Ecological Modernization of Industry under Changing Regulatory Regimes
Anja Schaefer, Open University, United Kingdom
Much ecological modernization in business occurs in response to various forms of legislative and regulatory pressure. However, what happens to such processes of ecological modernization when regulatory regimes change, particularly towards less stringently pro-environmental regulation? While much of the 'business and environment' literature has assumed that changes would generally be in the direction of more, and more stringent environmental legislation and regulation this need not necessarily be so. Watering down of environmental legislation and reduction in staffing of regulatory bodies are currently pursued or contemplated in a number of countries.

Another case is an industry subject to different regulatory regimes, which may not concur in environmental terms. This applies to the privatised UK utility industries, subject to industry regulation as well as the environmental regulation. In the case of the water industry these two regulatory regimes could be seen to be working in broadly the same direction - if not entirely in unison - in environmental terms. However, at the latest price review by the industry regulator price reductions were demanded, which reduced the available income for the companies and sent a signal that the industry regulator considered sufficient environmental investment to have been undertaken for the moment being.

To what extent and how companies have changed their environmental strategy following this latest review by the industry regulator? While a stimulus-response model would suggest that this change in regulatory emphasis would lead to a reduction of ecological modernization efforts on the part of the companies in that industry, the research presented in this paper shows that the response is not quite a straight forward as this, particularly where firms have identified a competitive advantage in good environmental performance (and image). The findings have implications for our understanding of legislation/regulation and competitive positioning as respective drivers of ecological modernization.

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