Environmental regulations: Indirect and unintended consequences on economy and business

Abstract

Purpose

The purpose in this paper has been to draw from literature to understand the not‐so‐direct or non‐implicit impacts of environmental regulations and propose some consequences on economic and business activity. In more general terms this research facilitates understanding on the broad concerns about the consequences of environment legislations, that is, the nature and magnitude of their capacity to produce significant change in industry and business structures in the long run, through indirect and not‐so‐obvious routes.

Design/methodology/approach

The discussion of the indirect and unintended consequences is based on systematic review of literature that includes studies in the area of international trade, technology, interactions at the national and regional level, industrial processes and dynamics, psychology, communication and organisational systems.

Findings

Review evidence reveals indirect and unintended impacts at the levels of economy and industry such as unintended negative effects on the environment itself, discrimination and additional international trade barriers, evolution of new commercial structures like secondary and used goods markets and recycling and refurbishment as a new industry, need for secondary level legislative support, decreased entrepreneurship and small firm activity, and emergence of circular supply chain models and strategic‐collaborative inter firm competition models.

Practical implications

The paper suggests possible future business and economic scenarios. Some of the possible models include emergence of a new industry in recycling and waste management, growth of secondary goods market for domestic consumption and trade, and emergence of a circular supply chain model where consumers and competitors play an interactive and collaborative role for survival and productivity. However it is imperative to empirically test these finds before generalisations.

Originality/value

The paper is a comprehensive review of an inadequately studied theme of indirect and unintended effects of environmental regulations. As environment issues become increasingly important it becomes more and more critical for both researchers and practitioners to understand what are these indirect impacts and the directions these indirect environment impacts will compel business and economies to move towards. It sets an agenda for future research.

Citation

Gurtoo, A. and Antony, S.J. (2007), "Environmental regulations: Indirect and unintended consequences on economy and business", Management of Environmental Quality, Vol. 18 No. 6, pp. 626-642. https://doi.org/10.1108/14777830710826676