Regulatory Limits to Corporate Sustainability: How Climate Change Law and Energy Reforms in Mexico May Impair Sustainability Practices in Mexican Firms

Abstract

This paper challenges the assumption that “state-of-the-art” regulation aimed at curbing greenhouse gas emissions (GHG) by firms is the panacea that will force firms to face the impact of climate change and create conditions that promote sustainable corporations. We argue that, in fact, such regulation, when improperly implemented, may impair sustainability practices because it creates unintended consequences. This paper tackles the design and efficiency of the institutional framework chosen through the lenses of the analytical themes of fit, scale and interplay. Then, we model a systems dynamic approach to represent how public policy in the arenas of energy effi-ciency and GHG emissions reduction may interplay with competitive business outcomes and cor-porate sustainability schemes. We found, as a result of the institutional design chosen, that the sys-tem is dominated by negative feedback processes resulting in inefficient outcomes that would be better tackled by firms not being subject to the restrictions imposed by the new laws.

An empirical analysis of SMES’ triple bottom line practices

“…This relationship between SMEs' awareness and increase in 3BL practices is significant at P # 0.05. We note that this finding is different from previous studies such as Aboelmaged (2018) in SMEs' 3BL practices in Egypt and Lloret et al (2019) findings in Mexico where regulation did not improve 3BL practices. The differences in the business environment and enforcement mechanism in New Zealand, Egypt and Mexico are likely to contribute to the significance of regulation across these studies.…”

“…Government regulations could influence the adoption of 3BL based on companies' compliance plans to meet the regulations (Lloret et al, 2019;Hubbard, 2009). For example, Böhringer and Jochem (2007) and Esty et al (2006) noted that the environmental performance index is evaluated from policies drawn from international agreements, sustainability development goals, other standards set by international organisations, national authorities or prevailing consensus amongst 3BL enthusiasts (Böhringer and Jochem, 2007).…”