UC Santa Barbara

Human activities continue to degrade the natural environment in myriad ways, and at the heart of the problem is industrial activity--the extraction of resources, production, transportation, and use of goods, and the eventual disposal or recycling of materials. Yet, opportunities exist to engage industrial activity in creative, strategic ways that will actively improve the natural environment and help restore it to a state that can sustain human and nonhuman life into the future. This dissertation is intended to be a step toward that future by progressing our understanding in three separate but related topics in the context of corporate social responsibility (CSR).

In the first chapter I reenvision what is meant by "green business." Although the literature on business strategy and the environment frequently discusses whether, why, and when companies profit from "greenness," surprisingly little has been said--and no consensus has been reached--on what businesses can do that counts as "green." Despite the growing importance of environmental concerns to managers, stakeholders, and policy makers, the lack of a structured and practical definition of green business leaves well-intentioned entrepreneurs and corporate environmental managers without useful guidance on how best to make environmentally relevant business decisions. In this chapter, therefore, I propose a new definition for greenness, which states that it is the net balance of the environmental consequences caused by an activity that determines whether or not the activity is "net green." To demonstrate the usefulness of the definition, I apply it to four case studies centered on pollution control and prevention activities, which seem prima facie green. Some of these activities turn out not to be net green after all; for others, the green intuition is correct, but with caveats.

The core outcome of the first chapter is that one of the most important factors determining whether an activity results in net environmental improvement or damage centers on the concept of "displaced production." The second chapter, therefore, analyzes the displaced production mechanism in the context of recycling and develops a methodology to estimate displacement rate. The typical assumption made in environmental assessments of product systems that include recycling is that secondary materials displace primary equivalents on a one-to-one basis. However, displaced production is a complex phenomenon governed by market mechanisms, and the one-to-one displacement assumption was heretofore untested. Chapter 2 advances the understanding of displacement by presenting a displacement rate estimation methodology based on partial equilibrium market modeling. First, I develop a basic market model that explains the underlying price mechanisms of displaced production and identifies key parameters affecting displacement rate. Results from the basic model suggest that one-to-one displacement occurs only under specific parameter restrictions that are unlikely in a competitive commodity market. Next, the modeling methodology is demonstrated by developing an econometric model of the U.S. aluminum industry. The aluminum market model corroborates the basic model and suggests that U.S. aluminum displacement rates are likely to be below 100%.

The third chapter shifts focus from what a business can do to be sustainable to the more common question in environmental strategy: why a firm would want to be socially and environmentally sustainable. One explanation posited in the literature is that corporate social responsibility leads to higher employee satisfaction, which increases worker productivity and profitability. Yet, empirical evidence for the relationship between CSR and satisfaction is scarce. Using a novel dataset, I test this relationship for 3,121 U.S. firms from 1998 to 2012 and find that a company's performance in six out of seven CSR dimensions can explain whether it is rated by its employees as one of the best places to work in the country. I disaggregate the seven CSR dimensions into forty-four individual CSR measures, and from those identify ten measures that are most likely to affect employee satisfaction--six areas in which to improve (employee ownership plans, family benefits, gay and lesbian policies, charitable giving, conscientious labor rights, and product innovation) and four areas in which to reduce negative impacts (toxic emissions, workforce reductions, poor labor rights, and deceptive marketing).

This dissertation contributes to the literature in industrial ecology and life cycle assessment by clarifying the displacement mechanism and suggesting improved ways to estimate displacement rate, as well as to the business strategy and the environment literature by crystallizing what is meant by "green business" and furthering our understanding of how CSR is likely to increase a firm's economic success.