The relationship between environmental regulation and companies' Essay

The relationship between environmental regulation and companies' commercial competitiveness regarding the Porter Hypothesis - Essay Example This idea was stated twenty years ago and appeared to be disproving for all the previous opinions, which came to the same conclusion: environmental regulation are not beneficial for organizations as they have to spend much for innovations that decreases their profit. Hypothesis by Porter disproves such opinion stating that the strict policy stimulates â€Å"innovation offset†. If resources are used efficiently, the economy will only benefit. Since the hypothesis was stated there has been much controversy around it, many disproving theories have appeared notwithstanding that some of Porter’s words were simply misunderstood (Ambec et al, 2011). Certainly, such a supposition can’t be considered as correct without case study. The given paper will try to define if the Porter hypothesis is correct by analyzing the corresponding literature. The main questions â€Å"Over the past 20 years, much has been written about what has since become known simply as the Porter Hypo thesis (PH). Yet even today, we find conflicting evidence and alternative theories that might explain the PH, and oftentimes a misunderstanding of what the PH does and does not say† (Ambec et al, 2011). Actually, for now experts hesitate to answer the question what influence environment innovations have on organizations. The issue remains unclear. It is obvious that environmental innovations are not provided for free and they become a reason for additional expenses that at first sight can’t bring any advantage to firms. At the same time such regulation create good environment for eco-innovators’ activity (Ambec et al, 2011). To prove or disprove Porter’s hypothesis it is necessary to determine if environmental innovation determined by regulation is as successful as innovation determined by new technical and market opportunities. It is not less important to answer the question if regulatory-based environmental innovation is beneficial for organizations and their activity. The Porter hypothesis is correct The review of literature shows that despite numerous hesitations, controversies and disproving opinions â€Å"Porter spirit† appeared to be contagious that would never happen it the argument were wrong and useless. According to Alex Krauer, "Financial performance and environmental performance can go hand in hand. Eco-efficiency is the key to sustainability, in both economic and ecological terms. The key to eco-efficiency is innovation and productivity improvement" (cited in Bernauer et al). This argument serves as the proof of Porter hypothesis’ popularity, moreover many developed countries try to bring this idea to life. Such approach was given a definition of a â€Å"win-win† opportunity, when both the wolves have eaten much and the sheep have not been touched. Porter states: â€Å"†¦properly designed environmental standards can trigger innovation that may partially or more than offset the costs of complyi ng with them† (cited in Bernauer et al). It means that the environmental regulation does not bring any problems, on the contrary it brings new opportunities. Innovation survey that has been held in Germany revealed that the outcome depends on the field regulation is applied in. The field of company’s activity plays the decisive role. â€Å"Regulations in favor of sustainable mobility contribute to higher sales with market novelties while regulations in the field of water management lower this type of innovation success†