Strategy Tools and the Kyoto Protocol's Flexible Development Mechanisms

EXECUTIVE SUMMARY The relationships between traditional tools used in the strategic planning process and the decision to pursue one of the flexible development mechanisms outlined in the United Nations' 1997 Kyoto Protocol were investigated. Published research was used to develop propositions regarding the relationships between clearly stating a commitment to environment in strategic vision and mission, developing core process-based competencies, and the pursuing a cost-leadership strategic position on the choice of flexible development mechanisms. Level of firm internationalization was proposed to moderate these relationships. Future research integrating strategic CSR and consumer-driven aspects of climate change was suggested. Keywords: Global Opportunity Recognition, Marketing Strategy, Strategic Alliances in Emerging Markets INTRODUCTION In the years since the 1997 Kyoto Protocol was ratified, expressions of corporate environmental and social responsibility continue to be a mandate in terms of a firm's strategic planning (Carroll, 1979; Hart, 1995; Hosmer, 1994). As a result, firms are faced with the problem of how to integrate environmental responsibility into their business activities while maintaining strategic focus. It may be argued that environmental pressures have forced firms to adopt strategic intents, visions, or missions which incorporate mitigation of the environmental and social impact of their activities. The challenge to the firm is to design its activities to support this environmental focus while maintaining a good fit with the firm's basic strategic intent, core competencies, and generic strategic position in the market in order to create and maintain competitive advantage. The three flexible development mechanisms outlined in the Kyoto protocol provide a potential avenue for firms' strategic response to pressures, both social and regulatory, to express a commitment to reduce the environmental impact of the firm's continuing activities, to enter into new markets, and to develop new products. While there is ample evidence on the profitability of CSR activities such as philanthropy to the firm (Russo & Fouts, 1997), empirical evidence on the characteristics of strategic intent statements, vision/mission statements, and generic market strategies that best fit with each of the three mechanisms outlined within the protocol is sparse. The effect of a firm's level of international diversification on climate change strategy has also been identified as lacking (Pinske, 2004). This research gap intensifies in importance as society's awareness of climate change and related policy increases, the processes associated with implementation of climate change strategy streamline, and the mechanisms outlined in the Kyoto protocol become a realistic, perhaps cost-effective option for firms to express their environmental and social responsibilities. The purpose of this research is to examine how the time-tested tools of strategic planning may be used in the decision processes of whether a flexible development mechanism is an appropriate avenue for a firm to pursue in response to climate change pressures from the external business environment. It is worth reviewing in the background section the mechanics of the three flexible development mechanisms and to illustrate how a firm is able to participate in one of the United Nations' (UN) climate regime programs as part of a larger strategic plan. The background and literature review sections describe the use of strategic intent, core competencies (through balanced scorecard), and generic competitive strategies in the decision to pursue a project type outlined in the Kyoto protocol in propositional form. Finally, the firm's level of internationalization is explored as a moderating factor in the propositions presented. A summary, discussion, and implications for further research conclude. BACKGROUND At the 1992 United Nations Conference on Environment and Development (UNCED) meeting in Rio de Jeniero (the Earth Summit), the United Nations Framework Convention on Climate Change (UNFCCC) was accepted as the global, market-based roadmap to combat climate change. …