Determinants of firm compliance with environmental laws : A case study of Vietnam

Abstract

Understanding of the factors influencing the behavior of firms allows for the development of environmental regulations and measures that generate greater compliance. Theories about compliance provide different perspectives on what motivates compliance and noncompliance. These theories suggest different approaches used to influence firms to comply with laws, regulations and beyond compliance environmental management programs which are designed to further environmental protection and sustainable development.

With regard to environmental management tools, ISO 14001 Environmental Management System (EMS) has emerged as a potential environmental compliance tool which can be used as a measure to enhance greater compliance with environmental laws. Through the case study of Vietnam, this thesis explores the potential role of the ISO 14001 EMS in complying with EIA requirements. The motivations for compliance with environmental laws and regulations and implementation of environmental programs including ISO 14001 EMS and EIA are assessed for development of a comprehensive model of firm compliance behavior with regard to environmental laws and regulations.

Scott (2001), in his work ¿Three Pillars of Institutions¿ proposes a single coherent model for the study of institutions, which is employed as the theoretical framework for this study to synthesize compliance literature across fields. A triangulation approach employing explorative case studies and interviews is used to develop a series of firm compliance motivations around Scott¿s ¿Three pillars of institutions¿, which is then tested using quantitative survey with companies in Vietnam who have certified to ISO 14001 and carried out EIA for their undertaken projects. The hypotheses are tested using mean importance ratings, t-test of the means, and factor analysis. A model of firm compliance behavior around the three pillars of `regulative¿, `normative¿ and `cultural-cognitive¿ is built as the results of the research. Almost all the factors determining compliance developed through the literature review and qualitative case studies and interviews are found to be applicable to the responding companies. Firms are found to be motivated to comply by a variety of factors including rational calculations of the cost and benefit of compliance; rules, laws and sanctions; morality; social influence; legitimacy of laws; and shared understanding of compliance. The determinants of non compliance include high costs of compliance compared to non compliance; weak enforcement of laws; lack of capability and commitment; low social pressure and lack of shared understanding of compliance. The level of importance placed on different factors are analyzed using ANOVA test and are found to vary across companies with different sizes and business structures and firms from different fields of operation. ISO 14001 certification also has certain influence on firms¿ compliance behavior.