter the market with a competitive
advantage. Nonetheless, significant differences in terms of organizational structure, planning
process and resource availability may influence the type of environmental solutions considered
(Roy & Boiral, 2003).
4
DRIVERS OF ENVIRONMENTAL MANAGEMENT AMONG SMEs
According to various studies, the key determinants of environmental responsiveness among
SMEs are government legislation, market pressure and management attitude. Laws and policies
often provide the initial push factor for SMEs to initiate environmental improvements (Schaper,
2002b; Fletcher & Liias, 2003; Hitchens et. al, 2005; Gerrans & Hutchison, 1998). SMEs are
often forced to monitor and control their environmental impacts due to licensing requirements,
local council requirements and heavy fines and taxes being imposed on them. However, it is
worth noting that much of the environmental legislation passed by governments in recent years
has generally been aimed at large corporations (Schaper, 2002a). These legislations usually
exempt SMEs in order to spare them additional costs but such action actually reduces the
pressure on them to improve environmental performance.
Along with the pressure of government legislation, customers have also become more
environmentally aware and demanding businesses to be more responsible towards the
environment. Within the UK, consumer evidence has been collected that suggests that customers
look at the social behaviour of companies from which they buy (MORI as cited in Toyne, 2003).
Many consumers have shown a willingness to spend more on environmentally products, thus
providing the opportunity for SMEs to produce greener goods and services at a premium price to
cater to this new market segment. There is however, evidence suggesting SMEs do not see the
marketing opportunities of going green. Gerrans & Hutchinson’s (1998) survey of SMEs in
Western Australia showed that the respondents generally did not feel their clients thought that
the environment was an issue, thus giving them little motivation to prioritize environmental
aspects of their operations.
An additional barrier to introducing environmental practices in business operations is
management attitude. The personal motivations and priorities of small firm owners/managers are
of paramount importance in determining the aims and policies of firms (Dewhurst & Thomas,
2003). Without the support of management staff, it highly unlikely that the introduction of
environmental programmes such as recycling and conservation of resources will succeed.
Schaper (2002b) nonetheless argues that not all positive attitudes towards environmental
initiatives translate into actual business practice. His research concluded that the depth of
commitment to environmental concerns among managers/owners of SMEs were dependent on
their age, gender and level of education. The highest level of environmental support came comes
from the 18-54 year olds and declines sharply thereafter with increasing age. In terms of gender,
women are reportedly more concerned about environmental issues than men, thus illustrating
that female managers/owners will also be more environmentally supportive than thei
environmental counterparts. Furthermore, individuals with higher education levels are also seen
to be more willing and able to undertake environmental improvement programmes.
BARRIERS OF ENVIRONMENTAL MANAGEMENT AMONG SMEs
SMEs face a number of barriers to adopting environmental practices and these include lack of
resources, time as well information and advice on environmental matters. As opposed to larger
5
corporations, SMEs simply do not have as many resources to address environmental issues
(Fletcher & Liias, 2003; Rajendran & Barrett, 2003; Roy & Boiral, 2003). One of the most
important resources much needed in introducing an environmental programme are financial
resources. Activities such as eliminating wastes, conducting environmental audits, adopting
cleaner technologies and undertaking plant modifications all require capital (Schaper, 2002b). If
it could be demonstrated that capital investments in environmental practices could lead to longterm benefits of cost savings and increased profitability, it is very likely that their take-up of
environmental practices would be more encouraging.
In terms of human resources, the role of management and the culture of the business organization
are important to the take up of environmental initiatives (Hitchens et. al, 2005). Roy & Boiral
(2003) research findings also support this argument. Their findings demonstrated that although
business managers are strongly involved in the various aspects of environmental management,
the employees’ participation in environmental management is very low. The correct attitude,
skills and expertise in environmental aspects of the business operation is much needed among
staff members of all levels to improve environmental performance.
According to Hitchens et. al (2005), lack of management time is another constraint on the part of
SMEs in the take up of cleaner technologies. Planning and researching suitable options for
environmental projects takes time and most often than not, SME owners/managers are too busy
running their businesses to pay attention to environmental aspects. Schaper (2002b) also agrees
on this and points out that small business owners/managers with more time availability will be
more likely to consider and implement environmental improvement programmes than their timeshort counterparts.
SMEs require assistance and help to find ways to improve their environmental performance
(Hallinan & Jenks, 2003). The failure of advice services and written materials on environmental
management currently available to SMEs is cited by several researchers as a main barrier to the
adoption of environmental practices (Schaper, 2002b; Toyne, 2003; Dewhurst & Thomas, 2003,
Schaper, 2002a). Increasing a firm’s knowledge of environmental issues would enable them to
improve their environmental performance and encourage them to act in an environmentally
responsible way. However, Hitchens et. al’s (2005) investigation of SMEs in Europe showed that
there was an abundance of easily accessible and cheap information as well as advise that was not
fully utilized by the SMEs, thus limiting their adoption of environmental practices.
CONCLUSIONS
The key issue for SMEs at the present time is to recognize that their potential earning is at risk if
environmental practices are not implemented to protect the environment from deteriorating.
SMEs have an important role to play as the cumulative effect of SMEs on the environment is
substantial and may lead to biodiversity loss and natural resources degradation. Environmental
entrepreneurship offers the opportunity for SMEs to introduce products and services that not
only protect and preserve the environment but also benefit them economically through cost
savings, increased market base and better business profits. Since regulation is one of the key
drivers of the adoption of environmental practices among SMEs, is recommended that the
6
government should be more aggressive in implementing laws and regulations that are applicable
to SMEs and not just large corporations. Information and advice on environmental programmes
that are affordable and suitable for SMEs should also be easily accessible so as to further
promote their take up of environmental practices. Such information and advice should convince
the SMEs that environmental practices contribute towards long-term financial benefits and
demonstrates their social responsibility. It is also recommended that individual SMEs should
work together as a team and pool their financial and human resources to initiate environmental
programmes such as recycling waste, conserving energy and educating the public about
environmental protection.
REFERENCES
Dewhurst, H. & Thomas, R. (2003). Encouraging sustainable business practices in a nonregulatory environment: A case study of small tourism firms in a UK national park.
Journal of Sustainable Tourism, 11(5), 383-403.
Fischer, K. and Schot, J., (1993). Environmental Strategies for Industry: International
Perspective on Research Needs and Policy Implications. Island Press
Fletcher, K. A. & Liias, E. (2003). SMEs and voluntary environmental performance: 2003 Golf
course business value survey. Available online
[www.audubonintl.org/resources/whitepapers/2003smeepg.pdf]
Gerrans, P. A. & Hutchinson, B. E. (1998). EMS and SMEs: Current and likely impact of
environmental management systems on small to medium enterprises. Available online
[www.sbaer.uca.edu/research/1998/icsb/g007.pdf]
Hallinan, P. & Jenks, R. (2003). The SME battle against environmental performance: The
Hackerfors Model in Sweden. Unpublished Master Thesis. Linkopings Universitet.
Sweden.
Hitchens, D., Thankappan, S., Trainor, M., Clausen, J. & De Marchi, B. (2005). Environmental
performance, competitveness and management of small businesses in Europe. Tijdschrift
voor Economische en Sociale Geografie, 96(5), 541-557.
Isaak, R. (2002). The making of an ecopreneur. Greener Managament International, 38, 81-91.
Keogh, P. D. & Polonsky, M. J. (1998). Environmental commitment: A basis for environmental
entrepreneurship? Journal of Organizational Change Managemen, 11(1), 38-49.
Lober, D. J. (1998). Pollution prevention as corporate entrepreneurship. Journal of
Organizational Change Management, 11(1), 26-37.
McDonagh, P. and Prothero. A. (Eds.) Green Management: A Reader, The Dryden Press:
London and New York 1997 pp. 526
Rajendran, D. & Barrett, R. (2003). Managing environmental risk in small business: An agenda
for research. Paper presented at the Small Entreprise of Association of Australia and
New Zealand 16th Annual Conference, Ballarat. 18 September – 1 October 2003.
Roy, M. & Boiral, O. (2003). Organizing for environmental performance: Specific challenges
for SMEs. Available online [www.handles.gu.sef/ifsam/streams/env/77%20final.pdf]
Schaper, M. (2002). The essence of ecoprenership. Greener Managament International, 38,
Schaper, M. (2002a). The challenge of environmental responsibility and sustainable
development: Implications for SMEs and entrepreneurship academics. Available online
[www.kmu.unisg.ch/rencontres/band2002/F_09_schaper.pdf]
7
Schaper, M. (2002b). What causes the discrepancy between environmental attitudes and
practices in SMEs. Available online [www.sbaer.uca.edu/research/icsb/2000/pdf/086.pdf]
Taylor, D. & Walley, E. E. (2003). The Green Entrepreneur: Visionary, Maverick or
Opportunist? Manchester Metropolitan University Business School Working Paper
Series.
Tilley, F. (1999). The Gap between the Environmental Attitudes and the Environment:
Behaviour of Small Firms. Business Strategy and the Environment, 8:238-248
Toyne, P. (2003). Corporate social responsibility – good business practice and a source of
competitive advantage for SMEs? Paper presented at the 48th World Conference
International Council for Small Business: Advancing entrepreneurship and small
business. 15-18 June 2003.
Utting, P. (2000). Business Responsibility for Sustainable Development, UNRISD Occasional
Paper 2, January 26-30.
Volery, T. (2002). Ecopreneurship: Rationale, current issues and future challenges. Available
online [www.kmu.unisg.ch/rencontres/band2002/F_11_volery.pdf]
8