Staying Ahead of and Profiting from Environmental Regulatory Uncertainty: Integrated Strategies for Competitive Advantage

Abstract

We offer two integrated strategies managers can use in the face of regulatory uncertainty vis-à-vis the natural environment. As integrated strategies, they both recognize non-market forces while taking into account market realities. Advocating for Pragmatic, Progressive Policy enables firms to shape future policy around existing environmental strengths; this strategy tips the scale towards a winning position by raising competitors’ costs when competitors have yet to develop identical competencies. Systematically Embracing Advancing Regulation enables firms to satisfy activists who would place pressure on policymakers to force firms to conform to higher environmental standards in other jurisdictions; this strategy tips the scale towards a winning position by allowing managers to adapt to coming regulation at their own pace while leveraging market competencies. We begin by presenting a brief framework that assembles the building blocks necessary to justify when, how, and why our strategies reduce vulnerabilities to regulatory uncertainty. We then present four case studies that highlight how some firms have implemented these strategies. In the analysis of these cases, we illustrate the conditions under which some have been successful at mitigating regulatory uncertainty and some have not.