The receptive capacity of firmsç why differences matter

Central to the debate on effective environmental policy is the development of a suitable combination of regulatory instruments for delivering real improvements. There has, though, been a tendency to de-emphasise government controls through prescriptive commandand-control-style approaches, and at the same time promote greater stakeholder engagement and the use of governance arrangements that transfer decision-making capacities from the state to industry. Yet this important debate has given insufficient consideration as to whether, or how, firms might respond to different approaches. This article attempts to address this by looking at firms' orientations and capabilities. It shows that while firms have different 'receptive capacities' which influence their responses to regulation, there are groups of firms that share sufficient commonalities that they will respond in broadly similar ways. In advocating a pluralistic worldview, the analysis identifies a distinct role for the direct state, new governance and non-state arrangements. It ends by identifying a need for more individualised regulatory approaches.