Jagdish N. Sheth & Atul Parvatiyar
The purpose of this chapter is to highlight the new role of marketing in improving our environmental condition. Our fundamental proposition is that sustainable development can be achieved only by proactive corporate marketing and active government intervention. While governments engage in mandatory intervention, corporate marketers can undertake proactive interventions at the marketplace and within their own corporations. En this chapter, we discuss four mechanisms of government intervention (regulation, reformation, promotion, and participation) and four R’s of corporate marketing strategy (redirection of customer needs, reconsumption, reorientation of marketing mix, and reorganization) that are appropriate for promoting sustainable development. We suggest a two-dimensional shift in the approach to ecological problems: from consumption marketing to sustainable marketing and from invisible hand to a more visible hand of the government (Figure 1.1).
Public concern over environmental deterioration is rising and marketers have begun to recognize both the need and the value of environmental marketing. Some estimates suggest that manufacturers identified nearly 10% of all new products introduced in 1990 as “green” or otherwise “environmentally friendly.” This was more than double the number of green products introduced just one year earlier and about 20 times more than the number of green products introduced in 1985 (Davis 1992). There was also a dramatic rise in green marketing references in news, business, and trade sources during 1990 and 1991 (Morgan 1992). However, academic literature relevant to this issue is less extensive. In fact, since the late 1970s very few scholarly references on this subject are available.
During the mid-1970s, many scholars made important contributions with respect to the ecological perspective of marketing (Cravens 1974; Fisk 1973, 1974, 1975; Henion 1976; Kangun 1974; Perry 1976; Shapiro 1978). Despite these early efforts, other marketing scholars did not channel their intellectual pursuits in this direction. Perhaps the fundamental belief that market process is sufficient to correct any environmental imbalances prevailed. Also, scientific uncertainty and the hesitant commitment by business leaders to this issue made it difficult for marketing scholars to wholeheartedly engage themselves in research in this area. Whatever may be the reasons for marketing managers and academicians to fend the issue then, it may no longer be possible to ignore it now. Environmental problems have since grown and so has the general awareness about it. While during the mid-1970s it remained mostly an issue of conservation of resources and local area pollution, ecological concerns of today are global and more compelling.
The Ecological Imperative
The following discussion is a description of some of the ecologic al imperatives to which marketing has to respond in this decade. Scientists bring to our attention complex but urgent problems that have a bearing on our very survival: a warming globe, acid precipitation, threats to Earth’s ozone layer, accumulation of greenhouse gases, deserts consuming agricultural land, fast depletion of vital natural resources, the disappearance of rain forests, and loss of species (Chandler 1990). Although there may be scientific uncertainty about the extent of such ecological decline, there is evidence that the degradation of nature has begun to take its toll. Reports indicate that the Baltic Sea is dying from sewage and other pollution. Every year, we loose 25 billion tons of topsoil affecting 6 to 7 million hectares of agricultural land that convert into deserts. Another 1.5 million hectares of mostly irrigated agricultural land is affected by water logging, salinization, and alkanization (MacNeil, Winesmius and Yakushiji 1991). In places such as Mexico City and Eastern Europe, millions breathe toxic air; and China will soon have to cut all its harvestable forests (Smith 1992).
These and other dramatic changes are fundamentally impinging upon our global environment. An already crowded planet will have to support twice as many people within the next 40 years. To meet the needs of these people, world industrial output will have to quintuple (Smith 1992). About 90 percent of this population growth is expected in the already overpopulated poor countries who face tremendous shortage of resources for development. Already industrial production has grown more than 50 times over the past century, four-fifths of which has come since 1950 (WCED 1987). Such figures reflect and presage profound impacts upon the biosphere, as the world invests in houses, transport, farms, and industries. We all know that much of the economic growth pulls raw materials from forests, soils, seas, and waterways. The earth’s vital resources are shrinking to alarming levels due to unsustainable development activities. The need for further economic activity is likely to impose colossal new burdens on the ecosphere.
The gains in human welfare over the past few decades have been outstanding. The potential for future gains is also promising. Marketing played a vital role in these gains by facilitating the use and development of products with new technologies in biology, materials, construction, chemicals, energy, and electronics. However, vast increases in the scale of human impact on the earth accompanied past gains, for which marketing is also responsible.
The interdependence between global ecology and global economy is clearly established. We are forced to be concerned with the impacts of ecological stress—degradation of soils, water regimes, atmosphere, and forests—upon our economic prospects. Economy and ecology are becoming more interwoven—locally, nationally, and globally. Marketing cannot insulate itself from these ecological problems. It needs to be concerned about the resources it uses to satisfy consumer needs and wants and also be concerned about the effects of this consumption on human life and its biosphere. Sustainable development requires “sustainable marketing”—marketing efforts that are not only competitively sustainable but are also ecologically sustainable.
Marketing’s Role in Sustainable Development
Marketing’s role in the development process is well recognized (Kinsey 1982; Riley et al. 1983; Dholakia 1984; Carter 1986; KctIcr 1986). Much of the economic activity is triggered by the marketing process that offers and stimulates consumption opportunities to satisfy human needs and wants. However, marketing’s critical role in development will be appreciated only when, through sustainable marketing, it meets the needs of the present without compromising the ability of future generations to meet their own needs. This means that it might have to shed its present profligacy that encourages an unsustainable development path. A marketing approach that aims at serving the material wants of consumers through an ever increasing volume of goods without any attempt to maximize life quality (Kotler 1988), draws too heavily, and too quickly, on already overdrawn environmental resources and is likely to mortgage the future. Life quality represents not only the quantity and quality of consumption goods and services but also the quality of the environment. Clearly, marketing has to assume a more responsible role for sustainable development.
A two-dimensional shift in the fundamental approach of marketing needs to take place so as to facilitate sustainable development: one with respect to shaping customer needs and expectations, and the other with respect to providing customers with appropriate choices to meet their needs. Marketing’s claim that it serves societal needs by informing customers of the availability of goods and services to improve their quality of life can only be held tenable if its communication approach and techniques help in informing, educating, and channeling needs of its current and potential customers towards ecologically benign products, services, and/or activities. Implicit in this is the assumption that such marketing efforts are also directed to reforming inefficient and environmentally damaging consumption habits. Changing consumption patterns may call for positive incentives, new product and process developments, and price or non-price deterrents against certain customer practices.
Marketing’s second and perhaps more critical role will be its ability to identify and develop such consumption choices for society that meet its current needs without sacrificing the ability to meet its future needs. This means that we not only look for green products that do not damage the environment, but also develop such products and services that will improve the poor condition of our environment. The concept of a “socio-ecological product” has to extend our understanding that environmental consequences (the product’s aggregate impact on everyone affected by its use) are more important determinants of its acceptability than either user satisfaction or corporate profitability (Cracco and Rostenne 1971). The true socioecological product is one that becomes a consumer’s first choice, since it meets his/her consumption needs along with his/her need for a healthy, sustainable physical environment. It is important to understand that customer needs are not, nor should they be, in conflict with the environmental needs. In fact, the two needs occur concurrently. People need and want to coexist with nature. The sooner this is understood, the better it will be for our discipline and our society. It is necessary to change the mindset that believes that what is good for one cannot be good for the other.
Those companies who make these shifts toward helping us achieve sustainable development will do more than clean up or prevent their own pollution. They will make and distribute products more efficiently, worry about their products’ lifelong environmental impact, plan for their products’ recycling, and get their suppliers to also follow suit. This may require a new mindset, new tools, and adjustments throughout the organization. Some companies like 3M, Dow Chemical, AT&T and BMW have already started work in this direction (Smith 1992). Such a marketing approach that promotes sustainable development and protection of our ecosystem can be called “sustainable marketing.”
Corporate Strategies for Sustainable Marketing
Sustainable marketing requires proactive corporate strategies that would benefit both corporations and society. Such strategies must be aimed at redirecting customer needs and wants towards ecologic ally beneficial products and services, and providing the socio-ecological products to consumers.
It is an immense challenge for companies to advance simultaneously in economic development and environmental protection as sustainable development demands. However, this is something very attainable because companies have repeatedly demonstrated through their efforts in total quality management (TQM) that they can cope with the competing objectives—increasing quality while lowering costs (Schinidheiny 1992). Though the path towards sustainable development appears to be long and tortuous, corporations can effectively build a strategy for sustainable marketing through four distinct efforts: promoting reconsumption; redirecting customer needs and wants; reorienting the marketing mix; and reorganizing organizational efforts (see Figure 1.2).
Companies need to think not just about the impact of their product in the hands of the consumer, but also the process by which the product is made and sold. They have to be concerned about every product’s “eco-balance,” the minimization of risks and impacts throughout its life cycle, and the resources required to make and dispose of it. A new marketing approach promoting “reconsumption”—the ability to use and reuse goods in whole or in part, over several use-cycles or generations—can become the industrial ideal of an economic system. Developing products that can be reconsumed over several generations and educating the consumers then become the tasks of marketers. There is already evidence that products made of high-density plastics, ceramics, and rare metals have a far lesser impact on our fast depleting natural resources than steel, aluminum, or other metals, because they possess higher strength appropriate for facilitating reconsumption. Those companies that succeed in developing such products and in convincing consumers regarding their benefits will have competitive advantage over others as consumers become more conscious about the ecosystem. This requires a new thinking about product life-cycle usage.
Life-cycle usage implies life-cycle responsibility. Marketing managers geared towards thinking that their role and responsibilities end with the transaction exchange will not be able to cope with this new situation. Conceptual and operational plans will be required to manage such responsibility. Conscious strategies that promote reconsumption could provide the competitive advantage to many products. This has already been demonstrated in the case of some environmentally sound products that have commanded almost 25% premium. For instance, people typically pay more for organic ally grown food. Similarly, Germany’s AEG, a producer of white goods, recovered from near bankruptcy in the early 1980s by manufacturing a washing machine that used less detergent, energy, and water than its rivals (Cairncross 1992).
Sustainable marketing means more than pollution reduction and life-cycle responsibility. Businesses will be challenged to move toward “zero pollution.” “zero waste,” and redirection of product development efforts to meet ecological needs. The goal will be to make the manufacture, use, and disposal of products more compatible with sustainable development. These include efforts that help us produce more with less. These environmental marketing initiatives will be an integral part of corporate life in the 1990s.
For the most ardent environmentalists, customers are the ultimate paradox. Their consumption uses up the earth’s capacity to produce materials and absorb waste. Undoubtedly we agree that they should consume less, not differently. But until such human disposition comes about, it is necessary that they consume more environment ally friendly products. ft is marketing’s task to redirect their needs and wants towards consumption that is ecologically least harmful. Marketing’s current tools can be geared towards such redirection. The role of advertising and promotion cannot be understated in this regard. However, the use of market research and in-depth customer analysis will provide the most sustainable results in this respect. First, market researchers and consumer analysts need to identify the current consumption options, the criteria being used by the customer for choice behavior, the relative importance being placed on these criteria, and the sources of information that are shaping these criteria. It is only then that marketers can intervene to appropriately change the criteria for consumer decision making in favor of ecologically benign consumption. Consumer attitude studies will help in designing proper communication messages for sustainable marketing.
Consumer sensitivity to environmental issues does not always translate into purchase behavior. It is the responsibility of marketers to use their communication and promotional tools to convert this latent desire for environmental quality of life into actions and activities that actually promote such environmental quality of life.
If marketing during the past few decades has been so successful in increasing societal consumption and in meeting human needs, we are confident that it will also be successful in redirecting consumption behavior in favor of environmentally sustainable consumption. Marketing’s promotional ability cannot be underestimated. It only requires resolve and a cooperative effort. Large scale research on consumption behavior and net effect of interventions towards changing such consumption criteria could be effectively utilized by corporate marketers in their effort to redirect customer needs and wants.
Sustainable marketing requires the reorientation of the entire marketing mix, everything from product and packaging through positioning and promotion. Every marketer will have to assess the environmental impact of the manufacturing, content, package, lab el, advertising, distribution, use, and disposal of its products. Beyond assessment, strategic opportunities can be identified for a positive response that will earn the favor and support of environmentally conscious consumers, advocacy groups, media, and retailers. There may be strategic possibilities for new product development and acquisition opportunities. Retailers such as Wal-Mart, Kinart, and Safeway have already adopted aggressive environment al merchandising and promotional plans (Coddington 1990).
Reorienting the marketing mix means that marketers should consider options regarding repackaging, relabeling, reformulating, and or repositioning. We are already familiar with growing concerns regarding environmentally harmful product packaging. Several marketers have either started using biodegradable packages or are in the process of using recycled packaging. Product relabeling that includes more environment-related information has already begun to appear on retailer shelves. Many companies have initiated efforts to reformulate products to either remove the harmful ingredients, like phosphates in detergents, or make them more energy efficient. Repositioning products as environmentally friendly offers an opportunity to gain early market recognition and support of the conscious consumers and it also provides higher visibility in the already cluttered advertising media.
Reorientation is also required in selling approaches and sales incentive programs. Credible environmental themes based on appropriate environmental customer education can make the difference. Especially in business-to-business settings, those firms that provide vital environmental information to their clients on the use of supplies may make the difference. Chances are that as the pressure on companies to help the process of sustainable development increases, these companies will make similar demands on their suppliers. Retailers will favor those suppliers that carry products which help uplift their image as environmentally friendly organizations. The opportunities associated with proactive leadership far outweigh the risks.
Reorienting the marketing mix can lead to shifts in customer needs and also what we offer to the customers for consumption. Packaging, product-mix variables, and long lifetime warranties would be actions aimed at delivering ecologically beneficial offerings and advertising, labeling, and reorientation of selling efforts would help redirect customer needs for sustainable development.
Commitment to a vision of sustainable marketing must translate into strategies and action plans. This may often involve reorganization, restructure, and redesign of many processes and systems within a corporation. For example, some of these changes could include:
- Companies in the “sunset” industries develop environment ally sound substitutes.
- Alter the traditional roles of boards of directors and top management towards integrating the external and internal dimensions of a business, and to provide new vehicles for stakeholder participation.
- Develop a learning organization that involves middle management in the process of constantly rethinking and relearning the fundamentals of every aspect of business (Schmidheiny 1992).
Such reorganization must be complemented with proper incentive schemes within the organizational system that encourage its employees to adopt the philosophy of sustainable development. Providing meaning for employees beyond salaries is critical. Employee motivation can be further enhanced by providing technical and management training for environmentally sound operations. An organization that does not improve its own environment cannot market environmentally sound products or services. Focused education sets the orientations and attitudes of professionals and managers. Perhaps even a partnership with the government to provide education and training will help develop this capacity.
It should be realized that sustainable marketing efforts often require cross-functional teams. Promoting such cross-functional teams within the organization is essential. Those who think that marketing people will by themselves be able to develop green marketing orientation for the firm are sadly mistaken. Like total quality management, sustainable marketing requires the involvement of employees from all functional areas, including marketing, production, procurement, accounting, and information systems.
Corporate reorganization also signals new ways organizations are gearing themselves up to meet marketplace requirements. If corporations reorganize for environmental protection, customers will anticipate corporate marketplace offerings that are better for the ecosystem, and they will become interested in environmentally friendly offerings. Thus, customer needs will be redirected through corporate reorganization.
Government Intervention for Sustainable Development
Environmental policy is inevitably interventionist. Without intervention by the government, our environment cannot be fully protected (Caimcross 1992). Although the forces of unfettered competition can destroy the environment, this does not mean that we should replace markets with government. Such systems of absolute control by the government have not worked. This is made apparent by the scope of environmental catastrophe in the state-run countries of Eastern Europe. Bad governmental policies can further ruin the environment, even more so than unfettered competition. It is therefore important to identify mechanisms that the government can use to induce change. In this section we identify those mechanisms of governmental intervention that are necessary for environmental improvement. When free market process will not sufficiently promote sustainable development, government mandate is recommended. However, governmental intervention that too suddenly disrupts our industry and business practices could be catastrophic. Certainly, governmental measures must be strong enough to encourage everyone to follow the path of sustainable development and discourage those practices that cause environmental degradation. Yet these measures should be based on prudence (without delaying implementation) and should nudge businesses to internalize environment al costs or limit the damage to the environment. At the same time, government has to play the role of a champion in leading the world towards sustainable development. Its role has to extend beyond that of a watchdog to one of a promoter of better human life for current and future generations. Therefore, we suggest four interventionist roles for the government: regulatory, reformatory, promotional, and participatory.
Through the process of regulations and policies, including performance standards for technologies and products, governments can command and control the industry to prevent it from damaging our environment beyond sustainable limits. For such command and control to be successful it has to be based on factors like what standards will lead to efficiency; the extent to which the regulations and policies permit flexibility of response regarding the manner in which the industry can comply to such regulations; stability of policy; and transparency of compliance whereby the same policy applies equally to all other parties. We suggest that government make long term explicit policies in this regard.
It is also important that national governments and international organizations such as the United Nations work towards policy coordination. If the greenhouse effect is to be abated, all nations must cut emissions of carbon dioxide and other gases. This requires international agreements and coordinated action. Quite often, the same government will take conflicting positions on the same issues in different forums, reflecting the disputes among various constituencies within that government. Specialized agency and UN department heads carry on the dispute at the international level, and there is no higher super agency capable of resolving the differences. Furthermore, in this situation there is only a limited possibility of a coordinated and integrated effort at solving a problem on which expertise from several sectors is required (The Stanley Foundation I 989).The actions of each national government must be coordinated and consistent with others because the problems of the environment, resources, and development transcend national boundaries.
For sustainable development, major restructuring and reform of cultural, social, and political mores is in order. The systemic nature of these issues means that we recognize the linkages between production and consumption practices in most nations. Consumption reforms as well as production reforms must occur simultaneously. The commitment of the government towards such reforms is critic al. A clear path in this direction would be that of raising the level of knowledge about environmentally sustainable consumption and production processes. Governments may have to invest in educational programs that educate consumers on how to effectively reduce their use of energy and other resources, reconsume products, and reduce wastage.
There is also a need to reform institutional practices that are widely accepted but dysfunctional for environmental purposes. For example, most pricing and accounting practices do not place the cost of using irreplaceable natural resources or emission of wastes and pollutants need to be changed. Firms inability to internalize all costs in decision-making yields a distorted view of costs and it is an institutional failure. Reforming production processes, marketing practices, and rewards for employee performance may all require government mandates at least in the short run so that we shed our dysfunctional practices and adopt the path of sustainable development.
Reform of political institutions and orientations may also be necessary for a reordered world. The international security system which features more concern for economic and environmental questions and relatively less for military concerns will soon have to be adopted. This may require reorganization or expansion of some of the formal institutions of government or international bodies that are vested with responsibilities relating to security, environment, or economy. It includes redefining the roles and authority of these formal institutions so that they can function effectively for the new task at hand.
Through such market interventions as pollution taxes and charges, tradable pollution permits, deposit refund systems, performance bonds, resource-saving credits, differential prices, special depreciation provisions, and the removal of distorting subsidies or barriers to market entry, governments can potentially encourage the industry to change to cleaner technologies. To the extent that they may encourage industry to develop new technologies to overcome these costs, such economic measures are useful. If, however, these economic costs are being recovered through high market prices, then we are neither improving our environment nor is the system leading to improved efficiency. Therefore, governments also have to undertake positive measures that lead to continuous and speedy development of alternative technology for sustainable development.
Government’s promotional role should therefore extend beyond the use of these economic instruments. The true promotional role of the government comes with support facilities and institutions that it helps establish. As in the case of export promotion whereby governmental organizations help business firms with information, training and other support services, they need to develop similar services and programs to help business firms make the transition towards sustainable business practices. Several suggestions can be made in this regard: sharing information through a more effective database on environmental products, consumers, and support service availability; providing training; raising additional funds for environment al work (including low cost loans); providing assistance in assess ing the impact of current practices on environment and suggesting alternative processes; facilitating technology transfer; and identifying market opportunities for alternative products or technologies. The most effective and economical solutions will be those that work creatively with powerful market forces rather than trying to substitute them. Therefore, cooperation between industry and government is essential.
Through participative and cooperative action governments can help industry and the public move towards sustainable development. The participative role of the government spans over at least three areas: procurement, research and scientific development, and international agreements. In most countries of the world, government is the largest single customer. Through its purchase and procurement policies that are favorable to ecologically benign products, governments can make a substantial impact on what goods are produced in the nation and by what processes. A resolve not to buy ecologically harmful products or from companies that have environmentally defaulted would be appropriate.
Through cooperative measures such as participating in multilateral trade negotiations, promoting technology cooperation across companies and industry, and providing financial assistance for cooperative research, governments can foster sustainable development. Multilateral trade agreements are crucial for developing countries to afford investments in environmental improvement. As Gro Harlem Brundtland’s commission on world environment and development observed, global ecology and economy are so interrelated that if we do not meet the needs of developing countries, we will be endangering our own ecology (WCED 1987). Similarly, technology cooperation is vital for enhancing our ability to solve the environmental problems. Very few industries are capable of developing the necessary technology on their own. Sharing their resources across industry helps share investment risks. Included in technology cooperation is the issue of technology transfer, especially to the developing countries. Government’s role is important in facilitating such technology transfer is important.
Governments’ participation in the past has brought handsome results through space programs. It is perhaps time that governments individually or collaboratively set up NASA-like institutions for research and development in the area of environmental improvement. Funds allocated for such purposes will have a snowballing effect on the quantity and quality of research at academic institutions in this area. This will signal the commitment of governments towards achieving sustainable development and sustainable marketing.
Summary and Conclusions
In this chapter, we have argued that the modern marketing concept (understanding customer needs and fulfilling them) is insufficient for sustainable economic development. At the same time, environmental conditions are deteriorating at an alarming speed mostly due to consumption-oriented marketing. We suggest that it will require a proactive corporate marketing strategy and active government intervention to encourage ecological marketing.
We suggest that marketing practice must redirect customer needs toward ecologically safe products and practices through technologic al innovations. In addition, it must encourage reconsumption of products through recycling of waste and excess capacity. Finally, it must reorient its marketing mix to develop and promote ecologically safe products and reorganize itself to achieve this aim.
Concurrently, the government must also proactively promote the balancing of ecological and economic activities through regulation policy; participation through procurement, research and development, and international cooperation; reforming the production and consumption practices through mandates and incentives; and finally actively promoting the environmental causes by partnering with the industry.
In short, we believe that the visible hand of the government must guide the markets toward environmentally sound production and consumption practices. And, at the same time, marketing practice must both shape customer expectations and deliver them in a manner which creates a win-win situation between cost efficiency and ecological protection. In other words, it must innovate to overcome the apparent trade-offs between economic value and environmental value of marketing practices.
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