Impacts of environmental regulations on firm performance
Currently there are two dominant theories by professor Michael Porter explaining how firms could increase profitability by acting sustainably and what the potential outcome of complying with environmental regulations may be. The Porter hypothesis is about the impact of regulations and has further be...
| Autor principal: | |
|---|---|
| Formato: | Second cycle, A2E |
| Lenguaje: | sueco Inglés |
| Publicado: |
2020
|
| Materias: | |
| Acceso en línea: | https://stud.epsilon.slu.se/15683/ |
| _version_ | 1855572620300255232 |
|---|---|
| author | Emerson, Oliver |
| author_browse | Emerson, Oliver |
| author_facet | Emerson, Oliver |
| author_sort | Emerson, Oliver |
| collection | Epsilon Archive for Student Projects |
| description | Currently there are two dominant theories by professor Michael Porter explaining how firms could increase profitability by acting sustainably and what the potential outcome of complying with environmental regulations may be. The Porter hypothesis is about the impact of regulations and has further been developed into ‘creating shared value’ which explains how firms can reach new potential profitability by searching for sustainable business opportunities. Both of these theories are viewed separately and not in conjunction with one another even though one has motivated the other. Furthermore, the theories underlie a stakeholder theoretical approach, meaning that firms should focus on all various stakeholders in a firm, instead of a shareholder approach, which argues for firms to focus solely on profitability and shareholder value maximization. So far studies have been inconclusive regarding the validity of the theories and scholars find evidence both for and against.
The aim of the study is to evaluate the two theories in order to understand if a relationship exists between them and moreover the impact of shareholder theory versus stakeholder theory is examined to view if firms have different outcomes when faced by regulations. The focus of the study is on how firms respond to regulations and how they work to become compliant whilst simultaneously remaining or increasing profitability. To analyze these theories, a qualitative case study is performed deductively with five firms in different industries and of different sizes that are affected by new environmental regulations concerning single-use plastics.
The study found that out of the five firms, three were shareholder-oriented and two were stakeholder-oriented. The shareholder-oriented firms achieved or projected increased profitability and shareholder value in response to the new environmental regulations whilst the stakeholder-oriented firms achieved the opposite.
The conclusion of this study presents a new conceptual model which shows the relationship between the Porter hypothesis and ‘creating shared value’ where this relationship underlies shareholder theory. The empirical findings show that the Porter hypothesis is strongly connected to ‘creating shared value’ and shareholder theory is the foundation for firms that increase profitability after complying with environmental regulations. The implication of this is that firms do not directly need to consider sustainability in their business models. Regulations will push firms to be sustainable as well as to maximize shareholder value and firms which have a sustainability outlook in their business will likely fall behind when faced by regulations. |
| format | Second cycle, A2E |
| id | RepoSLU15683 |
| institution | Swedish University of Agricultural Sciences |
| language | Swedish Inglés |
| publishDate | 2020 |
| publishDateSort | 2020 |
| record_format | eprints |
| spelling | RepoSLU156832020-07-01T01:02:01Z https://stud.epsilon.slu.se/15683/ Impacts of environmental regulations on firm performance Emerson, Oliver Forestry - General aspects Economics and management Currently there are two dominant theories by professor Michael Porter explaining how firms could increase profitability by acting sustainably and what the potential outcome of complying with environmental regulations may be. The Porter hypothesis is about the impact of regulations and has further been developed into ‘creating shared value’ which explains how firms can reach new potential profitability by searching for sustainable business opportunities. Both of these theories are viewed separately and not in conjunction with one another even though one has motivated the other. Furthermore, the theories underlie a stakeholder theoretical approach, meaning that firms should focus on all various stakeholders in a firm, instead of a shareholder approach, which argues for firms to focus solely on profitability and shareholder value maximization. So far studies have been inconclusive regarding the validity of the theories and scholars find evidence both for and against. The aim of the study is to evaluate the two theories in order to understand if a relationship exists between them and moreover the impact of shareholder theory versus stakeholder theory is examined to view if firms have different outcomes when faced by regulations. The focus of the study is on how firms respond to regulations and how they work to become compliant whilst simultaneously remaining or increasing profitability. To analyze these theories, a qualitative case study is performed deductively with five firms in different industries and of different sizes that are affected by new environmental regulations concerning single-use plastics. The study found that out of the five firms, three were shareholder-oriented and two were stakeholder-oriented. The shareholder-oriented firms achieved or projected increased profitability and shareholder value in response to the new environmental regulations whilst the stakeholder-oriented firms achieved the opposite. The conclusion of this study presents a new conceptual model which shows the relationship between the Porter hypothesis and ‘creating shared value’ where this relationship underlies shareholder theory. The empirical findings show that the Porter hypothesis is strongly connected to ‘creating shared value’ and shareholder theory is the foundation for firms that increase profitability after complying with environmental regulations. The implication of this is that firms do not directly need to consider sustainability in their business models. Regulations will push firms to be sustainable as well as to maximize shareholder value and firms which have a sustainability outlook in their business will likely fall behind when faced by regulations. För närvarande finns det två dominerande teorier av professor Michael Porter som förklarar hur företag kan öka lönsamhet genom att agera hållbart samt vad det potentiella resultatet av att följa miljökrav kan vara. Porters hypotes (på engelska: ’the Porter hypothesis’) handlar om effekterna av regelverk på företag och har sedan vidareutvecklats till ’skapa delat värde’ (på engelska ’creating shared value’) som förklarar hur företag kan nå ny potentiell lönsamhet genom att söka efter hållbara affärsmöjligheter. Båda dessa teorier ses separat och inte i samband med varandra trots att en har motiverat den andras begynnelse. Vidare utgår båda ur intressentteori (på engelska: ’stakeholder theory’) som menar på att företag ska fokusera på att alla företagets olika intressenter och inte enbart på att generera vinster och öka aktievärdet som aktieägarteorin (på engelska: ’shareholder theory’) förespråkar. Hittills har studier varit entydiga om teoriernas giltighet och forskare hittar bevis både för och emot. Syftet med denna studie är att utvärdera de två teorierna för att förstå om det finns en relation mellan dem och dessutom undersöks effekterna av aktieägarteori och intressentteori för att se om företag får olika resultat när de ställs inför reglering. Studiens fokus är på hur företag reagerar på miljökrav och hur de arbetar för att efterleva kraven samtidigt som de har kvar/ökar sin lönsamhet. För att utvärdera dessa teorier utförs en kvalitativ fallstudie med en deduktiv metod med fem företag i olika branscher och av olika storlekar som alla påverkas av nya miljökrav gällande begränsning av engångsplaster. Studien fann att av de fem företagen, var tre av dem aktieägar-orienterade och två av dem intressent-orienterade. De aktieägar-orienterade företagen uppnådde eller prognostiserade ökad lönsamhet och aktieägarvärde som respons på de nya miljökraven medan intressent-orienterade företagen ernådde motsatsen. Slutsatsen av denna uppsats är utvecklingen av en ny konceptuell modell som visar förhållandet mellan Porters hypotes och ’skapa delat värde’ där denna relation bygger på aktieägarteori. Den empiriska datan visar att Porters hypotes är starkt förknippad med ’skapa delat värde’ där aktieägarteori är utgångspunkten för de företag som ökar lönsamhet efter att ändra sin verksamhet till följd av miljökrav. Implikationen av detta är att företag inte direkt behöver ta hänsyn till hållbarhet i sina affärsmodeller, regleringarna kommer att driva företag att vara hållbara såväl som för att maximera aktieägarvärde och lönsamhet samt att företag som har en hållbarhetsutsikt i sin verksamhet troligen kommer att falla bakom när de möts av nya lagkrav. 2020-06-18 Second cycle, A2E NonPeerReviewed application/pdf sv https://stud.epsilon.slu.se/15683/7/emerson_o_200630.pdf Emerson, Oliver, 2020. Impacts of environmental regulations on firm performance : the development of a new perspective. Second cycle, A2E. Uppsala: (S) > Dept. of Forest Economics <https://stud.epsilon.slu.se/view/divisions/OID-300.html> urn:nbn:se:slu:epsilon-s-15683 eng |
| spellingShingle | Forestry - General aspects Economics and management Emerson, Oliver Impacts of environmental regulations on firm performance |
| title | Impacts of environmental regulations on firm performance |
| title_full | Impacts of environmental regulations on firm performance |
| title_fullStr | Impacts of environmental regulations on firm performance |
| title_full_unstemmed | Impacts of environmental regulations on firm performance |
| title_short | Impacts of environmental regulations on firm performance |
| title_sort | impacts of environmental regulations on firm performance |
| topic | Forestry - General aspects Economics and management |
| url | https://stud.epsilon.slu.se/15683/ https://stud.epsilon.slu.se/15683/ |