Effects of regulatory uncertainty on corporate strategy—an analysis of firms’ responses to uncertainty about post-Kyoto policy

A better understanding of corporate strategy under regulatory uncertainty enables policy makers to improve policy making efficiency and enhance regulations’ effectiveness. Based on a review of the literature on policy formulation, we propose that regulatory uncertainty is characterized by a dependence on political negotiation, a discrete scenario structure, and a discontinuous resolution. Data from a worldwide survey show that firms pursue response strategies to regulatory uncertainty that address these characteristics by participating in policy making and increasing strategic flexibility. Surprisingly, the results also show that regulatory uncertainty only partly causes firms to postpone strategic decisions. We find that existing regulation and a need to act quickly despite regulatory uncertainty are opposed to the pursuit of a postponement strategy. We conclude that improving the mechanisms by which firms participate in early stages of the policy making process could enable them to operate in a more target-oriented manner, allow for more efficient policy implementation, and increase a regulation's effectiveness.     

Environmental cross-compliance mitigates nitrogen and phosphorus pollution from Swiss agriculture

In 1993 the Swiss agricultural policy was revised with – amongst other goals – the objective of improving the environmental performance of agriculture. A voluntary agri-environmental scheme to promote integrated production (IP) was introduced. In 1999 the IP standards were integrated in cross compliance requirements and termed Proof of Ecological Performance (PEP). We evaluated the effectiveness of this policy in terms of reducing diffuse nitrogen (N) and phosphorus (P) pollution of ground and surface water. We combined monitoring schemes covering the reference period from before the introduction of IP/PEP (1990–1992) with the evaluation of cause/effect relationships in selected case-study areas. The evaluation showed an overall reduction of diffuse N and P pollution from agriculture even though some goals were not reached. Nitrate leaching declined, but only a 3–4 mg L⁻¹ reduction was observed rather than the intended decrease of 5 mg L⁻¹. The P pollution of surface waters from agriculture decreased by only 10–30% instead of 50%. The intended reduction of the nitrogen surplus of Swiss agriculture by 33% was not attained, but the P surplus of Swiss agriculture was more than halved. IP/PEP practices that improved N and P management included reduced N and P fertiliser inputs and pig and poultry feedstuffs with reduced N and P contents, both of which are a consequence of the requirement of equilibrated farm nutrient balances, as well as increased use of cover cropping and of conservation tillage systems.