How Regulation Effects Corporate Social Responsibility: Corporate Environmental Performance under Different Regulatory Scenarios

Abstract

Abstract In a multilevel corporate social performance model we examine the effects of three different regulatory scenarios on corporate environmental performance (CEP) (relating to compliance and beyond compliance behaviors) as a measure of CSR. The empirical state defined as a “cooperative regulator” is assessed against three simulated scenarios: a “coercive regulator” (more punitive), a “demanding regulator” (strengthened standards) and a “lax regulator” (less punitive and less demanding). The relative effect of different regulatory scenarios is examined within a multilevel multivariate model. The model allows for the estimation of the role of regulatory strategies in relation to other CEP antecedents. The model includes the principal driving factors effecting CEP and incorporates three levels of analysis: institutional, organizational, and individual. The multilevel nature of the design allows for the assessment of the relative importance of the levels and their components in the achievement of CEP. Included in the institutional level are stakeholder expectations, regulatory demands and regulatory power. Included in the organizational level are corporate organizational culture, CSR orientation of managers and organizational leadership. Included in the individual level are personal workplace behaviors and norms, namely: job satisfaction, organizational commitment and organizational citizenship behavior. The simulation of regulatory scenarios shows that the empirical “cooperative regulator” has the strongest positive effect on CEP. Contrarily, coercive regulatory practices reduce the internal motivation for compliance and beyond compliance action, although they may increase the external incentives. Laxer regulatory practices reduce the credibility of the normative effect of the regulatory regime and weaken the internal motivation for CEP. While findings show that regulation does play a key role in CEP performance, the organizational level has the strongest and most positive significant relationships with CEP. Organizational culture and manager’s attitudes and behaviors are significant driving forces. Generally, the individual level, depicting workers’ attitudes toward their workplace, is found as insignificant in promoting CEP.