Self-regulatory institutions for solving environmental problems: perspectives and contributions from the management literature

What role can business managers play in finding solutions to environmental problems? For many years, the business management literature proposed that managers could help their fi rms discover win/ win opportunities that protect the environment while simultaneously increasing profi ts (Porter and van der Linde 1995b ; Hart 1995 ). Th is is an attractive suggestion, for it implies that environmental protection can be accomplished with little pain, and that environmental problems are caused not by defects in our institutions but by failures in our insight or perception. Th e literature on when it might “pay to be green” has advanced our understanding of how and when fi rms achieve sustained competitive advantage. What this literature has failed to do, however, is demonstrate that “win/win” opportunities will be suffi cient to bring about meaningful environmental improvements. “I used to think that all we needed was a few managers to ‘get it,’ ” remarked Matt Arnold, founder of the Management Institute for the Environment and Business. “Now I think that the problem goes much deeper.” 1 If managers who “get it” cannot fi nd ways to profi tably protect the environment, then, given the magnitude of today’s environmental problems (UNEP 2002 ; Worldwatch Institute 2006 ), the rules of competition must be changed to make environmental responsibility more profi table. North ( 1991 , p. 97) defi nes these rules, which he terms “institutions,” as the “humanly devised constraints that structure political, economic, and social interaction.” Institutions come in many forms: formal or informal, private or public, centralized or decentralized (North 1981 ; Ingram and