Write a theory on Relevance Of Environmental Performance

Introduction

Businesses in the earlier times were focused on quality and consumer acquisition, then along came the time for competitive management and globalization. The times today have changed, where the environmental performance of the business has emerged as a driver for the business success (Joshi and Rahman, 2015). Even as businesses strive to enhance their environmental performance, the lack of understanding of the drivers of the same and evaluating principles raises challenges for the business. Through the present review, the issue of carbon emission target setting for maintaining environmental targets by organizations is assessed. In view of the impact of the climatic changes on the shareholder’s value, the study assesses the environmental performance on the principles of legitimacy theory.

Practical Motivation

In their review, Joshi and Rahman (2015) reflect that the increase in the population, coupled with the consumerism of the society, has paved the way for the stress upon the natural resources. While the carbon footprint at large has a long-standing association with these results, the organizations and their subsequent carbon emission have been recognized as a driver of increased environmental threats (Chen and Chai, 2010). An example of the same can be noted for GenX that has been in the news for discharging in the Cape Fear River and affecting the major drinking supply. Thus, the need to understand the drivers of environmental pollution in the industrial sector becomes paramount, owing to their direct and indirect impact on the environment. Since stakeholders are essentially community representatives, the present study assesses the impact of climate change with respect to stakeholder value. This will provide a better sense of understanding about their engagement in the environmental performance improvement process (Shishime and Fujitsuka, 2012). Through the use of a performance evaluation framework and setting targets, the interests of the shareholders can be protected (Schmeltz, 2012).

Theoretical Motivation

While financial targets are acknowledged as key indicators of the financial performance of the company (IFC, 2012), the variables such as environmental performance are mostly recognized as intangible drivers for organizational success (Shishime and Fujitsuka, 2012).  These intangible aspects, however, often create liabilities for the operations and deciphering the liabilities in this light improve the performance of the organization (Schmeltz, 2012). Amidst the gap in the literature with respect to environmental performance, the present research strives to gain an insight with respect to the management of environmental performance through strategically measuring the performance through target-based analysis. A similar model has been followed by Middeltown (2015), where they drive principles of the price model. The present study does not access the environmental performance with respect to the stakeholder values of financial drivers alone like Middletown; rather, a more comprehensive analysis is completed. Through the present review, the environmental performance is assessed, where the principles are based on the legitimacy theory. As per this theory, the business in a social construct performs certain tasks to gain social approval (Archel, 2009). In the view of the information asymmetry, the management of the environmental performance becomes affected; for this reason, the study base the need to measure the performance with the agency theory.

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