Constructing regulatory regimes for sustainable development: commitment to resolve, clarity, and reasonableness

Abstract

ABSTRACT To be effective, a regulatory regime for sustainable development must demonstrate to the regulated entities its resolve to attain regulatory goals while avoiding an arbitrary exercise of authority. Yet many developing countries lack the robust political-administrative institutions to construct and maintain such regimes. The environmental reform in Guangdong, China, shows how, with underdeveloped formal political-administrative institutions, the regulatory regime must demonstrate commitment acts, including transparent enforcement, compliance benchmarking, expectation pacing, and third-party enforcement. These acts help, over time, to maintain enterprises’ perceptions of the regulatory regime’s resolve, clarity, and reasonableness. By analyzing primary data from extensive fieldwork and survey observations conducted at two separate times, we show that enterprises are more likely to adopt environmental management measures if they perceive higher regulatory resolve, clarity, and reasonableness. Their assurance needs vary at different stages of regime development. Establishing clear expectations matters at an earlier stage when regulatory goals are new and expectations relatively lax. Yet, as expectations become more stringent, maintaining reasonableness becomes essential. In both stages, a perception of resoluteness in enforcement matters.