THE ROLE OF ENVIRONMENT REGULATION ON FIRMS ’ PRIVATE ACTION ON ENVIRONMENTAL QUALITY: CASE OF NON-ADOPTION OF SOLID WASTE MANAGEMENT PRACTICES BY FOOD PROCESSING SECTOR IN SRI LANKA

The purpose of this study was to examine empirically extent to which the regulatory framework and the legal system on environment have an impact on firms ‟ private action on environment quality using the case of Sri Lankan food processing firms ‟ non-compliance to the 9 different solid waste management practices (SWMPs) recommended by the Ministry of Environment for a firm to adopt based on the production and processing activities it undertakes. The perceptions of managers of 160 firms that did not adopt a single SWMP were assessed by means of an index – “Environment Regulation Responsiveness Index ” (ERRI) of which the values reflects the relative strength of the firm in concern perceived on the environmental regulation (i.e.-1.0 the least to 1.0 the most responsive). The outcome of analysis highlights that the magnitude of ERRI of the majority of firms was relatively low (i.e. in between-0.5 to 0.5), especially for the small scale firms, suggesting that firms did not consider the government regulation as a promising factor to act on the environment. This calls for a critical revision and adjustments to the policy on environmental quality management both at the national and provincial level in order to promote voluntary action by firms