Climate change, biodiversity loss, depletion of natural resources, ocean acidification, and pollution represent just some of the most important sustainability challenges our society faces. They are problems that occupy the minds of people worldwide every day. Many businesses have built addressing these challenges into their strategies and practices – and their actions are crucial to the future of our planet. When the United Nations Sustainable Development Goals (SDGs) were set out, it was made clear that their adoption in business contexts is critical for not just the firms themselves, but for society. SDG success requires collaboration among all stakeholders. Family firms account for two-thirds of all businesses worldwide. More than half of publicly traded firms in the US and over 40% in Western Europe are controlled by families. Their involvement in achieving the SDGs is essential. It should be a perfect match. Family businesses are widely viewed as proactive, as having characteristics that make them particularly suitable to embracing sustainability. They are founded to endure for generations; their owners have noneconomic, family-centric goals and want to raise the reputation of the family and the firm in the communities where they operate and are deeply rooted. Especially after the Covid-19 pandemic and living in a polycrisis world – the pandemic, the energy price crisis, a labour shortage crisis, wars, the invasion of Ukraine, political tensions – in the mindset of family business owners it is becoming more important to pay attention to society. All these aspects lead to the view that family firms should have a higher willingness when it comes to protecting the environment and embracing environmental practices. A PARADOX Although family businesses are viewed as being more socially responsible than other types of firms, our research shows this does not apparently translate into environmental performance. Of course, there are some family firms that are amazing in what they do for the environment. Family businesses such as Panasonic, Toyota, and Samsung excel in delivering eco-friendly products, minimising the environmental impact of their products. But for every renowned firm such as Patagonia, Body Shop and IKEA who are at the forefront of environmental efforts (though are still far from perfect), you have headlines about Volkswagen or Deepwater Horizon. Across three studies – involving between 1,690 and 40,910 firms – we see that family firms in general seem, despite a higher ambition and a higher willingness, less able to embrace environmental management practices – activities a firm undertakes to reduce its negative environmental footprint. There is a paradox. Our studies took in three elements of behaviour: pollution prevention; green supply chain management; and green product development practices. Across all three, our analysis shows family firms on average engage less than non-family firms. These practices are particularly low among family firms in industrial and utility sectors, and in developing countries. A QUESTION If family firms are dedicating fewer resources to sustainability practices, we must ask why. Some family businesses have characteristics that cause them to eschew progressive environmental management practices, which can be costly and demand continual investment. They may not have the skills or experience to adopt the practices and may have boards who put economic or family goals ahead of environmental concerns. Family firms are very often characterised by informal environments with a low degree of formalisation. Sometimes when you have to act professionally on sustainability, to work within formal structures and policies, they are not always present. The lack of human capital to successfully plan and implement environmental activities negatively influences environmental performance as well. The reluctance to adopt green supply chain management practices can be particularly severe due to a strong resistance to changing and innovating business models. Greening a supply chain requires substantial financial and human resources and can affect longterm relationships with suppliers and communities. Then, we find that family-controlled firms are more cautious, avoiding risky environmental activities, especially if they threaten family control. Our most recent study shows family firms with independent directors on their boards have better environmental management practices. 52 |
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