Dian Ekowati

Paper to be presented in Melbourne, 18-20 November 2007 

The issue of natural environment has attracted serious concerns from the world business people and became a crucial part of international trade issues. Therefore, companies which intend to enter into global trade, are challenged to comprehend relationships between pollution prevention, ISO 14000 program, government regulations, environmental performances, and work opportunities. In addition to this, a lot of environmental violation cases in Indonesia indicate that there are only a few companies have environmental concerns. This is not only because of company negligence on environmental problems but also because of lack of law enforcement from the government. In order to avoid these problems, companies have to realize that they must consider natural environment as a potential aspect to enhance their competitive advantages.
Related to those issues, companies need to adopt approaches to face strategic, structural, and contextual problems which one of those is environmental problem (Aragon-Correa, 1998). Aragon-Correa (1998) provides a solution alternative by attaching natural environment issue with a proactive view as a consideration in changing firm’s strategic model. In his research, Aragon-Correa (1998) argues that there is a relationship between business strategy proactivity with firm approach to the natural environment. A strategy application itself could influence firm’s viewpoint in having approach to the natural environment. Moreover, business strategy tendencies correlate with company’s objective achievement (Porter, 1980). This research aims to analyze relationships between business strategy and firm approach to the natural environment. Besides that, this study also intends to examine whether industrial differences influence on firm approach to the natural environment.
This study employed Hierarchical Regression Analysis to answer question on whether there is any relationships between business strategy and firm approach to the natural environment. It can be concluded that the scale of the organizations can be perceived as a significant factor in shaping the relationship between business strategies and firms’ approach to the natural environment especially with traditional environmental operations approach. However, it should be noted that the process of accommodating natural environmental aspects into management function would not only be determined by organization scale but also by company’s business strategy. This result was aligned with study by Aragon-Correa (1998) on business strategies proactivity and firm approach to the natural environment.
Related to business strategies issues, it seems that factor significantly affecting firm intention to pursue approaches to the natural environment was differentiation business strategy. By focusing on cost leadership business strategies, firms are more possible to minimize their social responsibilities toward natural environment and assume that natural management practices will be a costly effort. It can be understood as firms with tendency to conduct cost leadership strategy will be more sensitive to the effect of price changes of the product that make them more cautious in financial related decision making related to their operational activities. However, companies should also consider that there was an increasing level of customers’ awareness toward how companies should conduct their businesses. This would relate to the notion of company social responsibility toward its environment and its contribution to balance the interest of financial profit consideration with sustainable environmental protection as public and social issue. Furthermore, although this study was not aimed to find the causes of the differences, result of ANOVA test revealed that there were differences in firms’ approaches to the natural environment based on the industrial typology. This result supported Aragon-Correa’s (1998) that the typology of industry should be involved to determined whether there are significant differences in the green management practices across industries.