Why Small Firms Don’t Go Green

Since small firms most frequently pursue a differentiation strategy, an emphasis on environmentally- friendly processes could significantly differentiate a company from its larger counterparts.  And even though a green approach has proven to be effective for small firms, there are a variety of reasons leaders hesitate when looking to pursue an environmentally-friendly approach in their corporate strategy. According to Leonidou, Christodoulides, Kyrgidou, and Palihawadana (2017),[i] when compared with larger firms, small companies have a smaller environmental impact.  Furthermore, the following issues are deterrents:

  • Actions in relation to the natural environment are less conspicuous to various stakeholder groups.
  • Small firms possess less financial, manpower, technical, and allied means to embark on and implement environmental management activities.
  • Small firms lack access to financial markets, legal advice, and scale economies to achieve environmental progress.
  • They are less sensitive about their brand reputation and corporate image, and have less aggressive objectives with regard to environmental issues.
  • They usually adopt a more short-term perspective in their business.

A green approach is most effective in manufacturing industries where there are intense competition and heavy government regulation and intervention.  Yet, while the benefits are proven, very few small businesses take such an approach to strategy (Leonidou et al., 2017).


[i] Leonidou, L., Christodoulides, P., Kyrgidou, L., & Palihawadana, D. (2017). Internal drivers and performance consequences of small firm green business strategy: The moderating role of external forces. Journal of Business Ethics, 140(3), 585–606. https://doi.org/10.0.3.239/s10551-015-2670-9

 

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