The Law and Corporate Environmental Responsibility: An Analysis of Pakistani Listed Oil Refineries

Abstract

This study investigates the extent, reasons for, and consequences of environmental laws, rules, and regulations on corporate environmental abuses. The study limits its scope to the oil refineries listed on the Pakistan Stock Exchange. In light of state regulations and accountability through litigation, the effectiveness of the law on corporate environmental responsibility is explored. Environment means Air, water, land, buildings, structures, roads, all social and economic conditions affecting community life etc. Its importance was recognized post industrialization, when the world became a global village. Where the globalization leads to the development, it also badly damages the environment. And now environmental protection has become a sensitive global issue. There are number of endogenous and exogenous factors that effects the environment Apart from these only the state regulations and the rule of law is considered in this study. To explain the relationship and significance of the law on corporate environmental responsibility, a regression analysis based on panel data is applied. The explanatory variables include the rule of law, state regulations, and corporate accountability through litigation. The results depict a contrary relationship. The rule of law is positively associated, whereas state regulations and accountability through litigation have an inverse relationship with corporate environmental responsibility. Litigation is found to be insignificant and shows a 53% deviation from the mean value. This indicates that the judicial system of Pakistan is not very effective; however, improvements in the rule of law can encourage oil companies to ensure their environmental responsibilities. There is a need of one law that deals with all the constituents of environment. The implementation of environmental regulations must be ensured by the state or government agencies, and the law should prevail and rules shall be applied irrelevant to the status and position of the wrongdoer.