The limits and possibilities in designing the environmentally sustainable firm

Abstract In the mid‐1980s national and international pressures re‐emerged on organisations to take responsibility for the environmental externalities created by industrial activities. With the Brundtland Report (1987) strong support for the principle of sustainable development in the protection of the natural environment emerged. This instigated organisations to engage in the development of environmental policies, incorporation of environmental strategies in product development, assessment of environmental impact of products and production activities, and increased green advertising. In spite of promising industrial environmental activities, a recent Swedish study (Arnfalk and Thidell, 1992) shows that the dominant force for environmental efforts remains legislation ‐ or threats thereof ‐ rather than integration of environmental criteria in designing and developing product‐ and production systems. To understand the limited response to environmental challenges we explored the sources of inertia in relation to environmental change activities in industrial networks (i) theoretically through a review of inter‐organisational literature on industrial networks and change, and institutional approaches to organisation; and (ii) empirically through some insights from three case studies of the mobilisation and coordination activities in industrial networks involved in substituting the use of Chlorofluorocarbons, CFCs, in refrigerators, and in the production processes of flexible foam and circuit boards. The theoretical review suggests that organisations are embedded in dependency relationships with other organisations that will restrict the material resources and social relations any given actor has to its relevant environment and, hence, influence possible actions and outcomes of environmental change. Product, production, and administrative systems are highly coordinated and adapted to each other which places considerable limitations on the willingness and ability of network actors and systems, to change. The empirical studies show interdependencies and inertia in the technological as well as the relational systems. Evidence of the internalising of environmental problems into individual or network behaviour was not found. Instead, when forced to change, actors cooperated to find solutions within established relationships that did not alter existing products and production systems. On the firm and network levels of observation the pattern of response that emerged during the change processes was the diffusion of solutions, not by strategic design, but through overlapping and interlocked network relations, i.e., through processes of institutionalisation. Our study suggests that the re‐orientation processes towards environmental sustainability in a firm can best be understood in the context of structures and processes on the network rather than on the organisational level.