‘Eco’ Managers Likely to Over Comply With Regulations

August 20, 2009

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Senior managers with a strong commitment to protecting the environment who also believe it makes financial sense to implement sustainable business practices are more likely to over comply with environmental regulations, according to a new study by an economist at Oregon State University (OSU).

The study, based on survey data from 689 businesses across six sectors in Oregon, examines why some companies violate environmental regulatory standards while others exceed them. The study’s author, OSU professor JunJie Wu, said the results could be used by policymakers when developing strategies to reduce environmental violations and to encourage businesses to exceed regulation requirements. The six sectors are food manufacturing, wood product manufacturing, construction of buildings, truck transportation and hotels.

The study, “Environmental Compliance: The Good, the Bad, and the Super Green,” also finds that costs and risks associated with environmentally friendly practices increase the probability of environmental violations. Examples cited include high upfront investments, high day-to-day costs, uncertain future benefits, and downtime and delivery interruptions during implementation.

In addition, smaller firms with annual revenue of less than $5 million and publicly-traded companies are more likely to violate environmental standards than companies that are bigger and privately owned, according to the study.

Other factors include competitive market forces, which can prevent environmental violations for a number of reasons ranging from competitive product differentiation to reducing employee turnover.

Interestingly, the study finds that pressures from consumers, investors and interest groups have no statistically significant impact on a company’s decision to violate or comply with environmental regulations. However, the report indicates that facilities that make products sold or sell services directly to consumers are less likely to violate environmental regulations.

The survey included questions about environmentally friendly practices they had implemented, which factors influenced their environmental management the most, and whether they had been sanctioned for environmental infractions. The survey also asked them to rate their level of compliance with regulatory standards for water pollution, solid waste, toxic and hazardous waste, and hazardous air emissions.

The study will be published in the Journal of Environmental Management.

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