Study of Determinants of Proactive Environmental Strategies in Power and Cement Sectors

Any emerging economy like India depends on the growth of the infrastructure for its economic development. Power sector and cement sector are two critical sectors which are essential for the development of infrastructure of a country. Not only these two sectors are the leaders in contribution to infrastructural growth, but they are also responsible for damage caused to the environment due to their emissions. The damage caused to the environment from these two sectors has compelled the environmentalists to raise their voice against them. Such opposition has forced the government to formulate laws for the environmental protection. The environmental regulatory bodies enforce these laws. The waste from one industrial process has become the raw material for the other thus reducing the environmental damage. The blending of cement with fly ash by the cement sector has restricted the environmental hazard caused by this highly toxic waste from the power sector. Several studies have been carried out to identify the determinants of PES in different sectors. However, no such research has been carried out specifically for the power and cement sectors. PES are considered to be more stringent than required by extant laws, Companies adopting PES ensure transparent environmental reporting and fore sighting of any prospective change in environmental legislation which has the potential to harm the financial interest of the companies. Pressure from the stakeholders, local communities, judiciary, market, and media may decide the environmental behaviour of the polluting companies. Statistical tools SPSS and AMOS were used for the statistical analysis. Exploratory factorial analysis (EFA) was carried out for the validity and reliability of the constructs. The research was implemented using a combination of confirmatory factor analysis (CFA) and structural equation modelling (SEM). The empirical analysis uses a two-stage process in which the measurement models are first developed and confirmed using CFA to obtain latent constructs of PES. In the second stage, the measurement model and the SEM are estimated jointly to examine the determinants of PES using path analysis. Business practices, performance improvement, market pressure and benefits, and institutional pressure were observed as determinants of adoption of PES in the power sector. On the other hand, organisational capability, market benefits, environmental risk management, and stakeholder pressure were found to be determinants in the cement sector. Observed determinants were ranked using path analysis. Performance improvement and institutional pressure were observed to be key determinants of adoption of PES in power sector. Organizational capability and market benefits emerged as key determinants of PES in the cement sector.