Are ‘green’ firms seen as more trustworthy alliance partners?

CSR

publication date 14 / 03 / 2017

Firms increasingly depend on alliances with other firms to realize their strategic objectives, and trust between the partners is an essential ingredient in well-functioning alliances. Hence, when selecting a partner, high perceived trustworthiness is usually among the key criteria.

A recent study published in Journal of Business Ethics shows that high environmental performance can enhance perceived trustworthiness, in the alliance context. The author of the article, Professor Anne Norheim-Hansen of KEDGE Business School, argues that a strong environmental reputation thus can be a source of competitive advantage in the alliance market – as it makes the firm more attractive to desired partners.

The main reason why being ‘green’ makes a firm seem more trustworthy is that it is taken as a signal of high integrity and benevolence. Integrity is also the dimension with the highest impact on strategic alliance partner attractiveness, according to the study. Other, earlier studies have shown that perceived trustworthiness contains three dimensions: integrity, benevolence and ability of the partner. Perceived ability was found to enhance partner attractiveness, but not to be enhanced by high environmental performance. 

Professor Norheim-Hansen argues that this latter result likely comes from the wide disagreement on whether it pays to be green: Interviews preceding the scenario-based survey of 138 CEOs and top managers of Norwegian manufacturing firms revealed that many still hold the view that simply respecting environmental regulations, and not a more proactive approach, is the most profitable option.

As both the world-wide focus on environmental sustainability and firms’ dependence on strategic alliances continue to increase, CEOs may be wise to ensure that their firm is not an environmental laggard.

Norheim-Hansen, A. (2015). Are ‘green brides’ more attractive? An empirical examination of how prospective partners’ environmental reputation affects the trust-based mechanism in alliance formation. Journal of Business Ethics, 132(4), 813-830.

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