20 Sep 2013  Working Papers

Historical Origins of Environmental Sustainability in the German Chemical Industry, 1950s-1980s

Executive Summary — This paper examines the emergence of environmental strategies in the chemical industry between the 1950s and the 1980s. German chemical firms have been hailed as "eco-pioneers" in this regard, but this study demonstrates that initially the leading chemical companies of both Germany and the United States followed a similar approach to societal concerns about environmental pollution. Both German and American firms suggested that pollution incidents and complaints were a matter for local responses, tailored to specific settings, and should be considered primarily as nuisances rather than as environmental or health hazards. By the 1970s, however, the evolution of environmental strategies in the German chemical industry diverged greatly from that of the United States. This working paper explores how and why by examining the strategies of two prominent German chemical companies, Bayer and Henkel. The German firms diverged from their American counterparts in using public relations strategies not only to contain fallout from criticism of their pollution impact, but also to create opportunities for changes in corporate culture to encourage sustainability. While the US chemical industry remained defensive and focused on legal compliance, there was a greater proactivity among the German firms. The study stresses the importance of the regional embeddedness of Bayer and Henkel in the state of North Rhine-Westphalia, which made their reputations especially vulnerable to criticism. A new generation of corporate leaders also perceived that more reactive strategies were needed to fulfill societal expectations. They were savvy enough to understand that investing in environmental sustainability could provide an opportunity to create value for the firm, and that self-identifying as eco-pioneers had commercial as well as reputational benefits, provided that the image reflected genuine policies and processes. Key concepts include:

  • Leading German chemical companies have been regarded and self-identified as "eco-pioneers," but before the 1970s their environmental strategies were broadly similar to their U.S. counterparts. Subsequently the German firms became more proactive in their environmental strategies.
  • The regional embeddedness of Bayer and Henkel in the state of North Rhine-Westphalia emerges as an important determinant of their emergent green strategies. The firms had deep reputational stakes invested in their region and were highly exposed to criticism of their environmental impact.
  • Corporate leaders of Henkel and Bayer were early movers in understanding that investing in environmental sustainability could provide an opportunity to create value for their firms.

 

Author Abstract

This working paper examines the growth of corporate environmentalism in the West German chemical industry between the 1950s and the 1980s. German business has been regarded as pioneering corporate environmentalism after World War II. In contrast, this study reveals major commonalities between the sustainability strategies of leading German and American firms until the 1970s. However during that decade the German firms diverged from their American counterparts in using public relations strategies not only to contain fallout from criticism of their pollution impact, but also to create opportunities for changes in corporate culture to encourage sustainability. While the U.S. chemical industry remained defensive and focused on legal compliance, there was a greater proactivity among the German firms. This paper stresses the importance of regional embeddedness of leading firms in the state of North Rhine-Westphalia, which made their reputations especially vulnerable to criticism. The research supports organizational sociology theory, which has identified the importance of visibility in corporate green strategies. The German chemical firms were pioneers in understanding that investing in environmental sustainability could provide an opportunity to create value for the firm by delivering both commercial and reputational benefits.

Paper Information