A new research study has found that family ownership of businesses positively affects corporate environmental performance, particularly if the business bears the name.
Researchers from Surrey Business School examined the impact of family-ownership on the likelihood of firms adopting the International Organization for Standardizations’ ISO 14001 criteria – a recognised and respected framework used by organisations to measure their environmental impact.
According to Professor Tazeeb Rajwani, co-author of the study and Head of the Department of Strategy and International Business at the University of Surrey, the desire to preserve socioemotional wealth and the firm’s own survival through generations drives relative-owned firms to pursue legitimacy by conforming to institutional expectations, such as the ISO 14001 criteria.
The study also determined that the effect is stronger for firms with names located closer to large cities.
“Every business aims to generate shareholder value, and this is no different for family-owned businesses. However, within a family business, the economic motive and the family are inextricably linked. We have found that one of the immediate objectives of the firm is to pursue initiatives that better their local community and environment.”
He continued:
“Investors, whose interest is profit maximisation, should be aware of the influence of non-financial objectives on strategic decisions in family firms. Additionally, managers who are not related of family-owned firms need to understand the existence of and recognise the potential influence of the family’s motives.”
The survey also found that the family’s name is an important symbolic characteristic that contributes to relatives identification with society. It concluded that the findings also have important implications for environmentally concerned stakeholders, including the firms’ own consumers and suppliers.
