Integration of environmental issues in the firm: learning processes and coordination

This paper considers the extent to which the organisational structure of the firm influences the perception and the integration of environmental problems. Environmental economists who have been concerned for many decades with market failures, and more recently with regulation failures, still commonly assume that firms operate efficiently. It is our contention that there is a third institution subject to failure with environmental implications. That institution is the firm. Indeed, if the firm is considered as an organisation of individuals who make decisions, the way in which individuals learn and routines change is essential in the determination of the organisation's performance. Solving environmental problems related to products and production processes often requires the development of new skills and capabilities. Thus, in order to conceptualise the integration of environmental issues in firms, the concept of "organisational learning" is useful. If a decentralised organisation is particularly adapted for the development of varied and localised learning, in order to increase the competencies within the organisation, a hierarchical framework seems to be necessary to maintain coherence within the firm.