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feel more pressure to reform or else bear the political cost of perceived negligence, i.e., the cost of regulatory sanctions or consumer sanctions (like boycotts). Furthermore, profitable companies with “slack resource availability” are typically more likely to launch CSR initiatives (Waddock
& Graves, 1997). Hossain et al. (1994) determined that size, financial leverage and foreign listing status all had a significant positive impact on voluntary disclosure.
Despite the popularity of company size as a significant indicator of corporate environmental behavior, size is not an adequate explanatory variable because of the market-based and legitimacy-related context that gives it meaning. In other words, companies would not inherently improve their environmental records as they increased in size were it not for the commercial pressures that induce this behavior. Furthermore, the relationship between high net revenues and increased environmental disclosure becomes even more muddied when considering Huang and Kung’s (2010) work on high profitability and disclosure. Huang and Kung found that high profitability among firms on the Taiwan Stock Exchange significantly decreased the
probability that they would disclose environmental information about their company. They explain that lower-profit companies might feel pressure to increase their environmental reporting in order to gain competitive advantage with eco-friendly branding. Blomback and Wigren (2009) add that a prevailing research trend that highlights size as a critical factor and treats “small firm CSR” through a different lens has made discourse on the subject less nuanced and persuasive.
4. Results
The results of my survey and interviews uncover an industry of steel-producing electric arc furnaces with very similar environmental protocols, technologies, as well as a focus on current and impending public-sector regulation, ISO certification, and a sensitivity to cost-benefit tradeoffs. Another defining feature of the industry seems to be an activist private sector advocate in the Taiwan Steel and Iron Industry Association, which acts as a go-between for industry and the government and also reduces the transaction costs involved in researching and designing environmental protection systems as well as vetting purveyors of environmental protection services, particularly companies that handle waste disposal. The paragraphs that follow will explore the interview testimony on these themes, but first, the data from the survey instrument poses some interesting questions for future research.
The structure of the survey instrument includes three main sections. First, companies give
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some general information about themselves such as the year they were established, their ISO certification status, their number of employees, and whether or not they produce for export. Next, they go through a list of Best Available Techniques for environmental protection in EAF
production and indicate which technologies and protocols their factory utilizes. Third, they gauge the pressure they feel from various agents in the private, public and voluntary sectors (as well as from intervening variable agents like existing R&D efforts and company size), according to levels on a Likert scale. Unfortunately, this survey methodology elicits some concerns about its findings. For one, the relative lack of responses poses problems for the generalizability of the data; in all, I collected five complete surveys from within Taiwan’s EAF industry plus one incomplete EAF survey, a complete survey from the China Steel group and an incomplete survey from a steel conglomerate with operations based overseas. Also, in the pivotal section of the survey that attempts to weigh varying levels of pressure from different sector agents, each
company tended to identify sources of pressure from nearly every indicator at comparable levels.
These more-or-less interchangeable results reduced further the potential for finding a quantitative basis for correlating sector pressure with varying levels of environmental investment, accounting for firm size, profitability and other factors. Thus, what follows in Table 4 is not a quantitative analysis of the data at all, but a faithful representation of survey results and response ranges, followed by interview data to shed light on the remaining gray areas.
Table 4: Collated survey data by indicator ranges
Average score of indicator
Sector averages Indicators (values)
3-3.5 Public sector: 3
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Table 4 clearly shows the limited range of responses generated by the multi-sector indicators portion of the survey. In fact, only one company disagreed that a single indicator (government subsidies) impacted their environmental protection protocols. To address this issue, future iterations of the survey might include a broader range of Likert scale values. For instance, rather than a five-point scale where “4” equals “agree” and “5” equals “strongly agree,” another survey might use an 11-point scale and have firms differentiate the degree of pressure they feel from “0,” meaning no pressure, to “10,” meaning strong and unrelenting pressure from a
particular indicator. Still, it’s interesting to note how, on average, firms agreed that 19 out of 25 indicators impacted their environmental protection efforts (averages below “4” indicate that most firms neither agreed nor disagreed that a particular indicator impacted their protocols). EAF steel firms feel, or want to convey that they feel, pressure to be environmentally responsible from all sides and all sectors.
Looking at the data another way, certain indicators point to a slightly wider variety of responses than others. For instance, every firm agreed on some level that the following indicators affected their environmental investment levels: routine upgrades, company size, neighbors, the
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media, public protests, lawsuits, voluntary EPA regulations, environmental impact assessments, current EPA emissions standards, future EPA regulations, market competition, management, and investors. By contrast, all other indicators elicited at least one response neither in agreement or disagreement about the indicator’s impact — a neutral response — or at least one company did not know about the particular indicator. Of course, the minuscule sample size does not allow for any meaningful statistical correlation between these discrepancies and, for example, company size or experience. This offers another opportunity for future research, including the search for more insight through interviews with companies. Sadly, each of these companies expressed a lack of human resources and time to field interview questions about the subject matter, and the bulk of this study’s non-survey qualitative data about EAF firms comes from industry
representatives that work closely with them and on their behalf as technology consultants and steel industry specialists.
Regarding the middle portion of the survey, EAF firm respondents varied much more widely with respect to the number of recommended environmental protection techniques and equipment they utilized. Judging purely from the number of different protocols utilized, one company identified 22 out of a maximum of 29 environmental protection methods, while the other companies confirmed 17, 16, 16, and 11, respectively. This data suggests a fairly broad range of EMS development levels in the EAF sector, however, this data is not clearly related to company factors like size, age, or target market (import/export).80 Looking at the areas with the broadest agreement, we can conclude that avoiding mercury, closed-loop water-based cooling systems, and distributing production residues for use elsewhere are techniques practiced by every surveyed company. Several industry-level interviewees elaborated on these and more revealing environmental investment trends.
First, TSIIA General Secretary Jerry Huang emphasized that, while EAF investment levels are not completely standardized, they are very similar when it comes to the biggest environmental concern for the industry: waste collection and disposal. Huang explains that, whereas 30 years ago EAF plants used scrubber technologies for their hazardous powder waste, this technology failed across the board and had to be replaced by a bag house system to conform
80 Unfortunately the scale designed to capture the differences between company revenues was invalid. This scale was based on a general scale of Taiwanese SMEs and did not consider the higher revenue-generating capacity of heavy industry SMEs.
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to increasingly rigid government regulations. Thus, nowadays Taiwan’s EAF facilities collect this dust through either a canopy hood or a (more costly, but more effective) total evacuation system that sequesters hazardous waste into a separate facility containing a bag filter. Of the 21 EAF firms on the island, however, only one company — Dragon Steel, a subsidiary of China Steel — has the facilities for in-house treatment of this hazardous waste. Also, including the Dragon Steel facility, Taiwan has only a total of three facilities capable of this work. A facility in Taoyuan handles much of the waste coming from Northern Taiwan, while Taiwan Steel Union, in Changhua County, offers the cheapest81 hazardous waste treatment services. Importantly, Taiwan Steel Union was implicated in the serious dioxin contamination incident of 2009
involving tainted duck meat (explored in Section 2.5). Therefore, of the six total stages of waste management (see Section 2.2, Figure 1), the vast majority of EAF facilities are only responsible for the first two steps: waste collection and storage. The crucial final stages of the waste
management process are arguably out of their hands, especially considering such a narrow field of companies offering these services.
The same cannot be said for non-hazardous EAF waste management, i.e., treatment and disposal or reuse of EAF slag. These companies must handle the slag they generate differently from carcinogenic EAF powder. First they must separate it according to when it was generated during steel production, as different production stages create slag with distinct physical
properties that are more suited to being reused in different final products (e.g., cement versus higher-quality construction materials). Huang recalled how the standard procedure of separating slag came to be after TSIIA agents visited each EAF steel plant and got them to commit to it. In addition, the TSIIA also monitors slag treatment facilities — of which there are more than double the number of EAF dust treatment facilities — and makes strong recommendations to EAF firms about which facilities’ services they should employ (based in part on these treatment facilities’ environmental protection records). For example, Huang recalls that in 2012 TSIIA organized EAF firms to sign an agreement not to do business with a particular waste treatment company that had been caught cutting corners in the execution of its duties.
Also beyond the reach of the survey data, General Secretary Huang stated in November 2014
81 Huang also noted in November 2014 that the price for treating dust is currently decreasing.
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that 14 EAF firms (70%) are certified according to the ISO 14000 standards.82 Also, all EAF facilities in Taiwan use continuous casting, all recycle gray water in their cooling systems, and all interact on some level with TSIIA’s specialized committees that are hired to research and audit environmental protection efforts and distribute the findings. In addition, Huang notes that 20% of EAF facilities are housed in industrial parks, while the rest are in “industrial areas,” and all are hooked into the national Taipower energy grid. The location of the facilities matters immensely when it comes to public sector pressure for environmental protection, as some local governments are much tougher and inspect factories more frequently than others. Huang explains that facilities in Kaohsiung must undergo daily audits via automatic environmental monitoring devices that report their data directly to local regulators. Furthermore, regional environmental protection bureau patrols regularly respond to calls from the neighbors of industry, and they are required to investigate any issues.
The efficacy of government monitoring and regulation garnered plenty of input from interview subjects, in academia especially. Dr. Tu Wen-ling, an associate professor in the
department of public administration at National Chengchi University, emphasized the likelihood that government outsourcing of environmental monitoring services to agents funded by the private sector might result in biased, unreliable data that favors industry; her research into a coal-fired power plant in Taichung provided evidence for this bias. The issue of government
outsourcing of administrative duties highlights another principle concern voiced by Dr. Tu and Dr. William Su, a former environmental law professor at National Chung Hsing University in Taichung: discrepancies between EPA promises and their administrative capacity. Both professors described the national agency as an adopter and vocal proponent of internationally competitive environmental standards, but stated bluntly that their monitoring abilities and enforcement practices are not up to the task of ensuring that domestic industries reach these standards, either for lack of funds (Dr. Su) or for lack of will (Dr. Tu). According to Dr. Su, Taiwan’s EPA system is still caught in a “command and control” administrative mode that requires immense inputs of human resources and funding to operate, whereas the foundation of a more cost-effective emissions trading system (that would transfer much of the cost of
82 During the first two or three years in which ISO 14000 entered the industrial sector, the government did provide a subsidy to China Steel and Donghe Steel, but Huang believes this impact was minimal for SME steel companies.
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environmental regulation administration to the private sector) has languished in government for 15 years. This view, of course, contrasts with that of activists and academics like Dr. Tu, who distrust private sector self-regulation.
In addition, Dr. Tu discovered a discrepancy between the data that privately funded monitoring firms collected and their policy recommendations; in particular, energy sector monitors apparently acknowledged worrisome levels of PM2.5 without following up with lawmakers to address the issue via policy changes. This suggests that environmental monitoring data might not have the same impact on policy as, for example, environmental standards adopted in other countries. Furthermore, Dr. Tu commented that the leadership of Taiwan’s EPA in 2013 regularly made public statements about the importance of balancing environmental protection with economic growth considerations, which might introduce some bias into the execution of the EPA’s administrative responsibilities. In sum, this testimony suggests that although EAF
companies and industry representatives (Sinotech, TSIIA) highlight public sector indicators – particularly regulation – as an important coercive impetus for environmental upgrades, the regulatory system is not flawless and steel industry firms have some opportunities to take advantage of administrative inadequacies.
Regarding the voluntary sector indicators highlighted in the survey instrument and interviews, one environmental activist focused on petrochemical companies in Taiwan cited the increased participation of voluntary sector groups in public hearings and EIA processes
beginning in the mid-1990s, which she claimed has given neighborhood and issue-based groups more leverage in pressuring all kinds of industries, including steel. Dr. Tu also mentioned this impact, adding that environmental groups such as Citizens of the Earth have been increasingly successful in reaching the public at large with low-cost grassroots monitoring (for instance, taking photographs daily over long periods of time to gauge basic air quality conditions) and other methods. All of these factors could potentially impact EAF companies, but it’s important to note that none of the academic or NGO representatives interviewed for this study had direct experience with the steel industry.
Lastly, each interviewee from each sector stressed the truism that EAF companies’
decision-making process must ultimately utilize a cost-benefit analysis, but these individuals disagreed about the extent to which multi-sector indicators impacted this analysis. Uniquely, a representative from China Steel conveyed that company’s approach to CSR and environmental
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protection as a source of competitive advantage:
“CSC wishes to become one of the most environment-friendly steel company (sic) in the world. Please refer to our CSR reports. However, all investments need to consider economic, technical and practical feasibility. So we will do it if an investment:
1. Needs relatively lower capital and has huge environmental benefit 2. Is global trend and the cost is affordable
3. Has IRR [internal rate of return] higher than CSC’s benchmark”
The search for competitive advantage via environmental investment indicates a heavy private sector-based impetus. Notably, representatives from Sinotech engineering and TSIIA contradict the relatively high level of EAF firm agreement in the survey regarding competition and
customer expectations as positive sources of pressure for green investment. Huang stated that customers, even customers abroad, “don’t care” about environmental performance provided that they receive good value and reliable service for a reasonable price.
This input goes a long way toward fleshing out the foundations of EAF investment levels into environmental protection. The discussion section that follows builds on the integration of survey data with interview testimony to shed light on the possible connections between indicators of multi-sector pressure and EAF investment (as well as the role of intervening variables), how legitimacy and stakeholder theories can explain these connections, and how to
square these theories with the cost-benefit analysis reality behind firm decision-making.