Environmental Policy Tools and Firm-Level Management Practices: Empirical Evidence for Germany

On the basis of abundant facility and firm-level data for German manufacturing, originating from a recent OECD-survey, this paper empirically investigates the relevance of a variety of incentives for environmentally innovative behavior of facilities, the respective influence of pressure groups, and the impact of both regulatory and market-based policy instruments, such as eco-taxes. Since the early 1990s, Environmental Management Systems (EMS), specifically, have become a vital voluntary complement to mandatory environmental policies based on regulation and legislation. EMS may be perceived as an organizational environmental innovation that may lead to improved environmental performance. While the paper provides a descriptive analysis of the determinants for EMS-adoption and incentives that may trigger environmental innovation activities within German facilities, the major questions that will be addressed in this paper are: (1) How can public authorities support the introduction of management practices that may lead to improved environmental performance? (2) What are the main determinants of environmentally innovative behavior of firms? Specifically, we are interested in the role that market forces and regulation play in the process of complex firm decisions on innovation and environmental performance. While the relevant literature on these issues is dominated by case studies, our large-scale survey indicates that the most important reasons why firms contemplate introducing EMS are to improve the efforts to achieve regulatory compliance, to improve the corporate image, and to create cost savings with respect to both waste management and resource input. Among pressure groups, internal stakeholders - management employees and corporate headquarters - appear to be more influential with respect to EMS-adoption and environmental innovation than external forces, such as public authorities.