Abstract

In the 1990s, Environmental Voluntary Agreements (VAs) involving regulatory agencies and industry have emerged as the promise of the future in environmental policy circles. The collaborative mechanisms of VAs can be conducive to the development of innovative solutions, which regulators or firms would have been unlikely to develop alone. From a business perspective, participation in VAs can reduce the burden of regulation, facilitate the communication of environmental improvements, and allow firms to be ahead of competition for environmental products. However, the benefits of participating in VAs can be outweighed by high transaction and administration costs if VAs are not properly designed. This article discusses when participation in a VA offers strategic opportunities and when joining a VA might turn into a costly enterprise.