Corporate Strategies
More Sustainability by Means of Convergent or Divergent Environment Regulations (seed project)
Cross National Variation in Regulation of Environment, Health and Safety Risks
Corporate Strategy, Regulation and Global Competition

Principal Investigators
MIT: K.Oye, J.Foster, M.Roman
ETH: R.Schubert, T.Bernauer
UT: H.Shiroyama
Chalmers: F.Norgrem, N.Adler

A major constraint in effective policy formulation for government and industry is the lack of understanding of how regulatory regimes and business strategy can reconcile competing private and public interests. There is limited knowledge of how to reconcile competing private interests in sustainable development programs, especially the market competition objectives of individual businesses. The evolving policy debate suggests that interest groups may not have a clear understanding of what their interests actually are, let alone how best to serve them. In addition, differences in domestic environmental, health, and safety regulations have resulted in conflicts in international trade, requiring dispute settlement in various cases.

The overall goal of the AGS research in corporate strategies is to analyze various linkages of environmental regulation and corporate strategies, and to explore mechanisms by which complementarities between public environmental interest and private environmental performance may be enhanced to achieve sustainable development. The research has been carried out through three related AGS grants, since 1997.

"More Sustainability by Means of Convergent or Divergent Environmental Regulations"/
"Cross National Variation in Regulation of Environment, Health and Safety Risks"
The first and second projects have focused on the following objectives:
  • To investigate under which conditions convergence or divergence of environmental regulations of different countries or regions is preferable with respect to global sustainability
  • To investigate conditions under which such convergence or divergence are likely to occur

The research was carried out with a theoretical impact analysis and case studies that were region-, sector- and institution-specific.

"Corporate Strategy, Regulation and Global Competition"
The objectives of this research were as follows:
  • To identify the incentives and disincentives motivating corporate environmental performance for different types of firms, sectors, and national regulatory regimes
  • To assess the differences in environmental performance resulting from alternative corporate approaches to meeting externally- and internally- defined environmental standards
  • To identify the competitive market consequences of alternative corporate and regulatory approaches to environmental performance
  • To propose how regulatory instruments might be designed to create more effective corporate environmental incentives and to encourage innovative corporate sustainable development strategies for which there are proven examples.

The research has involved comparative analysis of firms within six industrial sectors that represent large, international product markets.

"More Sustainability by Means of Convergent or Divergent Environmental Regulations"/"Cross National Variation in Regulation of Environment, Health and Safety Risks"
This research phase developed case studies on European water management policy and emission limits, which were analyzed from an economic and political perspective. Case studies dealing with pulp production and automotive assembly were also analyzed.

"Corporate Strategy, Regulation and Global Competition"
During this phase, firm-level case studies have been conduced within: biotechnology, petroleum refining, paper products, telecommunications, food processing and distribution, and financial services.

The research has found two basic strategic paths that corporations have to gain corporate competitive advantage:

  • By engaging regulation as an instrument for companies to formalize advantages in technology, product quality, marketing and distribution
  • By engaging directly with consumers in national and international markets to build demand for products and services that have differentiable environmental properties

These findings have the following implications for corporations and regulators:
  • For private corporations, promoting improved environmental performance and more stringent environmental regulation can be effective instruments of corporate strategy, when taken in conjunction with technology development programs.
  • For regulators, public policy may be strengthened most effectively when corporations join in coalitions to simultaneously advance environmental interests and long-term private interests.

Such findings provide a basis for suggesting to corporations some key strategic areas in which they can develop and exploit environmental advantages, such as integrating technology and product development strategies, supply chain management strategies, mergers and acquisition strategies, and regulatory strategies.