Environmental Strategy and Organizational Capabilities

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Business organizations respond to environmental issues usually through two strategic responses, first by merely complying with environmental regulations—termed as reactive posture—and second, moving beyond compliance to voluntary practices termed as proactive posture. The present study was designed to classify companies operating in India on the basis of their strategic responses toward environmental issues and to explore linkages with organizational learning, stakeholder integration, and cross-functional integration capabilities. The study used descriptive research design. Primary data was collected through an online survey method to capture managerial perceptions of how their companies are dealing with environmental issues. A total of 162 responses, received from managers in departments such as sustainability, Environmental Health and Safety, Corporate Social Responsibility, and general functions, were analyzed. The cluster analysis revealed three clusters. Cluster one represents environmentally proactive companies showing very high values on voluntary practices; whereas cluster two represents reactive companies exhibiting very low values on the voluntary practices. Cluster three is categorized as beginners’ category exhibiting satisfactory performance on the traditional practices but poor on the adoption of voluntary environmental practices. Further, the discriminant analysis showed that companies’ environmental strategies can be discriminated on the basis of deployment of organizational capabilities. The study provides useful theoretical as well as wide-ranging practical implications.