Explaining Corporate Environmental Performance: How Does Regulation Matter?

Forthcoming in Law & Society Review

57 Pages Posted: 23 Feb 2002  

Robert A. Kagan

University of California, Berkeley - Center for the Study of Law and Society

Neil Gunningham

School of Regulation & Global Governance (RegNet)

Dorothy Thornton

University of California, Berkeley - Center for the Study of Law and Society

Abstract

It is widely assumed that national and subnational differences in regulation and regulatory enforcement account for differences in environmental performance by regulated businesses. Against this "regulatory regime" assumption, however, one can pose a counter-hypothesis: by the beginning of the 21st Century, particularly in economically advanced democracies, differences among regulatory regimes have narrowed sharply, and local social pressures, market incentives, and corporate environmental management are the chief determinants of variations in firm-level environmental performance. This article tests the "regulatory regime" and the counter-hypothesis, drawing on a study of 14 pulp and paper manufacturing mills in Australia, New Zealand, British Columbia, and the states of Washington and Georgia in the U.S. Over the last three decades, we find, tightening regulatory requirements and intensifying political pressures have brought about large improvements and considerable convergence in environmental performance by pulp manufacturers, most of which have gone "beyond compliance" in several ways. But significant firm-level differences in pollution control still exist. Relying on 1998-99 effluent data, we find that regulatory jurisdiction does not account for differences in environmental performance across facilities. Just as salient in explaining those differences are variables such as corporate profitability, pressures by local communities and environmental activists, and especially corporate environmental management style although no single set of variables is determinative. A broader historical perspective on our data, however, indicates that regulation still matters, since large improvements in corporate environmental controls have been associated with tightening regulatory requirements and intensifying political pressures.

Suggested Citation

Kagan, Robert A. and Gunningham, Neil and Thornton, Dorothy, Explaining Corporate Environmental Performance: How Does Regulation Matter?. Forthcoming in Law & Society Review. Available at SSRN: https://ssrn.com/abstract=299239 or http://dx.doi.org/10.2139/ssrn.299239

Robert A. Kagan (Contact Author)

University of California, Berkeley - Center for the Study of Law and Society ( email )

Berkeley, WA 94720-2150
United States
510-642-4038 (Phone)

Neil Gunningham

School of Regulation & Global Governance (RegNet) ( email )

Canberra, Australian Capital Territory 0200
Australia

Dorothy Thornton

University of California, Berkeley - Center for the Study of Law and Society ( email )

Berkeley, WA 94720-2150
United States

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