Understanding business decision making on the environment

Abstract

This paper considers the influence of a range of factors within and around the firm on business decision making relating to the environment. Within the firm, it emphasises the importance of governance structures, corporate cultures and organisational capacities. Around the firm, it stresses the importance of the incentives, imperatives and informational pressures that emerge from governments, markets and civil society. It is argued that change is most likely where the various external pressures resonate with each other, and where they impact upon firms with receptive corporate cultures and adequate organisational capacities. It is also argued that these preconditions for change are often absent, which makes change more difficult or more expensive. It is further argued that even when these preconditions are in place, they are likely to engender only to incremental change. As prolonged periods of incremental change must eventually encounter diminishing returns, the key challenge for those seeking to promote significant changes in business behaviour is to put in place the full range of conditions needed to allow companies to make them. This can mean focusing not only on the operational but also on the strategic activities of businesses, and not only on individual businesses but also on the broader systems and networks within which they operate.