Corporate Environmentalism: Doing Well by Being Green

Abstract

Many firms go reduce their impact on the environment more than is legally required – that is, they 'overcomply' with environmental regulations. There is clearly a cost to this, so there has to be a benefit too. I suggest that firms are consciously internalizing external costs, with a view to reducing the potential for conflict between themselves and other groups in society. The avoidance of such conflicts can pay off in the long-run in terms of stock market valuation, relations with regulators and consumer perception of the company's products.