“Corporate environmentalism” – by which we mean environmentally friendly measures that are not required by law – is playing an increasingly visible role in environmental protection. We first encountered this phenomenon in the mid-1990s when we stumbled upon a report that the Council of Great Lakes Industries was offering a prize to the firmthat most significantly reduced its emissions of pollutants into theGreat Lakes. Immediately our skeptical economists' minds kicked in: “Why would companies voluntarily increase their own costs just to win a plaque they could put on the wall? Would there be any tangible benefits to society?” The conversation that ensued has proven to be much richer and more intellectually fulfilling than we ever imagined.

Investigating these questions with the tools of economic theory has helped us avoid becoming Panglossian optimists or naive cheerleaders for business, unlike the authors of many popular books on the subject. Nevertheless, our research has driven us to the conclusion that corporate environmentalism can indeed produce welfare improvements, though they are by no means guaranteed. Indeed, our ongoing work in this area has made us aware of the many subtle ways corporate environmental strategy intertwines with public policy. Part of our rationale for writing this book is the belief thatwe have arrived at an overarching framework within which much of the corporate environmental activity we observe can be understood.

While our analysis is rooted in economic theory, we have written this book with both business strategists and policy practitioners, as well as scholars, in mind.