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Stakeholder influences on environmental management practices: A study of fleet operations in Hong Kong (SAR), China.

Relationships between stakeholder influences and the effectiveness of environmental management practices are examined using a sample of 130 diesel fleet operations within Hong Kong Special Administrative Region of China (HKSAR) companies. The results indicate that fleet managers, in the HKSAR have adopted numerous elements of environmental management systems (e.g., environmental policies, planning methods, and implementation practices), but these have yet to be formally systematized. The influence of stakeholder groups on the adoption of more effective environmental management practices was found to be modest in the sample of fleets and appears to be limited to influences from community and media pressures. Fleet size, however, was shown to significantly moderate these relationships. For larger fleets, competitive and governmental pressures also emerge as significant predictors of environmental management practices.

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With increasing regularity, scientific evidence reminds us that current business practices are not sustainable. Whether one looks at the pace of global warming, evidence of mass species extinction, a looming crisis of potable water resources, or the monotonic buildup of toxic materials in our food chains, it is clear that businesses will eventually have to change the way they operate. Not surprisingly, as the true costs of this environmental degradation become clearer, stakeholder pressures are increasingly brought to bear on business firms for more sustainable practices (Mitroff, Pauchant, and Shrivastava 1989; Shrivastava and Siomkos 1989).

Although the best corporations have always listened closely to their customers, the importance of heeding broader stakeholder interests is increasingly being put forth as being critical to long-term business success (Freeman 1994; Freeman and Evan 1990; Henriques and Sadorsky 1999). This case for increased stakeholder influence is grounded in several developments. The Internet and wireless technologies provide stakeholders with better access to timely information, the means to publish their views to an international audience, and greater capacity to form alliances. This not only facilitates their involvement in decision making, but greatly enhances their ability to "shame and blame" large firms. As a result, an increasing number of larger firms are becoming aware of the importance of both building and maintaining a good corporate reputation. Not only can this lead to increased sales in global markets, but it can also translate into a number of other advantages over their rivals (Hart 1995; Nash 2000). Moreover, responsiveness to stakeholder pressures can take on special importance countries with more liberal political traditions (i.e., many European countries), where relationships are especially critical (i.e., Asian cultures), and where joint ventures may be mandated (i.e., developing countries).

In addition, there is a growing realization that sustainable business practices imply a broadened concept of business performance than is the current norm in most countries. In order for societies to avoid depriving future generations of an ability to meet their needs, firms should pursue a "triple bottom line" that addresses economic, environmental, and social dimensions (Deegan 1999; Elkington 1999). Because these broader expectations are emerging at a time when corporate legitimacy is increasingly suspect due to serious breaches in corporate governance, it is reasonable to anticipate actions that will promote greater sensitivity to stakeholder influences. Although these actions can be accomplished through various government-designed and -mandated mechanisms (i.e., regulatory, economic, and communicative), the business community would certainly prefer to convince government policy makers that various voluntary initiatives can effectively inculcate greater stakeholder sensitivity. If widely perceived to be successful, such initiatives may forestall unwanted regulations while, at the same time, affording businesses ample flexibility in their implementation. For example, firms that adopt ISO 14001 certification--an international standard for environmental management systems--or that sign up to more industry-focused initiatives (e.g., "Responsible Care," a voluntary code of practice within the chemical industry) have a mechanism for demonstrating to interested parties that they are environmentally responsive. It is also relevant that most of these programs require firms to provide some evidence that they have a methodology for better understanding stakeholders' views.

Unfortunately, relatively little is known about how much a firm's environmental practices are influenced by stakeholder pressures. Accordingly, this study will take a focused approach by examining how stakeholder pressures are influencing fleet operations within firms in the Hong Kong Special Administrative Region of China (HKSAR). For the purpose of this study, fleet operations encompass the management of corporate diesel vehicles (cars, buses, and trucks), which may be used for a broad range of purposes involving the transport of both people and goods within the territory. In the HKSAR, fleet vehicles are predominantly diesel powered and fleets tend to be relatively smaller as the territory is both small and congested. The HKSAR is an interesting area to examine these relationships because well-enforced regulations have yet to emerge in response to both ample and growing public concerns about environmental issues. Moreover, emissions from diesel vehicles comprise the greatest single contributor to air pollution in the HKSAR and are among the most obvious manifestations of environmental degradation (Tung 2000; Tung 2001).

BACKGROUND

Air pollution poses a serious threat to the HKSAR's economy and the well-being of its citizens. Apart from being a serious threat to people's health (Kinney 1999; Morgan, Reger, and Tucker 1997), there is also much concern that it will further tarnish the image of the HKSAR as an international city, thereby affecting its tourism industry and efforts to attract high-tech firms (Ng 2000). Air pollution now tops the list of complaints to the Environmental Protection Department (EPD) and pressures are mounting from a broad range of stakeholders for the government of the territory to do something about it. Of particular relevance to this study, direct stakeholder pressure on companies with substantial fleet operations is also increasing.

Air Pollution and Fleet Operations

Air pollution is comprised of many components, including black smoke, total suspended particulates (TSPs), respirable suspended particulates (RSPs), nitrogen dioxide (N[O.sub.2]), sulphur dioxide (S[O.sub.2]), carbon monoxide (CO), ozone, volatile organic compounds (VOC), and lead. RSPs, which in urban areas are most often from diesel engines, are particularly troublesome and lead to numerous respiratory ailments such as shortness of breath, coughing and wheezing, and damage to lung tissues. Individuals with chronic lung and heart disease, influenza, and asthma, as well as elderly people and children, are more susceptible to RSPs than healthy adult populations. Such particulate matter has been clearly linked to increases in mortality (Dora 1999; MacKenzie 1997).

In order to evaluate the monetary values associated with morbidity and mortality caused by the rise of ambient air pollutants, a study was commissioned by the HKSAR's Environmental Protection Department (Lai 1998). The "cost of illness" relating to air pollution, respiratory and cardiovascular diseases, was estimated to be 0.35 percent of GDP (HK$3.84 billion) in 1996. This includes direct and indirect costs such as medical expenses, productivity loss, compensation schemes, and awards. When a more liberal "willingness to pay" approach (which asks people how much they would be willing to pay to avoid disease occurrence) was used to take into account other, nonmarket values (e.g., pain and suffering over and above the cost of illness), the economic cost increases to HK$5.64 billion, or 0.51 percent of GDP. These monetary values provide some indication of the economic benefits that may attend reductions in air pollution.

As reported by the Environmental Protection Department, air pollution from diesel vehicles in the HKSAR has exceeded that from all industrial activity since 1991 (EPD 2000). Although industrial pollution has been reduced by the migration of most manufacturing to mainland China, this has been much more than offset by a substantial net increase in the number of motor vehicles. In addition, depending on the season, much of the industrial pollution simply blows back across the border from neighboring Shenzhen. As a result, RSPs in the HKSAR are about 30 to 50 percent higher than those in New York and Tokyo. Of relevance to this study is the fact that diesel vehicles, by themselves, account for 98 percent of the RSPs and 75 percent of nitrogen oxide emissions from all vehicular sources. This reflects the fact that the HKSAR has the highest ratio of diesel-powered vehicles in the world, with about 30 percent of all vehicles being diesel-powered, though many are not maintained properly (Chan, Chan, and Qin 1999). In 2000, six out of the fourteen monitoring stations for air quality were not able to fully comply with the air quality objectives on maximum hourly pollutant concentrations (EPD 2001). All this suggests that environmental practices in fleet management are extremely important to public health and well-being in this context.

Accordingly, in recognition that emissions from vehicles are the primary source of roadside air pollution, the government of the HKSAR has taken a number of measures to mitigate levels of RSPs. These measures include requirements such as phasing in liquid propane gas (LPG) for fuel in taxis, more rigorous vehicle inspections, and increasing fines for smoky vehicles.

In addition to these regulatory measures (which have yet to be aggressively enforced at all levels), the government is hoping that companies will voluntarily improve their fleet management practices. For example, since August 1999, the Environmental Protection Department (EPD) has worked with the Vocational Training Council to offer special training courses for vehicle mechanics on proper engine repair and maintenance in order to reduce the level of smoke emissions (Kong 2000). In addition, modest sums have been set aside to subsidize owners of pre-Euro light diesel vehicles to retrofit their vehicles with soot traps (EPD 2001), and cross-border discussions have taken place with authorities in Guangdong Province to coordinate policies related to fuel and vehicle standards.

Stakeholder Influences

A stakeholder may be defined as "any individual or group who can affect or is affected by the actions, decisions, policies, practices, or goals of the organization" (Carroll 1993). In the broadest sense, stakeholders may include a host of entities, including trade associations, competitors, government, customers, employees, suppliers, activist groups, customer advocate groups, unions, and political groups. It is safe to assert that effective managers consider all relevant stakeholder interests and are proactive when responding to those of highest priority. This is because managers must not only have a good understanding of key stakeholders' expectations but may also be able to shape these expectations through engagement. This not only provides inputs in the strategy formulation, but buys the firm extra "degrees of freedom" in its implementation.

To better manage stakeholder relationships, it is necessary to understand both the type and source of various stakeholders' influence and pressure (Ansoff and McDonnell 1990). Because a full listing of stakeholders for any particular firm would be lengthy, eclectic, and idiosyncratic, various frameworks for this purpose have attempted to group stakeholders together into more "generic" categories. Henriques and Sadorsky (1999) proposed four major generic groups of stakeholders--regulatory stakeholders, organizational stakeholders, community stakeholders, and media stakeholders. Categories proposed by other writers vary in terminology, but roughly fit with these four groups (Carroll 1991; Carroll 1993; Clarkson 1991; Freeman 1994; Phillips and Reichart 2000).

Due to the emphasis given to the problems associated with air pollution in the HKSAR along with its more obvious manifestations (i.e., reduced visibility, smog, and occasional health advisories), there has been a substantial increase in stakeholder awareness of the economic externalities of air pollution associated with RSPs and other components. As a result, managers of fleet operations are experiencing substantial pressures from numerous sources to operate more cleanly.

Environmental Management Practices in Fleet Operations

The management of fleets is an essential element in the attainment of economic goals for many firms. All firms must obtain raw materials, add value through processes that often involve moving "work-in-process" from one location to another, and then must distribute these goods or services to customers. As a result costs associated with logistics are seldom trivial and the speed and reliability of service can often form the basis of at least a modest competitive advantage for many firms and provide a major advantage for firms in the transportation sector.

Leading companies manage the environmental aspects of their operations with an array of tools (e.g., Life-Cycle Assessment (LCA), Design for Environment (DfE), re-manufacturing, de-materialization, environmental accounting, environmental reporting, closed-loop manufacturing processes, supply-chain auditing) that form the basis of an environmental management system (EMS) (Willums 1998). Many such EMS elements are applicable to fleet operations. The most frequently mentioned core components of an EMS include (1) establishment of environmental policy; (2) creation of a suitable organizational structure for attending to environmental issues; (3) allocation of adequate resources to attain environmental objectives and targets; and (4) management review (Freidman 1995; Henriques and Sadorsky 1999; Hunt and Auster 1990; Polonsky, Zeffane, and Medley 1992).

These broad components have been formalized in a number of environmental standards or benchmarks, including the Eco-Management and Audit Scheme (the standard of the European Union), ISO 14001, the "CERES Principles" (guidelines promoted by the Coalition for Environmental Responsible Economies), and "Responsible Care" (adopted within the chemical industry). For the purposes of this study, environmental management practices in fleet operations will be examined from the perspective of their development of the key components within the framework of an environmental management system. The following four sections are drawn directly from the international standard (ISO; 1996) and from Johnson (1997):

Environmental Policy. Such a policy provides a framework for setting environmental objectives and targets and reviewing them. An effective environmental policy statement would normally include a commitment by top management to continual improvement, pollution prevention in relation to the operation of the organization, and compliance with legal requirements. It should be documented, maintained, and communicated to all employees and be available to the public.

Structure for Implementation. Procedures should be established and maintained to identify the environmental aspects of an organization and the relevant legal requirements. The organization has to set up and review environmental objectives and targets within each relevant function. During the process, the views of the interested parties should be considered in addition to the legal requirements and their significant environmental aspects. Objectives and targets have to be consistent with the environmental policy and, in order to achieve the environmental objectives and targets, programs have to be in place to designate responsibilities for relevant functions and specify a timeframe to complete the programs.

Resource Allocation. Resource allocation to implement the priorities set forth in the environmental policy and to attain objectives is multifaceted. At least one management representative should be appointed to closely monitor the various aspects of the EMS and provide feedback to top management for review. Adequate resources should also be provided to implement the various plans and procedures. Training needs must be identified and appropriate training provided to all people whose work may significantly affect the environment. Internal and external communication procedures on significant environmental aspects must be maintained along with documentation to describe the core elements of the system.

Management Review. At the end of each planning cycle, top management should review the overall system and identify the corrective actions to be taken to handle nonconformance; operators should suggest preventive action. Changes to the appropriate procedures, objectives and targets, and environmental policy should be reformulated, if necessary, for continual improvement. Facilities need not adopt all of the EMS components unless they are seeking certification to one of the previously mentioned programs or standards.

CONCEPTUAL DEVELOPMENT

The relatively few studies that have focused on the relationships between stakeholder groups and environmental practices have typically categorized stakeholders into different groups and have considered environmental practices in the context of an environmental management system (EMS). Along these lines, Florida and Davison (2001) proposed that an EMS could be an especially useful tool for companies to communicate with key stakeholder groups about potentially controversial environmental issues. In particular, they assert that an EMS should enable a firm to better cope with environmental risks and costs. Another stream of research has examined motivations for seeking EMS certification (e.g., Darnall, N., Gallegher D.R., and Andrews, R.N.L. 2000; Andrews et al. 2003). The main findings from these studies suggest that motivations for seeking certification to an international standard (ISO 14001) tend to be driven somewhat more by internal considerations than by external pressures. However, a recent study of Japanese firms by Welch, Mori, and Aoyagi-Usui (2002) found that these motivations evolve over time, with the "first movers" being relatively more responsive to reputational and market considerations than those certifying to the standard more recently.

Against the backdrop of these studies that focused on formal EMS systems, it should be noted that the interest in formal certifications and full-blown EMSs has been relatively weak in the HKSAR. Indeed, as of Dec. 2001 there were only 105 certifications (ISO 2002). Although it seems clear that fleet managers in the HKSAR should be increasingly sensitive to the growing pressures from both within their firms and from stakeholder groups for improved environmental practices, it is not yet clear that such pressures have reached a threshold where the average fleet manager would be highly responsive. For example, one might reasonably expect fleet managers in the HKSAR to be apprised of government intentions related to fleets and modify their environmental management practices accordingly; however, in the absence of effective enforcement mechanisms and stiff fines, it is hard to say a priori how many may be taking a "wait and see" attitude prior to changing their practices. Similarly, it is difficult to say in advance how much influence the media may be influencing on fleet management practices. While newspaper articles and television "exposes" undoubtedly make an impression on fleet managers, it is difficult to predict how broadly this would lead to changes in environmental policies, planning, or implementation practices. As a final example, although most stakeholders seem to be pressing for better environmental management of fleets, local business networks could be expected to be relatively less supportive--even possibly antagonistic--to such reforms. Thus, although both the literature on stakeholder influence and our knowledge of public concern about air pollution from diesel vehicles permits a reasonably confident expectation that fleet managers in the HKSAR should be responding to these pressures in fleet management practices, further specificity of relationship seems unwarranted. This leads to our initial, general hypothesis:

H1: Stakeholder pressures will influence environmental management practices related to fleet management in the HKSAR.

It seems reasonable to expect that fleet managers would tend to focus on implementing those environmental management practices that are most in keeping with organizational goals and come from those stakeholders that are most central or unpredictable to their unit goals. Accordingly, we would expect the influence of stakeholder pressures on environmental management practices to be substantially different for firms where fleet operations are a major aspect of their business than if fleet management is more of a peripheral concern. First, as fleets become larger they come under greater scrutiny from various stakeholder groups. Thus, for example, fleets that intensively cover an area serve a marketing function in creating brand identity, which is greatly undermined by visibly polluting vehicles. Second, regulators often pursue a strategy of prioritization such that, under limited resources, they choose to go after the most serious offenders. Third, stakeholder groups will also prioritize larger firms in order to more effectively use scarce resources. This is to say that a more targeted campaign against a larger firm is likely to be more efficient than trying to shape the practices of many smaller operators. A final point: The larger the fleet size, the more likely that fleets would be professionally managed and that expenses reach a scale worthy of certain equipment and practices.

In addition, firms with larger fleets will be more strongly influenced by a broader set of stakeholder groups due to the heightened visibility that comes with having a large number of vehicles and the "deep pockets" that large fleets imply. As Ansoff and McDonnell (1990, 195) stated, a "firm's success is highly dependent on how and by whom the interconnections are controlled and regulated." Thus, firms with large fleets must be broadly attendant to pressures from the government and regulatory groups upon whom their "charter to operate" most depends and who know they will be the first who will be subject to scrutiny. Moreover, firms with large fleets must yield to pressures from various competitive influences and the media. In a relatively small venue such as the HKSAR, it is more difficult to escape the attention of these groups and it is easier for these forces to form coalitions. Thus, the following is hypothesized:

H2a: The effect of stakeholder pressures on environmental management practices in the HKSAR will be stronger for larger fleets than for smaller fleets.

H2b: The effect of stakeholder pressures on environmental management practices in the HKSAR will be from a broader set of stakeholders for larger fleets than for smaller fleets.

METHODOLOGY

Data Collection and Sample

This study focuses on organizations that operate diesel vehicle fleets in the course of their business operations in the HKSAR. The unit of analysis is vehicle fleet operations at the facility level and includes all vehicles in use (i.e., automobiles, trucks, and busses) regardless of fuel type (although, as previously mentioned, in the HKSAR most will have diesel fleets). To improve the probability that the samples selected would actually operate at least one diesel vehicle, they were randomly chosen from companies of the following categories in the classified telephone directory: bus/taxi companies; movers and storage services; containerized freight services; air cargo services; freight forwarding; contractors (e.g., building, general); furniture companies; and fuel supply companies.

The survey process was primarily based on the "total design method" of Dillman (1978). Telephone calls were used instead of letters for advanced contacts as well as follow-ups in order to speed up the whole survey cycle. Once the sampling frame was established, the organizations were contacted via telephone. The names of the managers responsible for fleet operation were requested and their mailing addresses confirmed. After mailing 380 surveys with reminders, completed responses were received from 130 fleet operations, a response rate of 34.3 percent. This was deemed satisfactory as response rates are notoriously low in the HKSAR. Systematic tests of nonresponse bias were not undertaken; however, we would note that the average size, age, industries, and fleet composition represented by the sample are very typical of those in the HKSAR. Because business in the HKSAR is dominated by many small and medium-sized enterprises (SMEs), even though our sampling frame focused on transportation sectors, the resulting sample may appear biased toward smaller fleets. Nevertheless, we doubt the presence of any response bias due to size and believe this sample is representative.

Measures

Sources of Stakeholder Influence. Respondents were asked to rate the importance of the fifteen stakeholder influences used previously by Henriques and Sadorsky (1999). The respondents were asked to rate each stakeholder group on a five-point scale (1=very insignificant; 2= insignificant; 3=moderate; 4=significant; and 5=very significant). This particular scale was used because it covers a broad range of stakeholder influences that would be applicable to fleet operations, and its measurement properties in a North American context were clearly reported. In an attempt to compare the measurement structure of these items to Henriques and Sadorsky's study, the items dimensionality was examined using a principle components analysis using varimax rotation. Altogether, five components were extracted that accounted for 72.7 percent of the variance among the items. However, the item for employee pressures seriously cross-loaded on three components and was subsequently dropped. The component weights for the remaining fourteen items are reported in Table 1 (with key weights bold-faced). This table also provides the specific wording for each of the fourteen items.

As is evident in the table, the components corresponded closely to those previously identified by Henriques and Sadorsky (1999) and are labeled (from left to right) as follows: (1) government and environmental sources (2) media sources; (3) community sources; (4) competitive sources; and (5) network sources.

Given that this scale is used in a completely different cultural and economic context, it should not be surprising that the measurement structure should deviate modestly from the previous findings. In this regard, we were somewhat surprised to observe that the government and environmental organizations "loaded" so uniformly on a single factor. Explanations for this may be because one of the most visible environmental organizations in Hong Kong is Chief Executive Tung's Advisory Council on the Environment (usually referred to as "ACE") and because other environmentally related NGOs have been reluctant to target specific firms (e.g., Friends of the Earth--HK) or are more issue-specific (e.g., WWF on wildlife). Moreover, there is a cultural tendency on the part of the public to consider environmental issues as a governmental responsibility. Given this, a "typical" fleet manager in the HKSAR may perceive the role of "green groups" in society as a force for government regulation. It should also be noted that the last component (i.e., what we have labeled "network influences") does not conform to Henriques and Sadorsky's (1999) typology and is represented by only two items. The Cronbach's alpha ([alpha] of indices for these five components were 0.78, 0.97, 0.91, 0.69, and 0.82, respectively. Each index is a transformation using the mean of the items comprising it. Four of the scales have acceptable levels of internal consistency, while the scale for competitive sources is on the fringes of acceptability (.70 being often used as a heuristic for this purpose). Each scale also appears to discriminate from the other forms of stakeholder pressure reasonably well as evidenced by no cross-weighting over .40.

Effectiveness of Environmental Practices. A set of items that spoke to good environmental management practices was extracted largely from ISO 14001 and ISO 14004 documentation (ISO 1996) and Johnson (1997). Each of these was elaborated into a series of items that reflected "good practice" for a total of twenty items. Adherence to such practices is taken to be reflective of greater effectiveness. Accordingly, respondents were asked to rate the effectiveness of each of the items in their own facilities on a relative five-point scale (1 = "much below average"; 2 = "below average"; 3 = "average"; 4 = "above average"; and 5 = "much above average' '). As before, a principle components analysis was carried out on these items. One item pertaining to whether the "environmental policy is available to the public" was deleted because it seriously cross-loaded on the other components. Subsequently, three components had eigenvalues in excess of unity that spoke to environmental policy, planning, and implementation practices. The scale reliability of the resulting three scales was 0.79, 0.89, and 0.95, respectively. The weights from the principle component analysis are reported as before in Table 2.

Fleet size. The size of the diesel fleet was measured as the number of such vehicles owned and serviced by the facility.

RESULTS

About half of the respondents reported being in the following industry sectors that provide transport services for clients' goods: movers and storage services (12.5 percent); containerized freight (14.1 percent); air cargo (11.7 percent); and freight forwarding (13.3 percent). The remainder were from a broad range of other industries. Diesel fleet sizes of the respondents ranged from 1 to 4,338 vehicles.

The descriptive statistics are provided in Table 3. The means reveal that pressures from government and environmental organizations are by far perceived as being the greatest (3.51) and that those from network sources and the community are weakest (2.76 and 2.88, respectively). As these scales were constructed of items on a five-point Likert-type scale, with values of 3 indicating neutrality with the statements presented, it can be generally concluded that, with the possible exception of governmental pressures, none of these stakeholder pressures are perceived as being especially strong. Of the environmental management system practices, firms appear to report having made relatively modest progress in the development of environmental policies (whether formal or informal with a mean of 3.10), but appear to have done much less in the way of implementation (2.28). Whether this suggests that policy elements are mostly "window dressing" or there is a more legitimate lag in implementation cannot be determined from these data and would require further research.

The first hypothesis broadly predicted that stakeholder pressures would affect environmental management practices in managing fleets. This hypothesis was tested using a structural equation modeling approach in which each stakeholder pressure predicted each of the three dependent variables. This method afforded some benefits over independent OLS regression models in permitting simultaneous estimation, [chi square] statistics related to model "fit," and the modeling of correlations among the residual terms for each regression model. The results for the entire sample are reported in the first column of coefficients in Table 4.

As is evident, there are but two significant regression coefficients among the fifteen reported. The highest R2 is a modest 19 percent (for the prediction of the effectiveness of planning practices). The relative weakness of these models is further attested to by the lack of significant relationships with the perceived effectiveness of the facilities' environmental policies.

The effectiveness of planning, on the other hand, appears to be responsive only to media sources (albeit rather strongly so, as evidenced by a coefficient of .367). As these items involved the setting of objectives and targets, it is possible that the media in the HKSAR raise both awareness and some fear of being featured, which tends to promote the promulgation of environmentally-relevant objectives. The perceived effectiveness of implementation practices, on the other hand, is linked to pressures from community sources (.220). This implementation measure was comprised of a broad range of practices that all loaded together. Thus, we infer from this finding that pressures from specific community groups, perhaps in the form of complaints to top management, lead to "doing something" in a rather nonspecific manner. Overall, given the weakness of these models, there is only modest support for the first hypothesis.

The second set of hypotheses had two components related to moderation of these relationships. The first argued that there would be a strengthening of relationships in larger fleets; the second argued that the breadth of stakeholder influences on environmental practices would be greater for larger fleets. To conduct these tests the sample was subdivided into two groups based on the median fleet size of seven. Admittedly, fleets with seven vehicles would not generally be considered as being "large fleets" to most industry observers; however, this number probably does accurately reflect the realities in HKSAR, where the economy is comprised of a disproportional amount of small and medium enterprises. Thus, the smaller subgroup could certainly be considered as being comprised of small fleets, while the larger subgroup is probably comprised of medium and large-sized fleets. Seven vehicles also arguably constitutes a level at which some measure of "professional management" of the fleet becomes warranted in the HKSAR, given a combination of high vehicle costs, usage fees, and fuel prices (among the highest in the world) in combination with lower wage scales for fleet managers. Hypothesis 2a was tested by constraining all relationships between the stakeholder influences and EMS component effectiveness to be the same in the two groups (Arbuckle and Wothke 1999). This resulted in a chi-square increase ([DELTA] [chi square]) of 39.4 with 15 df. As this impairment of model fit is in excess of the critical value of 24.9 for 15 df, this hypothesis is supported, viz., fleet size does moderate these relationships. As is evident from examining the second and third columns of regression coefficients in Table 4, for operations with smaller-sized fleets the relationship of stakeholder influences on the effectiveness of EMS components is substantially weaker in the prediction of the effectiveness of environmental polices and implementation (i.e., [R.sup.2] of 11 percent for both). This may suggest that smaller operations are generally less aware of the need to accommodate stakeholder interests and that they are seldom the focus of such attention. Managers of smaller fleets continue to be responsive to community and media influences, even though the pattern of relationships shifts somewhat. Media influences continue to shape planning practices, but also implementation practices, whereas community influences significantly influence environmental policies. These arguments are reversed in the management of larger fleets and, therefore, the relationships and R2s are much stronger. This is most pronounced in the prediction of the effectiveness of environmental polices where the [R.sup.2] jumps to 34 percent.

As anticipated in hypothesis 2b, firms with larger fleets appear to be more broadly influenced as there are many more significant relationships. Given the previous statistical test that confirmed differences, support for this hypothesis is taken from the marked difference in patterns among significant coefficients in Table 4. Such differences are most evident for the relationship of stakeholder pressures and environmental policies, whereas these influences are noted for government and environmental, network, competitive, and media sources where these are all lacking for smaller fleets. Broader influences are observed for the effectiveness of planning and implementation practices as well, although less marked. Altogether, these results provide ample support for both H2a and H2b.

DISCUSSION

This study examined relationships between stakeholder influences and effectiveness of environmental management practices of fleets in the HKSAR and yielded several interesting findings. The first is simply that fleet managers in the territory appear to have adopted some vestiges of these practices. While none of the fleets in the sample had certified systems (i.e., ISO 14001) in place at the time of this study and few were championing environmental management, most indicated that they have at least considered environmental issues in their planning and policy formulation and in how they managed their operations. Relatedly, this study confirmed that fleet managers in the HKSAR generally appear to be sensitive to a need for improvements in their environmental performance. When asked about the most important environmental problem in the HKSAR, 69.2 percent of the respondents rated air quality as the top priority. However, this finding must be viewed with caution for there is a possibility of some bias in these responses due to the "social desirability" of the items. For example, when asked whether their firm is committed to "continual improvement and the prevention of pollution," the authors suspect that respondents generally overstated this commitment.

This study also found that environmental management practices among fleet managers in the HKSAR appear to be modestly influenced by stakeholders. This should be taken as an encouraging finding because it shows that firms are managing their fleet operations with greater sensitivity to information, opinions, and/or pressures from interested parties. Moreover, because so few regulations speak to specific environmental management requirements, this is a sensitivity that is not yet strongly mandated. Consequently, this provides some evidence that fleet managers in the HKSAR are willing to go somewhere beyond minimum standards set by legal requirements.

Those influences that were common to fleet operations, regardless of their size, were limited to media impacts (i.e., on the effectiveness of EMS planning) and community influences (i.e., on the effectiveness of implementation of practices). In this regard, it should be noted that the media in the HKSAR had been very active in covering environmental issues and topics in the period just prior to this study (SCMP 1999). Moreover, most fleet managers are aware that such media coverage is often precipitated by community interests.

The comparison of smaller and larger fleet operations was more informative. It was found that larger fleet operations appear to be much more strongly and much more broadly impacted by stakeholder influences than are their smaller counterparts. This greater strength is evidenced by the much greater predictive power of the models related to the effectiveness of both environmental policy and implementation practices and by an increase in specific coefficients. Because the split between large and small fleets was empirically determined (based on a rather small median of seven vehicles) and may be subject to question, we reanalyzed the data using a larger cut-point. Dividing the sample around fifteen vehicles (which was the largest fleet size that permitted us to preserve a minimum of thirty facilities in the "large" subgrouping), we found that nearly all significant coefficients were amplified. This amplification was especially marked for the influence of government and competitive pressures on environmental management practices. The sole exception to this strengthening was that the relationship between network sources and the effectiveness of policy was attenuated and became not significant. As this was a negative relationship before, our interpretation of this result is that firms with larger fleets tend to be less vulnerable to any negative network pressures.

Among the relationships associated with larger fleets, "competitive sources" of pressure was found to be significant for all three environmental practices categories and is also accompanied by a sign change for the coefficients in each subgroup, indicating that these influences most strongly distinguish between larger and smaller fleets. As noted in Table 1, such pressures are those concerning customers, competitors, suppliers, and shareholders. Given this grouping, we take this as a positive indication that the environmental management of fleet operations is gaining credibility as a good business practice. It is likely that such influences would begin with larger fleets and eventually diffuse downward to be taken up by the managers of smaller fleets. Thus, these findings could be an indication that this process is well under way in the HKSAR.

The relationship between media pressures and policies was also significantly stronger for firms with larger fleets with respect to the promulgation of environmental polices; at the same time, it was somewhat weaker in terms of environmental planning and implementation practices in larger fleets. Although an interpretation of these differences is more challenging, it could be speculated that more professionally managed fleets would be less subject to the "emotional" influences of media coverage in terms of their everyday practices. At the same time, fleets must recognize the benefits of having an effective environmental policy in place for public consumption, should media attention be drawn their way.

Finally, it was observed that firms with larger fleets are generally more influenced by community pressures in terms of their implementation practices than firms with smaller fleets (who, in turn, were more strongly influenced by community groups in terms of their policies). In looking at the items for community pressures (the weightings in Table 1), it can be observed that one of the sources that loaded on this factor was from "lobby groups"--possibly because larger firms may be part of (or contributors to) such lobby groups.

Given that smaller fleets' practices were found to be influenced by only community and media sources, we would infer that these managers of smaller fleets are less subject to top management scrutiny. As a result, these small fleets are probably less "scientifically" managed, which would leave the manager of the fleet operations relatively free to obtain information and influences from outside of the firm (i.e., from the media and from their informal interactions with the community). In all likelihood, fleet managers of fewer than seven vehicles would have predominantly received mechanical training and experience and, as a result, be more attuned to the media and any direct community complaints.

Limitations

As with any cross-sectional study, this research is severely constrained in its ability to offer insights into the causal direction of relationships. However, it does seem likely that stakeholder influences would shape environmental management practices rather than the other way around. In all probability there is some reciprocity in these influences. For example, one of the purposes of a certified EMS is to provide a measure of confidence among stakeholders that a particular facility has such a system in place (and, thus, should have better environmental performance).

In addition, any study that obtains all data from a single survey is invariably subject to concerns related to mono-method bias. Although this survey was taken anonymously, there might still be a tendency for the respondents to rate their organizations more favorably and in line with their perceptions rather than relying on facts. We would contend, however, that such bias would tend to link constructs, thereby inflating relationship. Thus, the relative weakness of most of the associations found in the smaller fleet subgroup would imply that mono-method bias was not particularly severe in this study. In addition, the most significant findings of this study were based on comparisons that would be much less vulnerable to this threat to validity.

Attempts to generalize these findings to other contexts should also be undertaken with caution. Not only was this study limited to the HKSAR (a rather unique environment for fleet management), but the transport industry includes many independent taxi and minibus owners/drivers who were not included in the study.

CONCLUSION

Given that there have been few ISO 14001 certifications in the HKSAR and none specifically focused on diesel fleet operations, it is somewhat encouraging to note that some of the elements of environmental management system practices are developing. Moreover, it was found that the influences of stakeholder pressures on large and small fleet operators were different. While larger firms appear to be generally more sensitive to governmental, environmental, and organizational pressures, firms with smaller fleets appear to be more strongly influenced by community and media pressures. Thus, it would appear that significant improvements in the environmental practices among diesel fleets in the HKSAR can be achieved by efforts that involve a broad spectrum of stakeholder interests. Large fleet operations require continued governmental pressure as well as from environmental organizations. Such fleet managers are also responsive to market- and organizational-based pressures for improvement. However, because the aggregated effect of small-sized diesel fleets is relatively large, this study points to an important role of media and community groups in pressuring them toward improvements. Although the statistical power of these regression models is relatively modest, given the high economic and social cost resulting from dirty diesel fleets in the HKSAR and elsewhere, this study underscores a need for additional policy mechanisms to give such stakeholders an even greater voice.
Table 1. Principle Components Analysis of Stakeholder Influence
Sources (a)

 1 2 3

1. Government and Environmental Sources
 Environmental organization pressure .790 .380 .047
 Government information .736 -.094 .290
 Environmental organization information .758 .394 .169
 Government regulatory pressure .596 -.208 -.176

2. Media Sources
 Television and radio information .174 .188 .220
 Newspaper information .185 .206 .189

3. Community Sources
 Lobby group pressure .210 .857 .094
 Community stakeholders .164 .841 .069

4. Competitive Sources
 Customer pressure .020 .130 .191
 Competitor information .141 .099 -033
 Supplier pressure -.153 .354 .388
 Shareholder pressure -.084 .110 .304

5. Network Sources
 Trade association information .135 .048 .843
 Informal network information .205 .115 .831

 4 5

1. Government and Environmental Sources
 Environmental organization pressure .041 .059
 Government information .346 .052
 Environmental organization information .068 -.071
 Government regulatory pressure .316 .348

2. Media Sources
 Television and radio information .909 .072
 Newspaper information .911 .086

3. Community Sources
 Lobby group pressure .225 .148
 Community stakeholders .139 .151

4. Competitive Sources
 Customer pressure .019 .746
 Competitor information .059 .730
 Supplier pressure .037 .570
 Shareholder pressure .118 .491

5. Network Sources
 Trade association information .143 .133
 Informal network information .199 .007

(a) Varimax rotation

Table 2. Principle Components Analysis of Effectiveness of
Environmental Management System Practices (a)

Variables 1 2 3

1. Effectiveness of Implementation
 Maintain document control .834 -.035 .227
 Maintain procedures for handling
 environmental records .831 .351 .107
 Maintain operational control .808 -.027 .273
 Maintain documentation to describe the core
 elements of the management system .807 .250 .091
 Identify training needs and provide
 appropriate training to all personnel
 whose work may create a significant
 environmental impact .800 .376 .070
 Conduct management review .769 .306 .096
 Maintain procedures for handling
 nonconformance and taking corrective
 and preventive action .749 .215 .130
 Maintain procedures to monitor and measure
 key characteristics .726 .388 .152
 Maintain internal and external communication
 on significant environmental aspects .700 .334 .140
 Maintain procedures for periodic
 environmental management system audits .690 .455 .156
 Appoint at least one management
 representative and provide adequate
 resources to implement the environmental
 management system .685 .436 .106
 Maintain emergency preparedness and response
 procedures .596 .055 .353
2. Effectiveness of Planning
 Maintain programs for achieving objectives
 and targets .345 .822 .256
 Setting and reviewing environmental
 objectives and targets .280 .811 .243
 Identify and maintain all environmental
 aspects of organization's activities .215 .673 .421
3. Effectiveness of Policy
 Environmental policy .153 .175 .795
 Communicating of environmental policy to
 all employees .247 .207 .720
 Commitment to comply with relevant
 environmental legislation and regulations,
 and with other requirements to which the
 organization subscribes -.033 .100 .697
 Commitment to continual improvement and
 prevention of pollution .308 .223 .690

(a) Varimax rotation

Table 3. Descriptive Statistics (a)

 Mean s.d. 1

1. Pressure from government and
 environmental sources 3.51 .77
2. Pressure from network sources 2.76 .87 .30 **
3. Pressure from community sources 2.88 .90 .39 **
4. Pressure from competitive sources 3.03 .82 .22 *
5. Pressure from media sources 3.09 .99 .46 **
6. Environmental policy effectiveness 3.10 .77 .30 *
7. Environmental planning effectiveness 2.64 1.02 .21 *
8. Implementation effectiveness 2.28 1.14 .16

 2 3 4

1. Pressure from government and
 environmental sources
2. Pressure from network sources
3. Pressure from community sources .29 **
4. Pressure from competitive sources .40 ** .36 **
5. Pressure from media sources .40 ** .36 ** .30 **
6. Environmental policy effectiveness .10 .29 ** .20 *
7. Environmental planning effectiveness .21 * .26 ** .22 *
8. Implementation effectiveness .23 ** .27 ** .21 *

 5 6 7

1. Pressure from government and
 environmental sources
2. Pressure from network sources
3. Pressure from community sources
4. Pressure from competitive sources
5. Pressure from media sources
6. Environmental policy effectiveness .20 *
7. Environmental planning effectiveness .38 ** .52 **
8. Implementation effectiveness .25 ** .46 ** .62 **

(a) Pearson correlations

* p < .05, two-tailed tests

** p < .01, two-tailed tests

Table 4. Standardized Regression Coefficients for Model Predicting
EMS Component Effectiveness

 Total Smaller Larger
Dependent Sample Fleets Fleets
Variable Independent Variable n=130 n=71 n=59

Effectiveness Government and
of Policy environmental sources .174 .034 .311 **
 Network sources -.057 .022 -.209
 Community sources .183 . 378 ** .081
 Competitive sources .007 -.149 .242 **
 Media sources .034 -.124 .300 **
 [R.sup.2] (unadjusted) 10% 11% 34%

Effectiveness Government and
of Planning environmental sources -.060 .000 -.072
 Network sources .051 .109 -.074
 Community sources .106 .068 .142
 Competitive sources .008 -.153 .310 **
 Media sources .367 ** .418 ** .245 *
 [R.sup.2] (unadjusted) 18% 22% 19%

Effect. of Government and
Implementation environmental sources -.049 -.158 .075
 Network sources .138 .194 -.046
 Community sources .220 ** .020 .315 **
 Competitive sources -.012 -.141 .245 *
 Media sources .099 .283 * .135
 [R.sup.2] (unadjusted) 11% 11% 27%

* p < .10, two-tailed tests

** p < .05, two-tailed tests


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Mr. Wong is senior engineering coordination engineer, The Hong Kong Electric Co., Ltd., Hong Kong (SAR), China. Mr. Fryxell is professor of management, China Europe International Business School (CEIBS), Shanghai, China.
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Title Annotation:Hong Kong Special Administrative Region
Author:Wong, Lai Tim; Fryxell, Gerald Erick
Publication:Transportation Journal
Date:Sep 22, 2004
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