The Greening of Industry: Navigating the Nexus of Environmental Policies and Regulations, and Emission Abatement Strategies

Despite the prevailing discourses on the importance of environmental policy and regulation on emission control, related theoretical and empirical developments are lacking. Using institutional theory, we propose that environmental policy and regulation contribute to emission control by integrating environmental impact exposure into decision‐making processes. An empirical test of this theoretical framework was conducted using data from the World Bank Enterprise Survey on circular practices, which collected data from 18,734 firms. An analysis of emission control at the firm level indicates that environmental policy and regulation significantly influence emission control, and the degree of environmental exposure fully mediates their effects. This study presents a plausible theoretical account and empirical validation of a mechanism that enhances emission control strategies and decisions through environmental policy and regulation. It means that environmental policy and regulation do not solely affect the likelihood of carbon emissions from firms, but also the relationship is directly and indirectly influenced by the firm's environmental impact exposure.