What's Regulation Got to Do With It? : Examining the Impact of Regulatory Intensity on Facility Environmental Management and Performance

Abstract

Understanding the influence of regulation on environmental management is important—studies typically find regulation to be a significant influence on environmental activity. However, studies typically assess regulation together with a suite of other influences such as investors and customers, which are often also found to be significant influences on environmental management. This research, on the other hand, suggests that regulatory constraints form a framework within which organizations operate, and therefore are associated with organizations' views of other motivating factors, as well as environmental management and performance. Additionally, this study assesses the influence of management attitudes toward environmental protection and attitudes toward regulation on motivations, environmental management practices, and performance. This study uses two-step cluster analysis to classify facilities according to the level of regulatory constraints affecting the facility, thereby representing the regulatory framework. Facilities are classified based on the industry sector, the number of environmental permits the facility holds, and the number of different environmental media the facility holds permits for. This study finds that highly regulated facilities are larger manufacturers, while moderately and lightly regulated facilities are primarily nonmanufacturers and smaller facilities, which may assist policymakers in targeting voluntary environmental management policies to specific types of facilities. Next, differences in motivations for environmental management, environmental management practices, and environmental performance among these groups are examined using ordinary least squares (OLS) regression and logistic regression. This study finds that moderately and highly regulated facilities rated customer influences and the ability to achieve competitive advantage as less important motivations for environmental management than lightly regulated facilities. This study also finds that facilities in the highly regulated group exhibit more intense environmental management practice implementation and greater pollution prevention activity than lightly regulated facilities. In addition, moderately and highly regulated facilities engage in significantly fewer voluntary environmental management activities than lightly regulated facilities. Management attitudes toward regulation and toward environmental protection are significantly positively associated with other external motivations for environmental management (customer, environmental interest group, competitive, and investor pressures), and are also significantly positively associated with greater pollution prevention activity.