Environmental social controls and Australian capital investment

industry effects

Dorothy Wood, Donald G. Ross

Research output: Contribution to journalArticle

Abstract

Environmental Social Controls (ESCs) are intended to influence the environmental performance of firms and require them to be more accountable for their environmental impacts. ESCs include governmental interventions such as regulation, subsidisation and mandatory disclosures. A less formal means of social control is stakeholder opinion, which acts principally through market forces. These ESCs are posited to have a socially beneficial effect, imposing various costs and benefits which drive the firm towards investment in less polluting capital equipment. This paper presents the industry effect findings of a survey of 1000 Australian financial managers involved in making capital investment decisions. More particularly, the paper looks at industry differences in perceived importance of mandatory disclosure, regulation and stakeholder opinion to capital investment. Relative to the other ESCs, mandatory disclosure was found to have a very low influence on capital investment across all three industry sectors. The capital intensive extractive sector was found to have the highest level of responsiveness to all ESCs. The food sector was most influenced by regulatory indicators such as fines and penalties, licenses, and permits. The metals sector reported low influence scores relative to the other sectors studied. The findings suggest that greater understanding of industry differences is needed to increase the effectiveness of ESCs.
Original languageEnglish
Pages (from-to)3-18
Number of pages16
JournalJournal of the Asia Pacific Centre for Environmental Accountability
Volume14
Issue number2
Publication statusPublished - 2008

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