Assessing the role of environment regulation on firms’ private action towards environmental quality: Case of non-adoption of solid waste management practices by food processing sector in Sri Lanka

J.M.M. Udugama and U.K. Jayasinghe-Mudalige
Department of Agribusiness Management, Wayamba University, Sri Lanka

Whether a firm takes private actions to augment environment quality, more often than not classified as a public good, in a situation where it can compensate the less significant losses in the market with relatively higher gains obtained through failures in government policy is of an economic issue of concern amongst the economists and policymakers. The specific objective of this study was to address this economic problem from an empirical point of view. It uses the special case of Sri Lankan food processing firms’ non-compliance to the recently introduced National Strategy for Solid Waste Management of the Ministry of Environment, which recommends 9 different solid waste management practices (SWMPs) for a food firm to adopt based on the production and processing activities it undertakes.

From a database containing the information with regard to different types SWMPS adopted by a firm, we have selected 160 firms which did not have even the “most economical” practices out of the 9 SWMPs recommended in place, i.e.: (1) sorting of waste based on 3R system; (2) composting and (3) good manufacturing practices (GMP). The perceptions of managers of these firms on various facets related to existing and anticipated environment regulatory framework and the legal/judiciary system were assessed by taking the scores provided by them to a series of statements (n = 14) on a multi-point bidirectional likert-scale. The Confirmatory Factor Analysis techniques, including the Scale Reliability and Unidimensionality were employed to these scores to derive an index – “Environment Regulation Responsiveness Index” (ERRI) the values of which reflects the relative strength of a firm in concern reacts to the environmental regulation (i.e. -1.0 the least to 1.0 the most responsive).

The magnitude of ERRI of a majority of the firms was relatively low (i.e. in between -0.5 to 0.5), especially for the small scale firms, indicating that firms’ did not consider the government regulation as a promising factor governing their action on environment. It also highlights that a vast majority (> 90%) of firms have “no plans” to adopt any of these practices in the near future citing the financial burden and the lack of information on SWMPs. The outcome of analysis, thus, calls attention for a critical revision and adjustments to the policy on environmental quality management at the National and Provincial level in order to promote voluntary action by firms.

Key words: compliance, environmental quality, food processing sector, regulation, solid waste management