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Research Insights: Use Environmental Performance to Get to the Top

A recent academic study found solid evidence that companies compete on the basis of environmental performance. Businesses were likely to undertake new environmental practices if their rivals had improved their own environmental performance in the previous year, the study found. The reason for this competitive response, the study said, is that environmental performance is a valuable source of competitive advantage and companies don’t want to fall behind. Smaller companies were found to respond faster to their competitors’ environmental moves, possibly because they are less constrained by bureaucracy; more profitable companies were more responsive to competitors’ environmental strategies, likely because they have the necessary financial slack; and industry leaders generally showed worse environmental performance than their nearest rival, possibly because the “number twos” are trying harder. The study, which looked at the two largest firms in 48 different manufacturing industries from 2006 to 2009, was published in the Journal of Operations Management earlier this year and summarized by the Network for Business Sustainability.

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