Current and Expected Development of Corporate Strategies for Managing Environmental Risks in Hungary
Abstract
:1. Introduction
2. Literature Review
2.1. Environmental Risks and Their Management
2.2. Levels of Development, Innovation, Strategies for Managing Environmental Risks
- product innovation;
- product and process innovation;
- and product, process and organizational innovation factors.
- Ambiguous;
- Accountable;
- and aspirational.
- can be applied effectively by increasing the return;
- increases differentiation and competitiveness;
- generates an environmental and social surplus;
- remains resistant to emerging social and environmental trends;
- and shows network effects, promotes stakeholder engagement (Young and Reeves 2020).
- Stage 1:
- Green Compliance as Opportunity
- Stage 2:
- Making Value Chains Sustainable
- Passive: little or no consideration is given to sustainability aspects.
- Event-driven: sustainability is integrated into the business process in an ad hoc, reactive manner.
- Practice-oriented: sustainability goals are met with practices implemented at the operational level.
- Strategically managed: sustainability aspects are treated as a strategic goal, as a differentiator in the market competition.
- Stage 3:
- Designing Sustainable Products and Services
- Stage 4:
- Developing New Business Models
- Stage 5:
- Creating Next-Practice Platforms
- Comply with the law.
- Anticipate future legal requirements.
- Think the value chain as an ecosystem.
- Develop responsible products and services.
- Lead the change.
3. Materials and Methods
4. Results and Discussion
4.1. Basic Characteristics of the Responses (Distribution Ratio, Mode)
- For the question “1/a. Promoting environmental innovation by exceeding mandatory regulations”, the most frequently given score (mode) for the present was four (26% of the respondents); however, for the future, the highest proportion gave a rating of five (33 %). It can therefore also be seen that the ratio of the most characteristic scores of the present and the future also differs, so the promotion of environmental protection innovation is even more often classified as a management task by enterprises. This is confirmed by the fact that even for the highest possible score (six), the difference between the current score (12%) and the expected future score (23%) is more than double (Figure 4). From the above, it can be concluded that in the future, businesses intend to place a much stronger emphasis on innovation, and it also shows that, at present, innovation is still not among the most important strategic factors in many cases.
- “1/b. Creating transparency regarding the resource use and emissions” is currently a more important factor in the life of businesses compared to the previous variable. Almost a third of the businesses included in the analysis gave a rating of five on this question. For the future, the rating of five appears in a similar proportion, but here too there is a striking increase in the frequency of the highest value (six) (32%). The enterprises therefore consider that their operations are currently transparent in relation to the use and emission of resources, but they still see the opportunity for development in the system, so they shape their strategies in the medium term accordingly.
- The highest proportion of scores for the question on “ 1/c. Assessment of opportunities and risks related to environmental protection” also fall into the 4–6 category (four–25%; five–30%; six–22%). The assessment of this variable is similar to that of the variable “1/a. Promoting environmental innovation”. Businesses are already dealing with the assessment of environmental risks, but at the same time, development is essential. This is not necessarily only due to the need for methodological improvements, but also due to the emergence of new risk factors that are not yet known and are likely to emerge in the future. For this reason, the two highest scores on the Likert scale (5–6) received 64% of the evaluations in the case of future value.
- In the case of “1/d. Incentives for daily action”, there is an even greater difference in the responses regarding the present and the future. For answers concerning the present, the average assessment is also displayed (20%), but almost half of the answers rate this indicator as a four or five. The proportion of the highest value (six) is relatively small (6%); however, companies consider that the development of incentives should play a very important role in the next 3–5 years, as reflected in the more than threefold increase in the share of businesses giving a score of six.
- The highest value was given for the future role of “2/a. Creating transparency of direct and indirect environmental impacts” by nearly 55% of the companies. All of this suggests that companies clearly consider the measurement and management of environmental impacts to be an important strategic factor that should be given even stronger emphasis in the coming years.
- In the case of incentives and obligations created for the partners in the value chain (2/b.), there is also a significant shift towards higher Likert scale values for the future (four: 24%, five: 30% six: 13%).
- However, the assessment can be said to be cautious, as the frequency of the highest score is visibly lower than the one for the previous indicator both in terms of the present and the future (Figure 5).
- Nowadays, the role of environmentally friendly product alternatives (3/a.) is indisputable, but half of the economic organizations participating in the research believe that nowadays it does not receive enough emphasis among managerial tasks: most of them rated it as a five (23%) or a four (22%). It is therefore no coincidence that the frequency of both rankings for the future is 24%, while at the same time a significant increase of the value six can be observed (from 11% to 18%).
- Determining consumers’ willingness to pay for more environmentally friendly products/services (3/b.) shows a more diverse picture than the previous ones. Unusually, here the most frequently given scores are not the values 4–5, but 3 (26.1%). All of this means that the majority of businesses have not yet taken systemic steps in this area, however, in a 3–5-year perspective, as can be seen in the spider web diagram (Figure 6), a very strong shift in favor of the value of five can be seen (from 11% to 26%). The lower values also show that this issue will be a significant management focus in the future, considering that the proportion of companies giving a value of one is 18%, while the same proportion will decrease to 10% in the future.
- The ecological pricing of products and services (3/c.) was also evaluated differently by enterprises. The ratio of values one and two currently hovers around 20%, looking into the future; however, the ratio of these values will decrease and the share of enterprises with the two lowest values for this variable is 11–12%. The growing importance of the question is shown by the fact that most respondents gave a value of five for the future (29%), which is also clearly visible on the spider web diagram (Figure 6).
- For the current situation, evaluating and encouraging the development of a green business model (4/a.) was most often rated three and four, so almost half of the enterprises clearly consider the need for development as a strategic factor. This is proven by the fact that for the future the most frequently given ranking is four (25%), but particularly strongly—almost doubling—appear the proportions of score five (from 13% to 21%) and score six (8% from to 16%). This is accompanied by a significant decrease in the proportion of score one (from 18% to 6%).
- A very similar pattern can be seen in the Figure 7 for the preparation of business plans according to the green business model (4/b.).
- Preparation of business plans according to the green business model.
- Evaluating and encouraging the development of a green business model.
- Creation of new markets, systemic market analysis from the point of view of environmental protection, establishment of a green market leadership role, market influence.
- Creating incentives for daily action.
- Promoting environmental innovation by exceeding mandatory regulations.
- Ecological pricing of products and services.
4.2. The Results of the Cluster Analysis for the Present
- Preparation of business plans according to the green business model (F = 154.41).
- Evaluating and encouraging the development of a green business model (F = 151.80).
- Creating incentives and obligations for partners in the value chain (F = 137.17).
- Promoting environmental innovation by exceeding mandatory regulations (F = 134.46).
- Creation of new markets, systemic market analysis from the point of view of environmental protection, establishment of a green market leadership role, market influence (F = 131.68).
- The Return on Assets (RoA) indicator shows the degree of efficiency in the use of assets. In the case of the enterprises included in the research, the enterprises belonging to the Laggards cluster perform best in terms of profitability relative to assets.
- The Return on Sales (RoS) indicator represents the net-profit ratio, so it measures profitability through the proportion of net sales that contributed to the after-tax result. Based on this profitability indicator, the Awakening cluster performed the best.
- In the case of the headcount-related profitability indicators, the cluster of Pioneers performed best, as expected.
4.3. The Results of the Cluster Analysis for the Future
- Seven enterprises from the cluster of Pioneers (1) were classified in a lower sustainability cluster, of which five enterprises fell into the cluster of Laggards (3).
- The greatest movement took place in the Awakeners (2) cluster; there was a shift in both directions, apart from a few enterprises; the range of companies belonging to this group changed significantly. However, 65% of the reclassifications took place in the direction of the lower cluster.
- A significant reorganization also took place in the cluster of Laggards (3); 60% of the group was placed in a higher-level cluster(in the Awakeners cluster), with the exception of three enterprises.
4.4. Limitations of the Research and Further Research Directions
5. Conclusions
Author Contributions
Funding
Data Availability Statement
Conflicts of Interest
References
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Sustainability Innovation | Competitive Advantage | ||
---|---|---|---|
Product | Quality improvement | Increased value creation | Market share |
Reduced material and energy use | Profitability | ||
More environmentally friendly materials | Sales growth | ||
Environmentally friendly packaging | First mover advantage | ||
Recycling and reuse | New market opportunities | ||
Eco-labeling (can increase sales) | Reduced costs | Productivity | |
Process | Reduced emissions | Efficiency | |
Reduced waste | Reduced costs | ||
Recycle and reuse | Non-financial assets | Reputation | |
Reduced energy and materials consumption | Image | ||
Reduced resources | Quality | ||
Lower consumption of water, electricity, gas patrol, coal | Customer satisfaction | ||
Managerial | Environmental management | ||
ISO certifications | |||
Green marketing | |||
Organizational methods |
Operational Optimization “Eco-Efficiency” | Organizational Transformation “New Market Opportunities” | Systems Building “Societal Change” | |
---|---|---|---|
Innovation Objective | Compliance, efficiency “Doing the same things better” | Novel products, service or business models “Doing good by doing new things” | Novel products, service or business models that are impossible to achieve alone “Doing good by doing new things with others” |
Innovation Outcome | Reduces harm | Creates shared value | Create net-positive impact |
Innovation’s Relationship to the Firm | Incremental improvements to business as usual | Fundamental shift in firm purpose | Extends beyond the firm to drive institutional change |
Strategy | Complying with regulations or pursue efficiency gains | Embedding sustainability as a cultural and strategic norm in a shaping logic that goes beyond greening | Logic of wide collaborations and investing in system solutions to drive new, co-created value propositions |
Process | Focus on internal and incremental innovations | Adopting new values, platforms and new ideation practices (e.g., biomimicry) | Adopting new collaborative process platforms with diverse stakeholders |
Stage | Green Compliance | Wait-and-See Strategy | Green Products and Services | Completely Green Strategy |
---|---|---|---|---|
Goals | Compliance, risks and costs goals | All five stages are of low importance, image and social goals | Focusing on green products and services, innovation, competitive advantage and turnover growth targets | All five stages are above average and balanced in importance |
Stakeholders | Outside of legislation, there is little external influence | The influence of external stakeholders is still low | Above-average influence of market players | Strong influence of all stakeholders |
Share among the investigated enterprises | 20% | 27% | 26% | 27% |
Author | Basis of Grouping | Grouping Criteria | Groups |
---|---|---|---|
Adams et al. (2016) | Sustainability-oriented innovation (SOI) SOI practices and processes | based on the examination of 100 scientific publications and 27 gray sources | Operational Optimization—“Eco-Effinciency” |
Organizational Transformation—“New Market Opportunities” | |||
Systems Building—“Societal Change” | |||
Mead et al. (2022) | Types of organizational narratives related to SOI | Using data generated from semi-structured interviews (n = 52) | Ambiguous |
Accountable | |||
Aspirational | |||
Landrum (2017) | Stages of corporate sustainability | Based on the integration of developmental stages of 22 micro- and macro-level models | Compliance |
Business-centered sustainability | |||
Systemic sustainability | |||
Regenerative sustainability | |||
Coevolutionary sustainability | |||
Young and Reeves (2020) | Spectrum of company maturity from corporate social responsibility (CSR) to “sustainable business model innovation” (S-BMI) | Non applicable | Corporate social responsibility |
Compliance-driven | |||
Reactive changes for sustainability | |||
Sustainable business model innovation | |||
Nidumolu et al. (2013) | Stage model of becoming sustainable | Studying the sustainability initiatives of 30 large corporations | Green Compliance as Opportunity |
Making Value Chains Sustainable | |||
Designing Sustainable Products and Services | |||
Developing New Business Models | |||
Creating Next-Practice Platforms | |||
Isensee and Michel (2011) | Based on the five steps of becoming sustainable by Nidumolu et al. | A survey of 295 medium- and large-sized enterprises in Germany | Green Compliance |
Wait-and-see Strategy | |||
Green Products and Services | |||
Completely green strategy | |||
Pavie et al. (2014) | Integration of responsibility at all levels of the organization | Via four workshops: ‘theoretical’ approach; Deductive; analyzed by academics; ‘Practical’ approach; Inductive; analyzed by banking- and insurance-sector users and professionals | Comply with the law |
Anticipate future legal requirements | |||
Think the value chain as an ecosystem | |||
Develop responsible products and services | |||
Lead the change |
Stage 1 | 1/a. Promoting environmental innovation by exceeding mandatory regulations |
1/b. Creating transparency regarding the resource use and emissions | |
1/c. Assessment of opportunities and risks related to environmental protection | |
1/d. Creating incentives for daily action | |
Stage 2 | 2/a. Creating transparency of direct and indirect environmental impacts |
2/b. Creating incentives and obligations for partners in the value chain | |
Stage 3 | 3/a. Evaluation of environmentally friendly product alternatives |
3/b. Determining consumers’ willingness to pay for more environmentally friendly products/services | |
3/c. Ecological pricing of products and services | |
Stage 4 | 4/a. Evaluating and encouraging the development of a green business model |
4/b. Preparation of business plans according to the green business model | |
Stage 5 | 5. Creation of new markets, systemic market analysis from the point of view of environmental protection, establishment of a green market leadership role, market influence |
Final Cluster Centers | |||
---|---|---|---|
Cluster | |||
1 Pioneers | 2 Awakeners | 3 Laggards | |
1/a. Promoting environmental innovation by exceeding mandatory regulations | 0.7589 | 0.0491 | −1.3919 |
1/b. Creating transparency regarding the resource use and emissions | 0.6941 | 0.1008 | −1.3911 |
1/c. Assessment of opportunities and risks related to environmental protection | 0.6146 | 0.0250 | −1.1562 |
1/d. Creating incentives for daily action | 0.7869 | −0.0943 | −1.1875 |
2/a. Creating transparency of direct and indirect environmental impacts | 0.7864 | −0.0490 | −1.2644 |
2/b. Creating incentives and obligations for partners in the value chain | 0.9069 | −0.2169 | −1.2008 |
2/a. Evaluation of environmentally friendly product alternatives | 0.7858 | −0.1309 | −1.0969 |
3/b. Determining consumers’ willingness to pay for more environmentally friendly products/services | 0.8575 | −0.2457 | −1.0170 |
3/c. Ecological pricing of products and services | 0.9430 | −0.2723 | −1.1063 |
4/a. Evaluating and encouraging the development of a green business model | 0.9075 | −0.1760 | −1.2519 |
4/b. Preparation of business plans according to the green business model | 0.9485 | −0.2234 | −1.2026 |
5. Creation of new markets, systemic market analysis from the point of view of environmental protection, establishment of a green market leadership role, market influence | 0.9657 | −0.3251 | −1.0608 |
Clusters | Return on Assets (%) | Return on Sales (%) | Earnings per Head (Thousand Ft) | Turnover per Head (Thousand Ft) |
---|---|---|---|---|
1—Pioneers | 4.90% | 4.08% | 1521 | 46,569 |
2—Awakeners | 3.54% | 4.41% | 1029 | 33,436 |
3—Laggards | 6.13% | 3.83% | 1251 | 28,446 |
Final Cluster Centers | |||
---|---|---|---|
Cluster | |||
1 Pioneers | 2 Awakeners | 3 Laggards | |
1/a. Promoting environmental innovation by exceeding mandatory regulations | 0.6587 | −0.2012 | −1.5996 |
1/b. Creating transparency regarding the resource use and emissions | 0.5952 | −0.1390 | −1.6180 |
1/c. Assessment of opportunities and risks related to environmental protection | 0.5663 | −0.1865 | −1.4876 |
1/d. Creating incentives for daily action | 0.5991 | −0.1366 | −1.5622 |
2/a. Creating transparency of direct and indirect environmental impacts | 0.6174 | −0.2321 | −1.4464 |
2/b. Creating incentives and obligations for partners in the value chain | 0.6843 | −0.3098 | −1.3831 |
3/a. Evaluation of environmentally friendly product alternatives | 0.6926 | −0.3222 | −1.3939 |
3/b. Determining consumers’ willingness to pay for more environmentally friendly products/services | 0.5214 | −0.1884 | −1.1748 |
3/c. Ecological pricing of products and services | 0.7061 | −0.3927 | −1.2728 |
4/a. Evaluating and encouraging the development of a green business model | 0.7443 | −0.3915 | −1.4594 |
4/b. Preparation of business plans according to the green business model | 0.7629 | −0.3830 | −1.4875 |
5. Creation of new markets, systemic market analysis from the point of view of environmental protection, establishment of a green market leadership role, market influence | 0.7389 | −0.4517 | −1.2368 |
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Fekete-Berzsenyi, H.; Molnárné Barna, K.; Koczor-Keul, M. Current and Expected Development of Corporate Strategies for Managing Environmental Risks in Hungary. Risks 2023, 11, 47. https://doi.org/10.3390/risks11030047
Fekete-Berzsenyi H, Molnárné Barna K, Koczor-Keul M. Current and Expected Development of Corporate Strategies for Managing Environmental Risks in Hungary. Risks. 2023; 11(3):47. https://doi.org/10.3390/risks11030047
Chicago/Turabian StyleFekete-Berzsenyi, Hajnalka, Katalin Molnárné Barna, and Melinda Koczor-Keul. 2023. "Current and Expected Development of Corporate Strategies for Managing Environmental Risks in Hungary" Risks 11, no. 3: 47. https://doi.org/10.3390/risks11030047