Incentives for environmental self-regulation and implications for environmental performance

The increasing reliance of environmental policy on market-based incentives has led firms to shift from regulation-driven management approaches to proactive strategies involving the voluntary adoption of environmental management systems (EMSs). Count data and quantile regression analyses reveal that liability threats and pressures from consumers, investors and the public are motivating EMS adoption and that consumer pressures are particularly effective in increasing the comprehensiveness of EMSs of firms that would otherwise be adopting a limited EMS. We also find that a more comprehensive EMS leads to lower toxic emissions per unit output particularly for firms with higher pollution intensity in the past. EMSs result in reductions in both off-site transfers and on-site releases per unit output. Finally, we find that regulatory and market-based pressures do not have a direct impact on toxic releases but an indirect effect by encouraging institutional changes in the management of environmental concerns.