Environmental regulation and recidivist companies: When best to intervene?

• In Event: The Criminology of Regulation: Special Issue of Regulation & Governance

Abstract

Considerations of environmental regulation have developed along existing paradigms when it comes to the regulation of companies. These include concerns for managing risk, emphasising command and control approaches, and considerations of ‘smart’ regulation. To date, however – and particularly in England and Wales – such approaches, while having much to say about how to approach regulation, have made little use of available data to explore when to intervene following regulatory violations. This article represents a first step towards informing regulatory practice with data, focusing on whether companies that violate environmental regulations for the first time are more similar to those who offend multiple times or to non-offending companies. Data include companies pursued by the Environment Agency for England and Wales between 2010 and 2021. The multinomial logistic regression compared one-time offenders (n = 1821) with repeat offenders (n = 446) and a non-offending sample (n = 4460). Results suggested that one-time offenders differed from non-offending companies on various financial measures but differed from repeat offenders on several company descriptors. Increases in the logs of assets and net income, and the return on common equity and the Zmijewski score (which measures bankruptcy risk) predicted a greater chance of being a non-offender. Decreases in the logs of current assets and current liabilities, return on assets, and return on common equity predicted the same. Conversely, being a utilities company was predictive of being a repeat offender, while small and medium sized companies, and trade and transport companies were associated with a reduced chance of being a repeat offender. The results suggest important considerations for where environmental regulators should direct their efforts. Financial difficulties in particular may serve to be an important indicator of whether a company that offends for the first time is at risk of recidivism. Implications for regulatory practice are discussed.

Author

• Ben Hunter, University of Greenwich