Governing Firms’ Corporate Environmental Response: Success or Failure? Evidence from a Panel Data Based Analysis on Solid Waste Management in Agri-Food Processing Sector of Sri Lanka

Panel data collected from a cross section of agri-food processing firms in Sri Lanka to represent industry structure, by means of personal interviews with environmental managers supported by a structured questionnaire, were used to investigate the dynamics of, and key drivers affecting, firms’ corporate environmental response, where the level of adoption of recommended solid waste management practices (SWMPs) by individual firms was of special interest. Scores provided by respondents to a series of statements to reflect potential impact of internal and external market-based, regulatory/legal, and altruistic motives governing firms’ environmental response in Stage I and Stage II (i.e., 3 years later) were subject to confirmatory factor analysis (CFA) techniques, separately, to derive indices (value range from 0 to 1), and which was analyzed using count data analysis. The results suggest that, overall, firms’ response, reflected by number of SWMPs in place, is “poor”; but, it has increased overtime. State of regulatory environment and altruism, along with firm characteristics (i.e., type, size, and vintage) had a significant impact in augmenting firms’ response in both stages, while the market-based incentives and internal efficiency (IEF) drive them towards higher adoption in the latter stage. Results highlight the importance of designing an incentive-based co-regulatory regime, where both local governing institutions and private firms work alongside to facilitate and promote corporate environmental response.