Environmental Strategy: Does It Lead to Competitive Advantage in the US Wine Industry

By Thomas Atkin, Armand Gilinsky and Sandra Newton
Originally Published in the International Journal of Wine Business Research

Managing environmental issues is a critical element of strategic planning. Less well known is whether or not managing environmental issues represents a potential or even beneficial entrepreneurial response in pursuit of either a low-cost or a differentiation position, essential to attaining a competitive advantage (Orsato, 2006). An environmental management system (EMS) is more than "doing well" or "greenwashing."

Implementing an EMS requires significant investments of managerial time, financial capital, and know-how (York and Venkataraman, 2010). While the wine industry has survived numerous environmental jolts in terms of industry evolution, wine businesses also confront survival threats from the natural world such as rising energy prices, water scarcity, mounting concerns about chemical exposure, and climate change (Guthey and Whiteman, 2009; Hertsgaard, 2010). Mitigating these threats involves many different actors and institutions in the wine business manager's decision to formalize a business case for EMS. Stakeholder pressures drive adoption of EMS, and adoption of EMS, in turn, can result in product innovation, pollution prevention, and stewardship of natural resources (Berns et al., 2009; Carrillo-Hemosilla et al., 2010). As the scope and intractability of an environmental problemrise, so do opportunities for EMS innovation in the pursuit of competitive advantage (Porter and Van der Linde, 1995).

The EMS process and product innovations may be positively related to business performance (Nguyen and Slater, 2010; York and Venkataraman, 2010). Several researchers have found that business age, size, and ownership (public versus private) are related to investments in EMS (Elsayed, 2006; Melnyk et al., 2003; York and Venkataraman, 2010). Because of the huge sunk cost associated with EMS investments, incumbent businesses may resist adoption due to fears of cannibalizing existing product lines and instead elect to pursue only those activities considered absolutely necessary for regulatory compliance (Gabzdylova et al., 2009; Hughey et al., 2005; Manktelow et al., 2002). Younger, entrepreneurial agricultural businesses, conversely, show a propensity to invest in EMS innovations that supplant existing structures, some creating newstandards for sustainable processes and products (Carrillo-Hemosilla et al., 2010; Gilinsky et al., 2008).

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