Environmental regulation and business 'self-regulation'

Both in Europe and in the United States there is now active advocacy, in some business and government circles, of increased 'self-regulation' of businesses for environmental protection and pollution reduction. Specific proposals include sectoral pollution-reduction 'covenants,' market trading of emissions permits, third-party certification of environmental performance (e.g. under the European Union's Eco-Management and Auditing Scheme [EMAS] and the ISO 14001 Environmental Management System certification), ad hoc negotiation of regulatory flexibility in exchange for superior environmental performance, and others. The purpose of this paper is to characterize the principal types of proposals for 'environmental self-regulation' that are now under discussion, to clarify their similarities and differences (both to one another and to more formal government regulatory systems), and to assess their strengths and weaknesses as approaches for achieving environmentally sustainable economic performance. The paper will also discuss two more fundamental issues: first, the role of environmental self-regulation in the increasingly global context of business decision-making, and second, the implications of environmental self-regulation in states where government regulatory capacity is itself either strong or weak.