Can regulation enhance innovation and competitiveness?

Greening Economic Growth: How can environmental regulation enhance innovation and competitiveness?

In recent years there has been a strong focus on the regulatory burden on Australian business. Directors are spending more time on corporate compliance and related activities, and less time on strategy, entrepreneurship, risk management, and organisation performance. (See further: Getting corporate regulation right: Compliance versus business performance.)

In this context, it is interesting to consider a recent study, Greening Economic Growth, looking at the potential upside of well-designed environmental regulation. The study challenges conventional economic orthodoxy that environmental regulation must, by necessity, negatively impact economic growth.

The study considers whether well-designed environmental regulation could potentially enhance competitiveness, and thereby improve economic performance by generating substantial “innovation offsets” (the “Porter Hypothesis”, 1991). It was concluded (following an extensive literature review and further investigation) that it is possible for environmental regulation to help improve overall economic productivity and competitiveness, if those regulations are properly designed and targeted.

As parliamentarians and regulators continue to make new regulations, and the Federal Government reviews existing regulations as part of its deregulation agenda, it is important that the director community continues to draw attention to the importance of well-designed regulation, and participate, where possible, in the design of regulations (e.g. through submission processes etc.).