1. Sanctions as moral messages General deterrence and environmental compliance in the waste industry in the Netherlands Dr. Karin van Wingerde vanwingerde@law.eur.nl

3. Aim & research questions How and to what extent does the threat of sanctions motivate firms in the waste industry in the Netherlands to comply with environmental regulations? and How important are deterrent messages compared to social license pressures and management-based regulation?

4. Qualitative empirical study among 40 companies in the waste industry in the Netherlands In-depth interviews with environmental managers, directors, and regulators (public and private) Observations Document analysis: Annual reports (financial, environmental) Legal permits, licenses, and certificates Inspection reports Analysis of media coverage of these firms Methodology

5. Fear of detection and legal punishment Knowledge of enforcement actions Perceptions of the risks associated with environmental violations Compliance measures Studied by making use of ‘signal cases’ Inspired by Thornton, Gunningham & Kagan (2005) Criminal and administrative penalties How does deterrence work?

6. Sanctions have little effect in terms of awareness – No particular interest in monitoring – Criminal case better remembered than the administrative case Not the sanction itself, but the infraction that led to the sanction is rememberd: ‘The penalty doesn’t draw attention. What matters is what happened, what was the problem, that is what triggers a reaction’ Deterrence: findings

7. ‘Weak signal, weak threat’ – Financial penalties are not deterrent enough: ‘it’s a joke’ ‘purely symbolic’ – (Administrative) violations without moral meaning Threat of severe legal penalties is only one of the incentives for compliance with regulatory standards −Other sources of control are more important… Explanations

8. Demands and expectations emerging from surrounding civil society (Gunningham, Kagan & Thornton, 2004) Neighbors, environmental interest groups, NGO’s, employees, the media Trust and legitimacy Social license pressures

9. Environmental managers about social license pressures ‘The money is not an issue, reputation is what it’s all about’ ‘Although we are a privately held company, when you are working with waste, you are owned by the public, so we have to be sensitive to public concerns’ ‘It works against you when you don’t establish a good relationship with the public. Being a good neighbor is crucial, or you will create a potential problem’ ‘You need to be proactive: don’t wait for complaints, but try to locate potential problems, fix them, and communicate about it to the public’

10. Regulating from the inside Social responsiveness: the firm’s ability to take into account the adverse consequences of its actions and respond to the expectations from the regulatory and social environment – ‘Public regulation is just a snapshot of compliance, you need to be in control all the time’ – ‘Punishment doesn’t teach you anything. It is more important to create a culture of compliance in which we are able to expose weakspots and actually improve compliance’

11. Into perspective: the waste industry’s quest for respectability Nowadays: – Important economic branch of industry – ‘21 st century firms’ However: – Environmental scandals – Uniser/EMK, Booy Clean, Kemp, Zegwaard, TCR

12. Conclusions No direct deterrent effect, but an indirect effect of sanctions: −The deterrent effect of sanctions runs through the social environment −This effect depends on the degree of social responsiveness of the regulated firm Deterrence works much better if there are other pre- existing normative systems that influence the behavior of companies

13. vanwingerde@law.eur.nl