Firm goes green if boss says yes
Washington, Aug 20: A new study revealed that the boss's compliance with environmental rules leads a firm to implement such regulations.
JunJie Wu, an economist at Oregon State University, examined why some firms violate environmental regulatory standards while others exceed them.
The data from the survey that 689 businesses revealed that senior management's environmental values were one of the leading factors affecting a firm's decision about whether to over-comply with environmental standards.
The study also showed that competitive market forces are significant factors in deterring environmental violations.
These forces include investing in cleaner products to differentiate them from another company's, improving environmental performance to keep up with competitors and being environmentally responsible to reduce employee turnover and increase productivity.
However, costs and risks associated with environmentally friendly practices are likely to increase the probability of environmental violations and decrease the likelihood of environmental over-compliance.
"It's surprising that management's attitude toward environmental stewardship plays such a large role," Wu said.
"Historically, economists believe that profit drives business decisions, but we've found that management's attitude affects a firm's decision about its compliance level. This doesn't mean, however, that profits don't play a role.
"It's also surprising that executives are willing to think beyond next quarter's earnings and spend money to adopt some environmental policies that might not benefit the company until perhaps much later," Wu added.
The study considered a facility to be in violation if it did not meet standards in at least one of these areas. It was considered in compliance if it did just enough to meet standards in all four areas. It was over-complying if it did more than the regulation required in at least one area and met standards in all other areas.
The study is available online in the Journal of Environmental Management.