The Effects of Mandatory and Voluntary Regulatory Pressures on Firms’ Environmental Strategies: A Review and Recommendations for Future Research

Abstract

This paper presents an in-depth review of scholarship on how mandatory and voluntary regulatory pressures on firms affect their environmental strategies and performance. While mandatory regulation typically has a strong and positive influence on firms' environmental performance, studies of the effects of voluntary pressures demonstrate that by themselves they are unlikely to bring about significant improvement in environmental outcomes. Accordingly, future research should focus on the complementary impacts of mandatory and voluntary programs on organizations' environmental strategies and performance rather than analyzing their separate influence. Scholars should examine i) more than a single environmental pressure at a given time, ii) more than one response to the regulatory context, iii) the synergy between mandatory and voluntary pressures, iv) the impact of imperfect enforcement, and v) the political influence corporations exert on the mandatory and voluntary pressures that affect them. This essay argues that managers react to environmental regulations in different ways depending on how they understand the multiple pressures that they confront and their opportunities to influence the outcomes.

The impact of ISO 14001 on firm environmental and economic performance: The moderating role of size and environmental awareness

“…Finally, we note that most previous studies treat the adoption of ISO 14001 as a binary choice (Aragón‐Correa et al, 2020). This treatment has been recently challenged by several authors who argue that there are differences in the scope of ISO 14001 adoption among firms.…”

“…Our main independent variable is ISO , which is measured as the percentage of facilities of a firm that have ISO 14001 certification; that is, the variable ISO ranges from 0 for firms without any certified facility to 100 for firms in which all facilities are certified with the environmental standard. To our knowledge, this measure is a novelty in the literature, as most studies identify the adoption of ISO 14001 with dichotomous variables only (Aragón‐Correa, Marcus, & Vogel, 2020).…”

Revisiting Stakeholder Theory and Environmentalism: Evidence from an Emerging Economy

“…Researchers have recognized the role of regulatory bodies in initiating environmental response for firms [8,9,31,32]. Comprehensive environmental strategies by organizations are more common in industries that face stricter environmental regulations [8].…”

“…Similarly, regulatory intensity and institutional pressure have forced firms to be environmentally responsive [31,32,34]. After studying the environmental performance of 14 paper and pulp mills in Australia, New Zealand, British Columbia in Canada, and the states of Washington and Georgia in the USA, Kagan et al [36] have found that regulatory requirements play an important role in improving the environmental response of firms.…”

Special Issue of Organization & Environment on “Nonfinancial Disclosure and Real Sustainable Change Within and Beyond Organizations: Mechanisms, Outcomes, and Complications”

“…The literature has examined, for example, the role of nonfinancial reporting standards and their design (e.g., Grushina, 2017; Rawhouser et al, 2018). Other studies have shown a potential consolidation in the very diverse nonfinancial disclosure landscape where voluntary guidelines exist alongside mandatory reporting regimes (e.g., Aragòn-Correa et al, 2020; Eberlein, 2019). Research has also critically examined how national standards coexist and compete with international frameworks (e.g., Einwiller et al, 2016).…”