Industry Self-Regulation and Government: A Study of a Hybrid Regulatory Model to Realize the Circular Economy
Abstract
Government often imposes social and environmental regulation on business to protect public interests. Alternatively, firms may collectively and voluntarily take on social and environmental responsibilities, which is frequently known as “industry self-regulation (ISR).” However, in the context of this qualitative study, neither of these two alternatives proved efficient.
I study the management of the Municipal Hazardous or Special Waste (MHSW) programs in Ontario, in which post-consumer household materials such as residual paint and dry cell batteries were collected and managed. According to the concept of the circular economy, preventing and/or re-entering waste into the product stream is key to solving global resource unsustainability, and this aim requires innovative business solutions. As my historical study of the period from 1981 to 2018 demonstrates, after business failed to voluntarily and consistently self-regulate to address used products, the government mandated waste management with a stringent regulation. Rather than spurring innovation, this prescriptive regime provoked escalating stakeholder conflicts. Ultimately, however, a hybrid regime evolved that married government regulation with ISR and kickstarted business proactivity and innovation. I study this regime to answer the central question: How can business and government coordinate their actions to realize a circular economy?
Based on this analysis, I propose a specific hybrid model in which business and government coordinate their actions by iteratively interacting to set rules and enforce them through five core practices. I compare this model with the pure models of ISR and government regulation to understand how it can address their respective shortcomings, such as business avoidance and underperformance, and how it can spur proactivity. Further, grounded theorizing enables me to identify four salient tensions that characterize this model: decoupling versus integration, control over means versus ends, harmonization versus distinctiveness, and as the outcome of the model, compliance versus proactivity. To secure proactivity and innovation, these tensions must be aptly balanced. The model can be useful in similar contexts that present urgent socio-environmental problems but little chance for the formation of collective actions with innovative outcomes—a common situation in many circular economy initiatives.