Get access

Explaining Corporate Environmental Performance: How Does Regulation Matter?


  • Robert A. Kagan,

  • Neil Gunningham,

  • Dorothy Thornton

  • The authors are grateful to scores of pulp mill managers, regulatory officials, industry consultants, and environmental activists—all of whom must remain anonymous—for their cooperation and insight. David Sonnenfeld, Kathryn Harrison, Peter May, and anonymous reviewers all gave us valuable advice on earlier drafts. Biyi Abesina provided valuable research assistance. The Center for the Study of Law and Society, University of California, Berkeley, provided space, administrative assistance, and social support for the research project that led to this article, and the Smith Richardson Foundation funded our research. Please direct correspondence to Robert A. Kagan, Center for the Study of Law & Society, University of California, 2240 Piedmont Ave., Berkeley, CA 94720; tel: (510) 642-4038; email:


How and to what extent does regulation matter in shaping corporate behavior? How important is it compared to other incentives and mechanisms of social control, and how does it interact with those mechanisms? How might we explain variation in corporate responses to law and other external pressures? This article addresses these questions through an study of environmental performance in 14 pulp and paper manufacturing mills in Australia, New Zealand, British Columbia, and the states of Washington and Georgia in the United States. Over the last three decades, we find tightening regulatory requirements and intensifying political pressures have brought about large improvements and considerable convergence in environmental performance by pulp manufacturers, most of which have gone “beyond compliance” in several ways. But regulation does not account for remaining differences in environmental performance across facilities. Rather, “social license” pressures (particularly from local communities and environmental activists) and corporate environmental management style prod some firms toward better performance compliance than others. At the same time, economic pressures impose limits on “beyond performance” investments. In producing large gains in environmental performance, however, regulation still matters greatly, but less as a system of hierarchically imposed, uniformly enforced rules than as a coordinative mechanism, routinely interacting with market pressures, local and national environmental activists, and the culture of corporate management in generating environmental improvement while narrowing the spread between corporate leaders and laggards.

Get access to the full text of this article