International Association for Management of Technology

IAMOT 2008 Proceedings

ENVIRONMENTAL THREATS AND THEIR IMPACTS ON THE AUTOMOBILE

INDUSTRY

BRENO NUNES
Technology and Operations Management Research Group
Aston Business School, Aston University
Birmingham, B4 7ET, United Kingdom
nunesbts@aston.ac.uk

DAVID BENNETT
Technology and Operations Management Research Group
Aston Business School, Aston University
Birmingham, B4 7ET, United Kingdom
d.j.bennett@aston.ac.uk

This paper discusses possible scenarios of environmental threats and the way they can
impact on the automobile industry. This industrial sector is usually associated with high rates
of raw material consumption and pollution during the production process, added to which
road vehicles are consistently targets of criticism because of their emissions, involvement in
accidents, the cause of noise and so on. This paper presents a reverse perspective of this
subject, i.e., how can environmental threats affect some of the largest manufacturing
enterprises of the World? We conceptualise environmental threat as any aspect of the natural
environment that might negatively affect an organisation for running its operations, including
the implication of those aspects. Hence, economic and social consequences that are derived
from environmental threats are also considered. To put it in other words, the discussion of
each environmental threat could explore implications in terms of regulation, technology,
culture and economy. The methodology used in this the paper is scenario building. Based on
various institutional reports and scientific papers, scenarios were built for evaluation of
possible threats for the automotive industry. So far, we could raise the following assumptions
regarding the environmental threats: (1) pressure for reduction of plant emissions, (2) raw
material shortage, (3) energy and oil security, (4) engine emissions control, (5) traffic control,
and (6) need for product recovery. The set of criteria was adapted from a suggestion of ISO
14004 for environmental impact assessment. Thus, to assess these possible threats, 3 criteria
were used: timescale, likelihood and severity of the environmental threat. The results show
that energy and oil security, engine emissions control and need for product recovery should
be prioritised. The limitation of this work is first its theoretical background, and second, its
generic approach that does not consider how different contexts could modify the strength of
each threat for a specific company. It is proposed to supplement this analysis with a survey-
based empirical study to help organisations prevent future damage to their business and
stimulate proactive behaviour of society towards higher levels of sustainability.

Keywords: Environmental threats, automobile industry, sustainable mobility, sustainability.

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Introduction

The current trend of scientific publications dealing with environmental issues is based
on the understanding of how organisations affect the natural environment, i.e. what is the
impact of a company’s processes and products on its surroundings (water, air, soil, flora,
fauna, humans, etc). This paper presents another perspective of this subject through the
concept of environmental threats. Here, environmental “threat” refers to aspects of the natural
environment that might harm businesses. These aspects might be created by anthropogenic
(emissions from factories, solid waste, etc) or natural events (volcanic eruptions, hurricanes,
earth quakes etc). This is an attempt to highlight the interdependency between companies and
their surroundings.
If a business is developed with consideration to its relationship with the environment
the chances of wealth creation and the welfare of mankind are higher. On the other hand,
when businesses do not take into account this relationship the image of the organisation may
be negatively affected and the economic gains might be offset by costs of recuperating the
natural environment (including people’s health). For example, some specialists believe that 4
to 8% of the Chinese GDP is consumed by pollution costs (Gallagher, 2003).
The basis of this paper is to identification from the literature of potential environmental
threats and then to build up a possible scenario based on timescale, likelihood and severity of
these threats to the industry. The relevance of the paper is, first, its contribution to knowledge
through the conceptualisation and identification of environmental threats and, second, the
proposed approach of scenarios for dealing in practice with environmental issues in the
automotive industry.

An Overview of the Automobile Industry in the World

The automobile industry is said to be the largest manufacturing sector in the World and
is one of the most resource-intensive of all major industrial systems (Mildenberger and
Khare, 2000). According to the 2006 annual report of ANFAVEA, World vehicle production
was 64,272,000 in 2004 and the World fleet had 837,184,000 vehicles in 2003. In developed
countries such as the USA, Italy, Japan, Germany, France and UK, the rate of vehicle per 100
head of population is higher than 55 (Anfavea, 2006). The highest rate is in United States,
where there are 76.92 cars per 100 persons (see table 1).
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Table 1 – Cars per 100 heads of population from 1994 to 2003

Countries 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

USA 76.92 76.92 76.92 76.92 76.92 76.92 83.33 83.33 83.33 76.92
Italy 55.56 58.82 58.82 58.82 58.82 62.50 62.50 62.50 66.67 66.67
Australia 58.82 58.82 58.82 58.82 62.50 66.67 66.67 52.63 62.50 62.50
Japan 52.63 52.63 55.56 55.56 55.56 55.56 58.82 58.82 58.82 58.82
Germany 52.63 52.63 52.63 55.56 55.56 55.56 58.82 58.82 58.82 58.82
France 52.63 52.63 52.63 55.56 55.56 55.56 58.82 58.82 58.82 58.82
Canada 62.50 58.82 58.82 58.82 58.82 58.82 55.56 58.82 58.82 58.82
Spain 41.67 43.48 45.45 47.62 50.00 52.63 55.56 55.56 58.82 58.82
UK 47.62 47.62 47.62 50.00 52.63 52.63 52.63 55.56 55.56 55.56
Austria 52.63 50.00 55.56 52.63 52.63 52.63 55.56 55.56 52.63 55.56
Belgium 45.45 47.62 47.62 47.62 50.00 50.00 50.00 52.63 52.63 52.63
Sweden 45.45 45.45 45.45 45.45 47.62 47.62 50.00 50.00 50.00 50.00
Czech Republic 27.78 33.33 31.25 38.46 40.00 37.04 41.67 41.67 40.00 40.00
Poland 20.41 26.32 23.26 23.26 23.26 23.26 28.57 28.57 33.33 34.48
South Korea 16.39 19.23 20.83 23.26 22.73 23.81 23.81 27.78 29.41 30.30
Mexico 13.33 13.33 12.66 13.51 14.29 14.71 15.15 16.39 18.18 18.18
Argentina 16.67 16.95 17.24 17.54 18.18 18.18 18.87 18.87 18.18 18.18
Brazil 9.62 9.71 10.64 10.99 11.11 11.24 11.36 11.63 11.90 11.90

It is expected that developing countries, mainly those, which are growing faster in the
21st century and with large populations such as China, India, Indonesia, Brazil, and Russia,
will tend to increase their rates of cars per head of population to numbers similar to
developed countries. Unfortunately, there are various negative implications for the
environment that occurred in developed countries and are about to be replicated in the
developing countries like: air pollution in urban centre, congestions, etc.
Pursuing changes in this industry is in fact complicated due to its economic and social
influence. Indeed, the impact of the automotive sector on a nation’s economy is significant
regardless of whether it is an emerging or developed country. For example in 2002, China
had 33.5 million people employed in the automotive industry and directly related sectors; one
out of 22 Chinese workers belonged to these sectors (Zhu, Sarkis and Lai, 2006). In the USA,
the Alliance of Automobile Manufacturers claims that 1 out of every 10 jobs is dependent on
the automotive industry (new vehicle production, sales and other related jobs) (Alliance of
Automobile Manufacturers, 2007).
Today the production of motor vehicles is led by General Motors (GM), Toyota, Ford,
Volkswagen and Honda. GM produced 8,926,160 vehicles in 2006; Toyota reached
8,036,010 and Ford, 6,268,193 in the same year according to the international organization of
motor vehicle manufacturers (OICA, 2007).
Table 2 shows the World’s 10 largest auto producers from 2000 to 2004. These
numbers will tend to change in the next years, mainly, due to the economic growth of China,
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India, Russia and Brazil. For instance, latest statistics show that Japan took the lead from
USA and China overtook the 3rd position from Germany in 2006 (OICA, 2007).
Table 2 - The World’s 10 largest Auto Manufacturing Countries from 2000 to 2004 (thousands of units) (Anfavea, 2006)

Countries 2000 2001 2002 2003 2004

USA 12,800 11,425 12,280 12,115 11,989

Japan 10,141 9,777 10,257 10,286 10,512

Germany 5,527 5,692 5,469 5,507 5,570

China 2,069 2,334 3,287 4,444 5,071

France 3,348 3,628 3,702 3,620 3,666

South Korea 3,115 2,946 3,148 3,178 3,469

Spain 3,033 2,850 2,855 3,030 3,011

Canada 2,962 2,533 2,629 2,553 2,711

Brazil 1,691 1,817 1,792 1,828 2,317

UK 1,814 1,685 1,623 1,846 1,856

Figure 1 shows the World’s 10 largest vehicle fleets. Recalling table 1, you see that
developed countries have higher rates of cars per head of population than developing ones. It
is possible to expect in a near future a significant increase in the vehicle fleet of China, India,
Russia and Brazil amongst other developing countries when they reach higher levels of
economic growth. Due to specific conditions for production and strengthening of their
internal markets, these countries will tend to increase production, their vehicle fleets, and
consequently, their rates of cars per inhabitant.

250.0 229.6 1994 2003

198.0
200.0

150.0

100.0 74.2
65.0 48.6
42.9 38.5 35.6 33.6
50.0 32.6 28.8 24.2 23.7 21.4
30.0 27.4 23.4
9.4 16.7 14.7

0.0
USA Japan Germany Italy France UK Russia China Spain Brazil

Figure 1 – The 10 World’s largest vehicle fleets (Million units) (Anfavea, 2006)

Moreover, new players might also emerge to revolutionise car production in the 21st
century. In an interview with a Brazilian magazine, VEJA, the Renault-Nissan CEO Carlos
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Ghosn admits the risks to the traditional companies in the sector considering that India and
China intend to produce low-cost cars (VEJA, 2007). Indeed, a USD 2,000 car planned by the
Indian group Tata has been announced recently in the media. This car will be basically
composed of plastics and have a high fuel economy to respond to the needs of the popular
market for low operating costs during the use.
In addition to the changes in the automotive industry, the Brazilian market has become
the testing ground for global automakers and serves as the base for new projects targeting
emerging markets. Brazil has also been used to experiment with strategies based on modular
concepts, mainly in production, but to some extent also in design (Baldwin and Clark, 1997).
Modular production/supply systems tested in Brazil have been at the centre of the discussions
about “transplanting” new models of production systems to traditional industrialised
countries, such as in the GM case and its so called “Yellowstone project”, in Ford’s plans for
modular assembly of the Focus and in Fiat’s Amazon project for renewal of the Punto etc
(Salerno and Dias, 2002).
A different type of modularisation from the one tested in Brazil appears in the literature.
Dower (2006) presents a modular vehicle, the Ridek, composed of a motorised deck (the
Modek) with a passenger compartment (the Ridon) riding upon it.
Wells and Nieuwenhuis (2006) explore five examples of relocalisation through the
concept of Micro-Factory Retailing (MFR): Th!nk, Ridek, Oscar, MDI Air Car and GM
AUTOnomy. The MFR concept is based on the claim that it would be more profitable,
environmentally-friendly and socially responsible to have many small factories rather than a
large manufacturing plant. The MFR would also be responsible for commercialisation and
maintenance in order to increase profit margins. Wells and Orsato (2005) provide a
preliminary comparison of the benefits between centralised (large manufacturing plants) and
decentralised (MFR) business models.
Although still in its early stages, some companies are now considering environmental
concerns within their new product development strategies. Well-known examples are Toyota
with the Prius and DaimlerChrysler with the Smart. Even more notable is the new Brazilian
Company, Obvio, which, since its conception, has had a full-commitment to sustainability. Its
projects are being developed through a carbon neutral standards programme, not only for the
car, with assistance from Lotus Engineering, but also including facilities, landscape,
transportation structure, social and economical regional environment (Obvio, 2007).
These cars (Prius, Smart and Obvio) provide evidence that a new green market niche
may develop soon. Nevertheless, due to its importance and size, the automotive industry is a
caldron of complexity and the decisions within the sector involve great risks. Mildenberger
and Khare (2000) provide the following quotation: “According to the German car-maker
BMW, it takes about 3-4 years to design a car, 7-8 years to manufacture it, and it would be in
use for about 10-12 years; thus, in all, a decision taken today will have its effect for about a
quarter of a century if it is not victim of irresponsible disposal of waste”

Sustainability Issues for Car Manufacturers

The benefits of cars are clear: they provide a door-to-door transportation system, the
means to gaining access to life’s necessities and employment, and a source of pleasure and
social status. However, despite these benefits there are environmental burdens as well: local
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air pollution, greenhouse gas emissions, road congestion, noise, mortality and morbidity from
accidents, and loss of open space to roads, car parks and urban sprawl (Vergragt, 2006).
The automobile industry has had few radical changes over the last 30 years. However,
these few changes were often remarkable and had a significant impact on practice and
academia. The Toyota Production System – “Just in Time” - and the modular consortium are
important innovations from the production system perspective. Also, the transfer of the
assembly plants to developing countries and global outsourcing are evident changes in the
industry’s business and operations strategy. Nevertheless, these changes have been
insufficient to make the sector more sustainable. As evidence of this the automotive industry
is still struggling against economic, environmental and social challenges. Orsato and Wells
(2006) point out the many economic challenges currently facing the industry: notably over-
capacity; saturated and fragmenting markets; capital intensity; and persistent problems with
achieving adequate profitability. Strong dependence on fossil fuels and large consumption of
raw material lead the environmental problems. As a result, in a near future, it is expected that
the sector will face strong pressures and take initiatives in order to reduce the environmental
burdens from car use and its production process.
Hoffman (1999) highlights the importance of preparing the organisation for change. He
explains that a crisis or organisational jolt may motivate companies to address the necessary
changes and in fact says that the first step to accomplish successful change in an organisation
is to “establish a sense of urgency”.
For the automotive industry, the “sense of urgency” has become clearer since Brazil,
Russia, India and China (BRIC countries) entered the league of big consumers. Road
transportation is strongly dependent on basically one type of energy (fossil fuels) and is
responsible for 57% of World’s oil consumption (IEA, 2005). The increase of transportation
in the BRIC countries will increase consumption, and therefore oil prices, affecting personal
mobility worldwide. Moreover, improving efficiency of engines to gain high fuel economy
will not solve completely the problem because the number of cars and their power are
steadily growing.
Corroborating with this hypothesis, Zhao (2004) claims that the rapid and continuous
growth of China’s vehicle population has also brought great challenges to China’s energy
resource security. He highlights that if China’s vehicles per capita were the same as the USA,
the oil demand in China would exceed worldwide production by 18%.
Regarding car use, Wells (2006) discusses the automobility culture in emerging
economies and the numbers of deaths and injuries resulting from road traffic accidents. In
total, since motorisation was started there have been more than 30 million deaths attributable
to road accidents, more than all the soldiers in the two World Wars combined.
Dixon, Scura, Carpenter and Sherman (1994) evaluate the economic damage from
specific environmental impacts. For example, to value the damage due to air pollution, he
calculates the cost of lost work days, medical expenses, cleaning costs and, losses of value in
properties. Indeed, pollution control regulations tend to see transportation as a target. As
vehicles are responsible for one quarter of total green house gases emissions (Sperling, 2000),
a stricter regulation for cleaner cars is expected as well. In the USA some initiatives are
already taking place in California, which is leading a process to have a zero-emission fleet on
the road (Greene, 2001).
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Research Methodology

The methodology used in this paper is scenario building based upon various
institutional reports and scientific works on environmental issues and the automobile
industry. The environmental threats were identified and analysed to build up a possible
scenario for the automobile industry.
It is important to highlight how environmental “threat” is conceptualised in this work.
The authors have defined Environmental Threat here as any aspect of the natural
environment that might negatively affect an organisation for running its operations, including
the implication of those aspects. Hence, economic and social implications (or consequences)
that are derived from environmental threats are also considered. For example, even if
customers are unaware of the problems of atmospheric pollution and global warming, but due
to the increase of gasoline prices they decide to choose a car with higher fuel economy, this
social-economic behaviour is a result of an environmental threat. Moreover, Gupta and
Sharma (1996) give examples of other environmental threats such as competitors gaining
market shares with greener products and stricter environmental regulations.
The set of criteria used to build a possible scenario in this paper is based on timescale,
likelihood and potential damage (severity) of each environmental threat to the automotive
sector. The criterion “timescale” has three ranges: (1) short term, which refers to periods of
less than 5 years; (2) medium term, which refers to periods of more than 5 and less than 25
years and (3) long term reflecting periods longer than 25 years. The criterion “likelihood”
takes into account three possible situations of low, medium and high. Finally, “severity” is
qualified as low, moderate and high.
The discussion of each environmental threat also stimulates an exploration of possible
implications in terms of regulation, technology, culture and economy.

Environmental Threats for the Automobile Industry

The major environmental concerns in the 21st century are: atmospheric pollution (and
its consequences for human health, global warming and ozone layer depletion), scarcity of
freshwater, raw material and land availability. The impacts on businesses may be enormous
as it was announced by the World Resources Institute’s report - Tomorrow’s Market: Global
Trends and Their Implications for Business (WRI, 2002).
According to the United Nations, the World’s population is forecast to reach 9 billion
people in 2050, mainly because of population growth in developing countries (United
Nations, 2007). As emerging economies repeat the historical development patterns of the
industrialised countries, rising car ownership and air travel will have major impacts on
material consumption, land use, pollution, greenhouse gas emissions, and petroleum demand
(WRI, 2002).
For the automotive sector, atmospheric pollution can result from plant emissions, but
mainly on car use because of engine emissions. Depending on the rate of consumption of
developed and emerging economies, raw material availability and energy security will
strongly be affected. “The growth in car production and usage has been a critical factor in the
growth of consumption of numerous resources, especially metals. Given an estimate that
China will produce over 6 million vehicle units in 2005, it is expected that there will be
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significant increases in imports of metals. The rapid and continuous growth of China’s
vehicle population has also brought great challenges to China’s energy resource security.”
(Zhao, 2004). In fact, the production of vehicles in China reached more than 5 millions in
2005 and more than 7 millions in 2006 (OICA, 2007) and crude oil prices hits US$ 100-a-
barrel (Financial Times, 2008).
Regarding the relationship between the automobile industry and land use, two major
consequences arise: traffic control and final disposal of end-of-life vehicles.
Space for roads and car parks are needed to avoid congestion and improve mobility. As
a response to the new environmental concerns, traffic control through alternative types of
collective transportation and stricter regulation on car use in urban areas might affect
customers and consumers’ behaviour, therefore, reducing the opportunities for the automobile
manufacturers of making profits. Moreover, traffic control will also take place as an attempt
of avoiding car accidents that increasingly occur in urban centres and on the motorways.
Last, but not least, companies will need to include product recovery as a new activity in
their operations function. As land becomes scarce and the vehicle fleets increases, availability
of landfill sites will decrease and, as a result, the costs of final disposal for end-of-life
vehicles will probably increase.
Table 3 shows a possible scenario of environmental threats and the assumptions about
timescale, likelihood and severity of them for the automotive industry.

Table 3 – Assumptions about timescale, likelihood and severity of the environmental threats for the automotive industry.

Assumptions
Environmental threats
Timescale Likelihood Severity

Reduction of plant emissions Short High Moderate

Raw material shortage Medium Medium Low

Energy and oil security Medium High High

Engine emissions control Short High High

Traffic control Short Medium Low

Need for product recovery Medium Medium High

A common fact among global companies is the transfer of their manufacturing plants
from developed to developing countries in order to access new markets, low labour costs, and
also a less strict environmental regulation regime. However, as soon as the new destination
meets the basic needs of its society, environmental protection becomes a concern; hence,
lenient regulation gets stricter. Thus, in the particular case of the automobile industry, new
destinations like China and India are already suffering pressure to adopt the Kyoto Protocol
decisions and conserve water, therefore using cleaner processes, by 2012. This makes the
threat impact on the industry in just 5 years time. What is more, the likelihood of adopting
such measures is high. However, behind the consequences of this threat there are
opportunities for cost reduction due to the fact that pollution means waste.
Regarding raw material shortages, new technology, car designs and recycling processes
make this a medium-term threat. Also, the use and discovery of new materials such as
aluminium, magnesium, plastics and renewable fibres reduce the likelihood of a shortage of
materials (Zah, Hischier, Leão and Braun, 2006; Tharumarajah and Kooltun, 2006). The
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pressures for waste reduction will positively impact the availability of raw materials. In
summary, the severity of this threat might be low in the industry.
A significant threat for the sector may be energy intensity and oil dependency. People
that are leaving the line of poverty will start consuming product and services, i.e., energy.
The automotive industry will compete among other priorities of World society for the use of
energy when the World population will probably be 8 billions people in 2025. Without any
radical change on the energy matrix of the automotive sector, oil demand is very likely to
exceed supply. Although, technologies related to the use of biofuels, hydrogen and fuel-cells
are already being developed; external constraints such as distribution and storage of energy
may require radical changes for car automakers in the design of their product and processes.
Car use is by far receiving most attention due to its large consumption of fossil fuels,
and therefore emission of greenhouse gases. In fact, the current internal combustion engines
have low efficiency and are the target of many policies, e.g., California zero-emission fleet
and the Brussels’ strategy to turn Europe into a low-carbon economy. For example, the
second plans to limit the carbon dioxide emissions to 130 grams per kilometre by 2012
(Guardian, 2007). Those policies are already on course and as the average car emissions in
Europe are still higher than 160 grams per kilometre (Guardian, 2007), engine emissions
control is a very likely and severe threat for the automobile industry. Green car production is
at its early stages to create an environmentally-friendly market and some researchers have
found that environmental issues still play a minimal role for customers (Lane and Potter,
2006).
Congestion taxes are also among of the proposed solutions to minimise air pollution in
urban centres and stimulate citizens to use public transportation. These measures have
already been taken in some cities like London, and similar programmes are used in
Singapore, Sao Paulo and Mexico City. The generalisation of this method is still
controversial and may be applied only on the most densely populated cities. Moreover,
[14,29] has shown the automobile culture is very strong, and mainly, as the car ownership is
associated with status besides its purpose of personal mobility, the impact on sales may be
low and customers will continue to buy cars for travel and other reasons beyond daily needs
such as travelling to work.
Landfill shortages will create pressures on car assemblers to take responsibility for their
products after use. Final disposal of scrapped vehicles will become an evident problem as the
fleet increases and, what is more, a more costly activity as landfill sites will become scarcer.
The recovery of end-of-life cars will require new skills and competences from companies, not
only from collecting the scrap, but also to take advantage of valuable components from the
car. In addition, new business models are already in course to transfer ownership, and hence
responsibility, from the customer to the manufacturer. Although implementation of such
policies worldwide is probably not happening in the next 5 years, this is a likely threat with a
high impact due to its complexity for industry to collect, separate, recycle and find a correct
destination for end-of-life cars.
It might become clear that the automobile companies would need radical changes in
their production systems to cope with those environmental threats; nonetheless, Orsato and
Wells (2007) explain that because carmakers are locked into three technological paradigms
(all-steel car bodies, internal combustion engines, and multi-purpose vehicles), which tends to
favour incremental improvements. In addition, the existing economic and political
interdependency between this industry and other sectors (e.g. oil industry) makes radical
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changes towards higher levels of environmental performance more difficult due to its
complexity and extension.
Ultimately, the proposed scenarios here give a general perspective on how automakers
could be harmed due to environmental regulation, lack of competitiveness, change of social
culture, and scarcity of production inputs. Indeed, different companies can perceive
differently each threat, and also, have different capabilities and competences to respond to
their implications.

Conclusions and Future Research

In this paper, the authors provided a subjective analysis of the global context for
environmental threats and their impact on the automotive industry; however, different regions
and countries will differ from each other due to their individual characteristics. For example,
Brazil may be not very sensitive to the threat of “energy and oil security” as other countries
because of its own programme of renewable fuels. However, on the other hand, the rapid
growth of its fleet may increase the threat of “traffic control” aimed at avoiding a high
number of deaths and injuries from car accidents. Therefore, the major contribution of this
paper is provided by the identification of the environmental threats and the suggestion of
using the scenarios approach to match the environmental threats to the context.
The major environmental threats identified in the literature are: (1) reduction of plant
emissions, (2) raw material shortage, (3) energy and oil security, (4) engine emissions
control, (5) traffic control and, (6) need for product recovery. According to the scenario that
was designed for this paper, companies should prioritise threats 3, 4 and 6 because of their
level of severity, likelihood and timescale. Thus, changing the fuel would minimise energy
and emissions related issues and developing a system of reverse logistics, or even changing
the business model [see (Williams, 2006)], would avoid problems with the disposal of end-
of-life vehicles.
The limitations of this paper are related to its theoretical basis, which needs an
extension into empirical research to find the perception, legitimacy and significance of
environmental threats for automobile companies in their own context. Hence, we propose a
survey-based research to supplement this paper and analyse how threats could be intensified
in specific market segments (e.g. luxury, popular, SUVs, etc), location, production mix
composition, and other relevant variables.
Despite its limitations, this piece of research brings a new perspective of the integration
of environmental issues in the strategic agenda of organisations. In fact, pressure for higher
environmental performance already exists from Ford, GM and Toyota who are requiring their
Chinese suppliers to obtain the ISO 14001 certification (GEMI, 2001). As cited earlier by
Gupta and Sharma (1996), there is also the risk of having obsolete environmental
technologies in the market, losing performance and competitiveness, and being far away from
attending to regulations and customer’s requirements.
In short, as well as being important to recognise the existence of environmental threats,
it is necessary to transform those threats into opportunities or challenges towards the
development of sustainable competitive advantage. The first movers in this direction will
seize on a comfortable position ahead of regulation, benefit from a green image,
technological superiority and innovative behaviour and, in the end, possess and experience
cost-effective and environmentally-sound processes.
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Acknowledgement

This research is supported by the Operations and Information Management Research

Group of Aston Business School and Alban, the European Union Programme of High Level
Scholarships for Latin America, under the scholarship Nº E06D103633BR. The authors are
grateful to both institutions for their support. Also, we would like to thank Dr. Duncan Shaw,
from Aston University, for his valuable comments on this paper.
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