Grantee Research Project Results
2004 Progress Report: Shaping Corporate Environmental Behavior and Performance: The Impact of Enforcement and Non-Enforcement Tools
EPA Grant Number: R828828Title: Shaping Corporate Environmental Behavior and Performance: The Impact of Enforcement and Non-Enforcement Tools
Investigators: Earnhart, Dietrich H. , Haider-Markel, Donald , Glicksman, Robert , Ebihara, Tatsuji
Institution: University of Kansas
EPA Project Officer: Hahn, Intaek
Project Period: March 12, 2001 through March 11, 2004 (Extended to December 11, 2005)
Project Period Covered by this Report: March 12, 2004 through March 11, 2005
Project Amount: $341,234
RFA: Corporate Environmental Performance and the Effectiveness of Government Interventions (2000) RFA Text | Recipients Lists
Research Category: Environmental Justice
Objective:
The overarching objective of this research project is to determine and isolate the effects of certain government interventions on corporate environmental behavior and performance (CEBP) at individual facilities in the industrial sector of chemical and allied products. We measure environmental behavior by the extent of treatment, auditing, and an environmental management system (EMS). We measure environmental performance by the level of wastewater discharges in absolute terms and relative to effluent limits. From this overarching objective, we identify seven specific objectives:
Objective 1: Identify the differential effects of government interventions on CEBP.
Objective 2: Identify the effects of general deterrence and enforcement approach on CEBP.
Objective 3: Test empirically the theoretical understanding of specific deterrence.
Objective 4: Identify the interactions between the effects of government interventions and facility characteristics, especially the status as a major or minor discharger.
Objective 5: Explore the influence of EMS protocols on environmental performance.
Objective 6: Explore the influence of community pressure on CEBP.
Objective 7: Explore the influence of financial status on CEBP.
Progress Summary:
To achieve Objective 1, Identify the Differential Effects of Government Interventions on CEBP, we have completed the following tasks:
- Organized state penalty data and generated state enforcement-related specific deterrence measures.
- Performed multivariate analysis on biological oxygen demand (BOD) discharges, total suspended solids (TSS) discharges, a composite measure of BOD/TSS discharges, and the monthly count of effluent limit exceedances to examine the effect of specific deterrence on environmental performance.
- Performed multivariate analysis on all forms of environmental performance from the four states selected to compare the specific deterrence effects between state penalties and federal penalties (West Virginia, Louisiana, Texas, and New Jersey) while statistically testing the different effects of state and federal penalties.
- Compiled and reviewed additional legal literature on what motivates corporate compliance with environmental regulations and how firms respond to different government interventions.
- Compiled written materials on civil enforcement processes, while interviewing U.S. Environmental Protection Agency (EPA) enforcement personnel in both headquarters and regional offices to clarify the manner in which the Clean Water Act’s civil enforcement process works.
- Developed a preliminary logistic correlation model to explain environmental behavior.
To achieve Objective 2, Identify the Effects of General Deterrence and Enforcement Approach on CEBP, we have completed the following tasks:
- Examined further survey responses to questions that distinguish overall enforcement approach.
- Reorganized federal enforcement action data to generate more meaningful measures of federal enforcement-related general deterrence for multivariate analysis.
- Generated measures of state enforcement-related general deterrence for multivariate analysis.
- Performed further multivariate analysis on BOD/TSS discharges and new multivariate analysis on the monthly count of effluent limit exceedances to examine the influence of general deterrence on environmental performance.
- Performed multivariate analysis on environmental performance from the four states selected to compare and test the general deterrence effects between state penalties and federal penalties.
- Compiled and reviewed additional legal literature on the relative effectiveness of the coercive and cooperative approaches to enforcement of environmental regulations.
Work to achieve Objective 3, Test Empirically the Theoretical Understanding of Specific Deterrence, was completed in the previous year.
To achieve Objective 4, Identify the Interactions Between the Effects of Government Interventions and Facility Characteristics, Especially the Status as a Major or Minor Discharger, we performed further multivariate analysis on BOD/TSS discharges and new multivariate analysis on the monthly count of effluent limit exceedances to identify interactions between the effects of government interventions on environmental performance and facility characteristics.
To achieve Objective 5, Explore the Influence of EMS Protocols on Environmental Performance, we have completed the following tasks:
- Identified correlations of audit practices with effluent violations.
- Developed preliminary logistic correlation model for explaining how environmental behavior factors influence environmental behavior.
To achieve Objective 6, Explore the Influence of Community Pressure on CEBP, we have completed the following tasks:
- Performed further multivariate analysis on BOD/TSS discharges and new multivariate analysis on the monthly count of effluent limit exceedances to examine the effect of community pressure (using community characteristic proxies) on environmental performance.
- Performed multivariate analysis on various measures of environmental behavior (e.g., annual number of audits) to examine the influence of community pressure.
- Examined the effect of community pressure on environmental performance and behavior.
To achieve Objective 7, Explore the Influence of Financial Status on CEBP, we have completed the following tasks:
- Performed further multivariate analysis on BOD and TSS discharges to examine the influence of financial status on corporate environmental performance.
- Performed multivariate analysis on the monthly count of effluent limit exceedances to examine the influence of financial status on environmental performance.
- Performed multivariate analysis to identify the interactions between the effects of government interventions and financial status, which was not included in the original project description.
- Examined financial status.
Results
Our research has generated the following results:
- The effects of inspection-related specific deterrence on environmental performance depend on the measure of performance. Federal inspection-related specific deterrence improves BOD-related environmental performance, whereas state inspection-related specific deterrence has no effect. In contrast, state inspection-related specific deterrence improves TSS-related performance.
- Whereas state inspection-related general deterrence undermines BOD- and exceedance-related performance, federal inspection-related general deterrence has no effect. In contrast, state inspection-related general deterrence improves TSS-related performance.
- The effects of enforcement-related specific deterrence on environmental performance depend on the source of the enforcement action and the measure of performance to a lesser extent. An increase in the number of administrative sanctions against specific facilities undermines BOD- and exceedance-related performance, yet a larger administrative sanction improves both performance types. In contrast, more civil sanctions improve BOD-related performance, whereas a larger civil sanctions undermines BOD performance. Civil sanctions do not affect exceedance-related performance and civil and administrative civil sanctions do not affect TSS-related performance.
- General deterrence stemming from the number of administrative sanctions undermines BOD-related performance, whereas general deterrence stemming from the average administrative sanction magnitude has no effect. In contrast, general deterrence relating to the number of civil sanctions does not influence BOD-related performance, whereas general deterrence relating to the average civil sanction magnitude improves performance. Contrary to BOD-related performance, general deterrence stemming from both the average administrative penalty magnitude and the average civil penalty magnitude improves TSS-related performance.
- Specific deterrence stemming from federal inspections is more effective at improving BOD-related performance than specific deterrence stemming from state inspections. State inspection-related specific deterrence, however, more effectively improves TSS-related performance than does federal inspection-related specific deterrence.
- No significant difference exists between federal inspection- and state inspection-related general deterrence.
- Differences exist between deterrence stemming from EPA administrative
and federal civil sanctions but only for BOD-related performance.
- In terms of specific deterrence, an increase in the number of civil sanctions improves performance more greatly than does an increase in the number of administrative sanctions, whereas an increase in the average administrative sanction magnitude improves performance more greatly than does an increase in the average civil sanction magnitude.
- In terms of general deterrence, an increase in the number of civil sanctions improves performance more strongly than does an increase in the number of administrative sanctions.
- Facilities owned by publicly held firms significantly outperform facilities owned by privately held firms.
- Larger facilities underperform smaller facilities.
- Facilities facing higher marginal compliance costs underperform their counterparts.
- Specific and general deterrence stemming from both inspections and administrative penalties depend on the ownership structure of the firm owning a facility and a facility’s industrial sub-sector, flow capacity, and marginal compliance cost.
- Financial status, as captured by annual revenues and return on assets, affects environmental performance: a greater flow of cash improves environmental performance and better financial success impedes environmental success.
- Specific and general deterrence stemming from both inspections and administrative penalties depend on the financial status of the firm owning the relevant facility (e.g., facilities owned by firms enjoying a larger revenue flow respond more strongly to specific deterrence stemming from federal inspections than do facilities owned by firms suffering a smaller revenue flow).
- Several proxies for community pressure affect performance. In particular, communities that are more wealthy (measured by per capita income), white, Democratic party loyal, urban, unemployed, uneducated, elderly, dependent on chemical manufacturing for their private earnings, politically active (measured by the voter turnout rate), and urban seem to induce better performance. The latter results apply to TSS-related performance, whereas contrary results apply to BOD-related performance.
Future Activities:
For the next period, March 12, 2005, to December 11, 2005, we plan to complete all of the remaining tasks and complete the final report for the project.
Journal Articles:
No journal articles submitted with this report: View all 15 publications for this projectSupplemental Keywords:
water, discharge, survey, socioeconomic, enforcement, monitoring, engineering, law, chemical and allied products, Heckman two-stage estimation, EMS, air and water pollution regulations, compliance assistance, corporate compliance, corporate environmental behavior, decision making, deterrence, economic incentives, enforcement, enforcement impact, enforcement strategy, environmental behavior, environmental compliance determinants, environmental decision making, environmental management systems, environmental performance, environmental policy, government intervention, incentives, legal and policy choices, motivators, policy analysis, policy making, public policy, regulations, regulatory impact,, RFA, Economic, Social, & Behavioral Science Research Program, Scientific Discipline, Sustainable Industry/Business, Economics, Corporate Performance, Economics and Business, decision-making, Environmental Law, Social Science, Economics & Decision Making, environmental performance, SEPs, environmental management systems (EMS), policy analysis, deterrence, compliance assistance, enforcement strategy, policy making, government intervention, incentives, decision making, environmental decision making, corporate compliance, environmental compliance determinants, socioeconomics, economic incentives, enforcement, environmental policy, air & water pollution regulations, Laws, environmental behavior, regulations, enforcement impact, EMS, legal and policy choices, public policy, regulatory impact, corporate environmental behaviorProgress and Final Reports:
Original AbstractThe perspectives, information and conclusions conveyed in research project abstracts, progress reports, final reports, journal abstracts and journal publications convey the viewpoints of the principal investigator and may not represent the views and policies of ORD and EPA. Conclusions drawn by the principal investigators have not been reviewed by the Agency.