policies also influence business decisions—through regulatory mandates, property rights and liability rules, disclosure mandates, taxes and subsidies, procurement criteria, and other policies—but the primary initiative lies with businesses themselves.

To date, however, the role of environmental considerations in business decision making has been seriously understudied. The dominant emphasis of environmental research in the past has been in the natural and health sciences and engineering, addressing such issues as the health risks of particular substances, the functioning of environmental processes and ecosystems and the impacts of changes in them, and technologies for pollution control.

Environmental research in the social sciences to date has concentrated primarily on economics, including the measurement of economic costs and benefits of pollution control to society and the relative efficiency of regulatory mandates versus market-oriented instruments of environmental policy (Stavins, 2003); on government decision making; and to a lesser extent on individual and household environmental decision making, such as energy conservation, recycling, and environmental considerations in consumer behavior (Gardner and Stern, 2002).

Over the past decade, a modest but growing body of research has begun to address environmental considerations in business decision-making (see Appendix C for a review). This research has consisted mainly of a group of literatures associated with established business research fields: environmental considerations in strategic management decisions, in operations, in organizational behavior, in marketing, in accounting, in finance, and in government policies affecting business. Two arguably new research areas also have emerged: one is the study of life-cycle analysis and industrial ecology (the study of flows of energy and materials through systems of industrial production, consumption, and waste disposal), although to date this area has been influenced more by engineers than by the social sciences. The other is the study of supply or commodity chains. Each of these areas, as well as several others, offers promising opportunities for further research.


The following discussion highlights particularly promising research areas and questions.

Environmental Performance and Competitive Advantage

When does it pay to be green? A central question concerns the conditions under which business decisions that enhance the environment also

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