International Research Journal of Environment Sciences__________________________________ ISSN 2319–1414

Vol. 4(12), 98-106, December (2015) Int. Res. J. Environment Sci.

Revisiting Corporate Stakeholder Environmentalism Theories to Ascertain

Influences in Sustainable Real Estate Decision Making in India
Pundir Manju Baisoya and Singh Sanjeev
School of Planning and Architecture, Neelbad Road, Bhauri, Bhopal, Madhya Pradesh, 462030, INDIA

Available online at: www.isca.in, www.isca.me

Received 30th September 2015, revised 7th October 2015, accepted 8th November 2015
Abstract
Sustainable real estate with multitude of rating tools and changing legislation puts the real estate firms under pressure to
amalgamate the sustainability initiatives into strategic decision making. Sustainability agenda is reflected as their corporate
social responsibility in varying scales due to the different external influencing factors. Property developers are business
firms that aspire to maximize profit but they do not operate in isolation and there are a number of influence factors for the
decisions made at firm level. This research revisits the theories of corporate stakeholder environmentalism and presents a
case of environmental sustainability decision making in real estate sector in India by way of an empirical investigation. The
purpose of this paper is to identify stakeholder influences in real estate decision making with a fundamental base of literature
review of the evolution of corporate environmental theories. The literature on sustainable real estate decision making is
limited and therefore, this research takes help of an empirical inquiry into the subject matter. With the help of a primary
question survey taking perception ratings from real estate sector experts, the paper draws out the key external and firm level
influences in real estate decision making towards higher environmental sustainability goals in Indian real estate sector.

Keywords: Stakeholder, environmentalism, sustainable, real estate, decision making, corporate, social, responsibility.

Introduction houses that work towards maximizing their profits and

therefore, the ethical case of environmental or social
The challenges and mounting pressures of urbanization and responsibility and opting for sustainable practices becomes an
climate change bring into focus the real estate development important concern.
firms, their operating strategies and decision making in relation
to sustainability. The real estate sector operates under a neo- The debate over economics and ethics has generated interesting
liberal regime, where private sector dominates and therefore issues related to business ethics within modern corporations.
clearly, the theories of corporate environmentalism see a Stakeholder theories are seen as an outcome of such debates that
manifestation in this sector. Environmentalism requires the generate a general framework for decision-making within the
enforcement of wider responsibilities for the impacts of modern corporation and tend to portray capitalism with a human
decisions through the legal and institutional frameworks that face. Stake holding is a philosophy that recognizes the
will impose the common interest. importance of social and economic cohesion. This paper
explores the concept of stakeholder environmentalism theories,
Modern real estate firms, like other business corporations, do as applicable to the modern corporations and the emerging role
not operate in isolation. The shareholders, resource and material of non-state actors in shaping business-environment relationship
suppliers, end users, working population, employees, local with the help of extensive literature review. The paper then
community, and urban civilization at large are affected by the presents a fresh perspective of a similar trend in the real estate
way a development enterprise functions. The resources used by sector through an empirical investigation into participation by
them are also not limited to the shareholders and owners; real estate developers in voluntary environmental initiatives. By
therefore, the impact of their operations is experienced by way of a questionnaire survey for perception ratings and
people who are in no way connected with their development interviews with sector experts, this paper identifies and links the
projects. stakeholder pressures to the level of environmentalism exhibited
among them.
After main streaming of the sustainability discourse and
publication of the Burtl and Report, sustainability issues are Material and Methods
now an important part of the socio-political agenda within our
society and so is environmental behavior of businesses. In the With the help of a mixed method approach combining literature
field of urban development, real estate developers are business review and a field survey, this paper investigates the

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fundamental theories surrounding stakeholder environmentalism influencing mainstream political debate. Since then,
traditionally in the corporate sector and draws parallels to the environmental concerns have evolved and extended from local
current real estate practices with a focus on Indian real estate and regional perspectives2 to global perspectives3. This has been
sector. At a broad level, the research questions that have been mainly due to successive discoveries that have changed
explored include: what is the corporate environmental associated values, interests, and knowledge about environmental
management principles applied to businesses? What conceptual problems. This shift in perception of the society about the
framework can be applied to understand stakeholder environment as a result has led to innovations in the
environmentalism and environmental capitalism? Can similar environmental management and policy-making arena4.
trends be seen in the real estate firms that incorporate green
development in their business agenda? The renewed interest in economy-environment relationships
emerged from the suspicion that economic activity is presently
With the help of an empirical enquiry into the subject matter by transforming the natural environment to such an extent that it
way of interviews with sector experts and primary questionnaire undermines capacity for future production. Corporate
surveys, this paper identifies the factors that influence the environmental management in general has been seen as an
decision-making process in real estate industry in India. As one accommodative response, a radical departure from the premise
part of a broader doctoral research, this paper is based on a held by eco-centric proponents who believe that corporate
questionnaire survey that targeted the motivation and external environmental goals and objectives necessarily disadvantage
stakeholder influences. The questionnaire survey was carried businesses5. It is believed that this engine of growth (business)
out online using a liker t scale perception ratings of various cannot be stopped but can be transformed so as to meet
options given by field experts that included real estate environmental challenges faced by present and future societies.
developers, construction sector professionals, environmental Questions therefore include whether societies have the capacity
experts and green building experts. 30 professionals have been for reforming existing modes of production and consumption so
contacted and their online responses were recorded and as to bring substantial improvement in environmental behavior
analyzed. of these agents of economic growth, and what the determinants
are of these reforms and modes of social regulation6?
Corporate Environmentalism: A Theoretical
Perspective It is argued that the capitalist drive for profit-maximization is
not sufficient motivation for the introduction of sustainable
Environmentalism is a set of ideologies and practices that production in the original and true sense of word7. The drive for
inform us about the flow from a concern in relation to the the ‘bottom line’, according to this school has made businesses
environment1. In academia, roots to environmentalism can be the major hurdle to sustainable development. Not all
traced back to early sixties with publication of Rachel Carson’s commentators agree with this argument and suggest that these
The Silent Spring, 1962 that focused on the poisoning of earth so-called ‘agents of capitalism’ are already working out
by chemical pesticides. Later, the Limits to Growth, 1972 where theoretical and practical tools to address problems of
Club of Rome investigated the idea of limits imposed by the environmental degradation8. Another school of thought believes
planet on the economic activities of humans. This idea was too that substantial improvements in the environmental performance
bleak and un-compromising, and too incompatible with received of economic activity can be achieved within the context of
ideas to secure mainstream political acceptance at that time. It existing institutional and social structures6.
was only in the mid-1980s that this concept showed signs of

Identification of
Semi-structured
Literature review: Questionnaire survey external influences for
interviews and
Corporate stakeholder (Real estate sector Environemtnal
discussions with
environmentalism experts sample size 30) sustainability decision
decision makers
making

Figure-1
Process adopted for empirical enquiry

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Radically changing corporate environmental goals and term strategies adopted by firms. An approach such as this,
objectives to achieve necessary scales of improvement in their attempts to incorporate environment into management theories
environmental performance could be devastating as fundamental that have so far avoided it, providing a green shade to
transformations in social structures, modes of economic stakeholder capitalism. This as stakeholder green and suggests
development, and ethics and values of profit-maximizing that such an approach offers even more sources of competitive
businesses will be required. As a result businesses rather than advantage than market and legal green12.
making fundamental changes tend to reform their activities in
relation to the environment5. Extended stakeholder Real Estate Sector Driven by Neo-Liberal
management is one such step towards a reform that provides Urbanism
firms the opportunity to environmentalize their business
strategies incrementally rather than making fundamental Real estate sector in India as elsewhere in the world is
changes. In such a scenario, a corporation when defining its dominated by private sector that operates under neo-liberal
environmental strategies recognizes and includes the values that market oriented forces. Planning and construction activities that
other stakeholders put on the environment, in such a way that it remained under state control in India are now being driven by
works to its economic advantage. Proponents of this argument private sector. This phenomenon, where the role of private
suggest that the 1990s have been witnessing the commencement sector increases in decision making regarding urban
of actual transformation of the institutional order of the development is termed as neoliberal urbanism15. It is defined as
industrial society induced by environmental concerns9. This has a form of urbanism subordinated to the dictates of capital, where
been explained in the ‘ecological modernization theory’ which urban powers attempt to position their cities in higher positions
is a view about the relationship between environment, the due to competitiveness14. This thinking has become dominant
economy, society, and public policy that has to be pieced since the last few decades in many parts of the world in the form
together from various sources10. of an ideology that advocates the privatization of social
resources including property. In other words, neoliberal
Within this relationship, structural institutional transformation ideology, therefore promotes open competition that is able to
reflected through the increasing importance of economic and bring faster transformations without government intervention
market dynamics portray economic businesses as social carriers and interference and may present a balanced economic model of
of ecological restructuring and reform. Opportunities for non- development16.
state actors and an emerging role for supra-national institutions
have been emphasized here. The entry of NGOs into the India’s urbanization is facing neo-liberal shift. The construction
negotiations with state representatives and economic agents to sector is dominated by private development projects that include
contribute to the development of proposals for environmental residential townships, institutions, commercial and retail
reform is part of such institutional transformation9. Political and developments, which is a clear evidence of urbanization within
economic influences have shaped relationships between the the context of neoliberalism, which is an economic
state, the market and the public in relation to the environment development-led phenomenon that supports privatization and
that has facilitated the structural transformation for free-market; and in which the role of state is restricted for
environmental management11. providing basic urban services17. This trend also leads to market
dependent approaches aimed at pursuing economic promotion
The new logic emerging from strategic environmentalism does and competitive restructuring18. For examples, real estate
not accept the premise that being green necessarily leads to projects have been promoted as key drivers of economic growth
greater expense. Environmental standards differ around the of a region. These projects have become symbols of prosperity
world, and to gain real and sustainable competitive advantage, for a geographical planning area, attracting investments and
companies have to be innovative in re-engineering processes promoting competitiveness18.
rather than simply addressing environmental issues by adding to
the cost curve. Also the importance of the consequences of the In Indian scenario, where the completely private or public-
environmental issues make it important to think business in private projects have approaching their planning and
environmental terms and taking the easy road by adding to the implementation completely advocates the neo-liberal approach.
cost curve won’t meet the challenge12. The key decision makers and project stakeholders see the
project as a profit making venture first. The overall
Corporate strategy to address issues related to economics and understanding of utilizing land as a resource, the short term
ethics has also been termed corporate social responsibility and impacts of construction and long term impacts of the entire
has been operationalised by both managers and theorists. It calls development and populating, infrastructural loads and urban
upon the managers and corporations to be good citizens or asks service provision pressures are not considered as the first
them to be responsive to social changes13. This concept of important step. This points at a shift from planning to project
corporate social responsibility could also be an extended based approach.
stakeholder management approach where stakeholder interests
in relation to the environment are being aligned with the long-

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Stakeholders in Real Estate moves away and the private sector plays a more active role in
shaping the development there is also a shift in the assumption
The sustainable urban development paradigm in real estate of social and environmental responsibilities solving social needs
developments and the complexity of environmental and and human capital growth as well as infrastructure related to
developmental issues in this sector calls for transcend final product22.
disciplinary boundaries and require trans-disciplinary and
diverse stakeholder interaction among the developers, investors, Sustainability Decision Making in Real Estate
end-users and policy makers19. Project stakeholders as identified
in figure-2, especially in real estate projects are individuals and Decision-making is identifying and choosing alternatives based
organizations who are either actively involved in a project or on values and preferences of the decision maker23, which
the internal stakeholders, and whose interests may be positively implies that there are options to choose from and some of the
or negatively affected as a result of project execution or options fit our ultimate goals or desires24. Environmental
successful project completion or the external stakeholders. decision making is to take this choice one step further, to
understand the limitations of our physical environment and
In real estate, the project stakeholders can be defined as consider it as a key stakeholder in qualitative sense first and
individuals, groups, or organizations who are actively involved then extending quantify the externalities.
in the project including those having interests that are positively
or negatively affected by the activities or results of the project20. Proponents of stakeholder theory suggest that the theory is more
The stakeholders can be either internal or external to the of a general framework for decision-making than a technique
organization and those directly involved in the project decision that generates determined results. Stakeholder environmentalism
making are the internal stakeholders and those who are affected offers a framework or guidelines that establish new ethically
by the project in significant ways, but are not directly involved aware and socially responsible business entities where mutuality
with the project - such as local residents and community are of rights and obligations are constructed while including
called external stakeholders. Real estate developments involve a economic, social and political attributes within a given society.
multitude of stakeholders after its initial conception and the Stakeholder environmentalism applies democratic principles to
social and environmental responsibilities have to be reflected in environmental governance and offers a powerful concept for
the way stakeholders make their choices to adopt environmental thinking about current political issues (environmental issues
sustainability practices. The stakeholder perspective for being one of them) around inclusion and governance in many
sustainable development takes into account the stakeholder different institutions and contexts25.
management theory that defines stakeholders as ‘those groups Stakeholder theory shows greater social responsibility and
and individuals who can affect, or are affected by the accountability and leads to stronger company performance in
achievement of an organization’s purpose’21. the long run26. Stakeholder environmentalism as a result
propagates those environmental strategies of firms should be
The sensitiveness towards environmental sustainability at the designed with present and future generations of stakeholders in
conceptualization and planning stages can positively affect the mind. This will lead to public trust and counter the effects of
long term environmental sustainability goals of a particular market imperfection. It will also make the company strategy
urban development project. The external stakeholders will be more sustainable. In a broader sense an extended stakeholder
impacted by the projects but may or may not have a say in the management approach among businesses suggests a shift in
way a project in planned, designed and marketed. This decision- business perception about the environment where environmental
making is carried out with the involvement of internal interests are merging with economic interests27. This suggests
stakeholders including project developers, investors, architects the emergence of a new era in corporate reporting and
and planners, and technical consultants etc. The resources used accountability where a new global framework will govern the
by them are not limited to the shareholders or the owners and measurement, and reporting of corporate social, environmental
the impact of their operations is experienced by people who are and economic performance– the three dimensions of sustainable
in no way connected with the business. While the public sector development28.

EXTERNAL STAKEHOLDERS (Local residents, socio-political

organizations, industries local businesses, etc.)
INTERNAL STAKEHOLDERS
(Investors, end-users, shareholders, workers,
collaborators, suppliers)
DECISION MAKERS
(Project Team: Developers,
Planners, Design and technology
professionals)

Figure-2
Stakeholders in real estate projects

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There are three main identified principles based on which the Therefore, as noted earlier, the voluntary environmental
real estate developers may choose to adopt environmental initiatives are driven by profit-driven motivation, though there is
sustainability decisions: a paradigm shift, a stakeholder issue or a recent acceptance of environmental responsibilities linked
a strategic issue29. In Indian context, this decision-making may indirectly to stakeholder pressures33. This is frequently
reflect a combination of these. Many real estate developers are discussed in terms of the need for business to establish
keen to adopt environmental initiatives to get regulatory legitimacy in the eyes of consumers, the public at large and
approvals, some have been motivated to develop green projects government.34 Beyond the need to keep pace with changes in
for consumer satisfaction and few have been striving for what society perceives to be acceptable, environmentally-
environmentally responsible initiatives for philanthropist sensitive business organizations are facing new demands to
reasons30. demonstrate their legitimacy as their global reach increases35.
This need affects all aspects of global business but especially
The level of environmentalism as a result could depend upon their environmental performance because of the high profile and
whether environmental concerns have acquired the significant scientific uncertainty of environmental issues, as well as public
attention of various stakeholders and how these concerns have skepticism about the effectiveness of government regulations36.
been translated to environmental strategies of corporations. The
level of environmental attention of various stakeholders also Stakeholder Responses to Sustainability Issues in
depends upon the characteristics of real estate firms, which
Real Estate Sector
explains the motivations and interests to pursue various levels of
environmental strategies and whether these variations are a In the present context, the real estate sector faces challenges of
result of the deferring levels of magnitude of influence by other complex and diverse nature when addressing the sustainability
stakeholders. issues. The regulations have been changing at a fast pace to
include the sustainability at national, state, city and building
Real estate firms like any other businesses, as noted before, levels and there is a wide range of sustainability assessment
being profit-maximizing entities, shape their strategies only with methods and frameworks being employed for planning design
the aim of economic benefits. With environmental concerns and construction activity. The planning, design and construction
now being included in the mainstream debates, acceptance of an of buildings and supporting infrastructure are aligned with
increased environmental responsibility is possible as there are targets in of resource preservation, energy efficiency, climate
opportunities to obtain market benefits and cost savings. This change and human health. This requires a close knitted decision
existence of a ‘win-win’ situation has been widely speculated making and highlights the importance of stakeholder
upon but the ability to profit from investment in environmental participation and management.
improvement may be less than initially hoped.
The decisions for achieving sustainability have to be taken at
Corporate Social Responsibility (CSR) has been providing a multiple levels of planning, strategy, design and material etc. In
competitive advantage in the real estate sector though it is felt addition there have been pressures of maintaining credibility
that the current efforts by corporations in real estate can be and meeting customer expectations like any other private
improved upon31. It is further observed that many of the business enterprise. Putting the principles of environmental
approaches under CSR are too generic and may lack connection sustainability into practical planning solution requires intensive
to a firm’s overall sustainability strategy. The environmental involvement and participation of the stakeholders. In the context
strategies can be either reactive or proactive in nature depending of decisions regarding achieving environmental goals for
upon the motives of action and time appropriateness of the example in a large scale township project, the differing
decision. expectations and various tangential forces of regulation, cost
and finances, choices for technology etc. may take extra efforts
Traditionally, as seen in corporate environmentalism, there are to manage stakeholders collectively for a given common
three broad drivers for firms to take decisions in favor of objective37.
sustainability32. These are i. to gain strategic advantage ii. to
avoid strategic disadvantage and iii. to act responsibly. Many In terms of environmental sustainability decision-making, the
businesses have come to believe that there is real profit to be stakeholders can be considered as being supportive, neutral, or
made from adopting voluntary initiatives and presenting the anti38. Figure two presents the supportive stakeholders that may
organization as ‘environmentally’ sensitive mainly by way of be considered as people leading towards high sustainability
creating a positive image and good publicity. However, there decisions which have a three pronged motivation for their
are a great number of enterprises that may choose to raise their decisions. Stakeholders mainly the real estate owners, investors
basic environmental standards to avoid perceived threats. This and professionals are responding environmental sustainability
disadvantage may be a loss of market share if the strategies of issue in three different ways, philanthropy driven by ideological
competitors prove effective or it may be a loss of reputation or concerns, public perception driven by marketing strategies and
standing that concerns the organization. When the goal is to actual performance improvements that may lead to financial
avoid disadvantage, the motive for corporate environmentalism benefits39.
is partly to deflect or pre-empt new legislation.

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Stakeholder attitude (real estate developers and investors)

Supportive Neutral Anti

Ethical/Ideological Business related Compliance

Motivation for decision

Figure-3
Stakeholder attitude and motivation for sustainability decisions

Extending this understanding to the Corporate Social influence factors, for example as given in figure-4, the costs and
responsibility (CSR) the responses of the decision makers has benefits of adopting any particular environemtnal initiatives will
four major components viz the economic responsibility or being also have a link to the investor pressure and vice versa in
profitable, legal responsibility, the ethical responsibility and the addition to indirect links to customer demands and competitive
philanthropic responsibility40. The stakeholder analysis advantages over other similar projects in the market. The
approach therefore identifies the need to describe the inter regulatory compliance and alignment to green policies or any
relationships, attributes and the interests of the stakeholders in other sustainability related policies and adopting a perfromanace
each of the issues and related conflicts. Real estate development rating system has also been related to competitive advantage of
projects, with their multiplicity and complexity of issues a real estate firm.
involved, therefore, rely upon all the three types of drivers of
decision making, the ideological, the market oriented and the These behavior-altering factors as seen are strongly linked to the
economic. stakeholders and play an important role in a real estate firm’s
decision making towards achieving higher sustainability goals.
Factors Influencing Sustainable Real Estate In other words these factors are shaped by the influence of the
Decision Making in India stakeholders that could vary between companies and locations.
The role of the state as a stakeholder and regulations are
It is observed that within any industry the company’s strategic influences has been seen as important by all the firms
environmental strategies determined by external factors, irrespective of their environmental performance. The external
mediating factors and the moderating factors41. External influences do not affect the final decision making with a similar
pressure emanates from the legal regulatory system, market strength and dynamism. The survey and the interviews
behavior and social expectations of the industry. Discussions conducted yielded the profiles of existing levels of participation
and interviews with real estate developers, sector experts and in voluntary environmental initiatives provide explanations by
real estate consultants and strategic advisors point towards a two investigating the role of the stakeholders as factors underpinning
pronged response by the decision makers to address the such initiatives. An investigation into the level of voluntary
sustainability issue at firm level. One is ethical and relates to environmental initiatives among businesses and the factors
both moral and social issues and also the concern of adverse underpinning such initiatives was able to establish the link
effect of building activities on the natural environment; and the between the new emerging logic of being green to stakeholder
second is directly related to compliance to the regulatory capitalism. The level of voluntary action among firms and the
framework accepting the rules and standards governing kind of proactive environmental strategies adopted by firms
sustainable development. The generic key influence factors for reflect upon the changing power dynamics among stakeholders.
environmental sustainability decision making in real estate
sector as presented in figure-4 have been identified as i. green At a firm level, from a business perspective, the opinion of field
building/green township policies, ii. performance ratings and experts emphasizes that the environmental sustainability
competitive advantages, iii. investor pressure, iv. customer decision is favored by a private developer due to the
awareness and higher demands for greener projects, v. corporate commitment of the leadership, regulation guiding the
social responsibility, vi. regulatory compliance and vii. the costs development and meeting the end-users demand and
and benefits of adopting sustainability initiatives. expectations, however the three highest favoring factors remain
cost reductions, firms image and investors influence. Figure-5
There are overlaps and interconnections amongst these presents the comparative ranking given by field experts for the

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favoring factors for environmental decision making at a real environmental decision making as with any other decision decisio
estate firm level, i. cost reductions and savings, ii. image of the making remains the cost factor, reduction in overall project cost,
company/brand/reputation, iii. investor influence, iv. regulatory increasing revenues or increasing the project selling prospects
compliance/risks and v. meeting expectations of the clients. The remain on top priority
iority on a developer’s agenda.
highest number of people stated that topmost reason for

Regulatory
compliance

Green Investor
policies pressure

Real Estate decision

making for
environmental
Customer sustainability Perfromance
demands ratings

Costs and Competitive

benefits advantage

Figure-4
External interdependent generic factors influencing decision making for environmental sustainability in real estate sector

Leaders personal interest

80
70
60
50
Cost reductions/savings/ Image of the Company/
revenue growth 40 Brand/ Reputation
30
20
10
0

Meeting end-customer's
Regulatory risks
expectations

Investor's influence

Figure-5
Favouring factors for sustainability decision making at a firm level

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Conclusion Environmental Responsiveness of Industry, European

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