Impact of Environmental Regulation on the Sustainability of Eco-Friendly Product Designs

EVALUATING THE IMPACT OF ENVIRONMENTAL REGULATION ON THE SUSTAINABILITY OF ECO-FRIENDLY PRODUCT DESIGNS IN THE AUTOMOTIVE INDUSTRY
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Evaluating the Impact of Environmental Regulation on the Sustainability of Eco-Friendly Product Designs in the Automotive Industry
           The contemporary global business environment is constantly changing dues to changes in technology, societal factors, and regulations, among other factors. As such, it is imperative for multinational enterprises (MNEs) to keep up with these changes and understand how they might affect their operations and practices. According to Morrison (2020, p.18), MNEs are organisations that operate beyond their home countries and are a fundamental hallmark of the global business environment. As MNEs operate in different countries, they have to take into consideration the cultural, political, legal, and economic aspects of the global environment when engaging in international trade. This paper aims to critically evaluate the key developments in the global business environment of the automotive industry and assess their impact on sustainability. Specifically, the paper will evaluate the impact of environmental regulation on the sustainability of eco-friendly product designs in the automotive industry.  
The Automotive Industry: A Brief Overview
           The automotive industry is one of the world’s largest manufacturing sectors. It is also one of the fastest-growing industries in the world and according to Carlier (2021), by 2030 the industry is expected to grow to about $9 trillion. Also, the main segments of the global automotive industry include the production of passengers and commercial vehicles. The global automotive industry promotes the sustainability of the global economy by providing employment opportunities to people in both developing and developed countries, more so by offshoring production in developing countries. However, it has also raised concerns about environmental protection as well as sustainability. As a result, the automotive industry has been influenced by external pressures from governments, consumers, suppliers, employees, shareholders, and competitors (Szasz et al. 2021, p.5). This external pressure has been influencing how MNEs in the automotive industry approach their operations and practices, especially in relation to environmental and sustainability issues.
Key Developments in the Global Business Environment of the Automotive Sector
           The global automotive industry has developed rapidly in recent years to become a driver of global economic growth. However, the recent concerns and focus on climate change have contributed to major developments in the global business environment of the automotive industry. Environmental changes have affected many sectors in the world and people have become more aware of how different sectors are contributing to these environmental challenges. According to Gohoungodji et al. (2020, p.2), the automotive industry has been in the limelight for its role in global warming because the automotive industry is one of the largest sources of industrial waste. In addition, over 17% of the automotive industry's global pollution comes from vehicle production processes. As a result, the following key developments in the automotive industry have emerged in recent years. 
* Green Innovation
           To protect the environment, the automotive industry has been pushed towards green innovation. According to Gohoungodji et al. (2020, p.2), green innovation refers to the development of new or improvement of existing products and manufacturing processes to address the rising environmental challenges. Green innovation in the automotive industry can be seen in many areas such as waste recycling, energy conservation, green product design, and pollution prevention, among others. To achieve green innovation, MNEs in the automotive industry have been forced to address the financial and human resources challenges associated with shifting to green innovation. Gohoungodji et al. (2020, p.4) indicate that the implementation of green innovation requires high technological investment costs while the human resources have been resistant to technology and innovation, thus impeding any efforts toward green innovation. However, green innovation remains a key development in the automotive industry that is aimed at addressing global environmental challenges. 
* Regulatory Trends
           Similarly, governments around the world have joined forces to address the environmental challenges by implementing regulations to help reduce global warming. According to Carlier (2021) regulatory trends in the automotive industry range from the Paris Agreement, a global initiative, to local initiatives aimed at facilitating lower carbon emissions and reduced environmental pollution. Yet, despite these regulatory trends, many MNEs in the automotive industry have failed to completely comply with existing regulations (Szasz et al. 2021, p.1). A good example of MNEs that have failed, in the past, to conform to the regulatory trends is Volkswagen. According to Szasz et al. (2021, p.2), Volkswagen had an emission scandal that caused the recall of 11 million vehicles. These vehicles had an emission beyond what was allowed by the law, despite there being a law in the United States that regulated emissions. The scandal pointed to not only unethical but illegal practices by the automotive company. Such occurrences show that the automotive industry is still grappling with regulatory trends. It also shows that regulatory trends will continue to impact how business is done. As Carlier (2021) reveals, the regulations on automotive emissions are becoming more stringent to ensure that the automotive industry reduces its greenhouse gases emissions. These will definitely impact the operations and practices of MNEs with regard to production and manufacturing processes. 
* Disruptive Innovation
           The automotive industry is ripe for disruption and how MNEs in this industry respond to disruptive innovation will determine their sustainability. As Ferras-Hernandez et al. (2017, p.855) indicate, the need to create sustainable solutions has facilitated disruptive innovation in the automotive industry. The key disruptive innovations in the automotive industry have been digital and electric vehicles. These disruptive innovations promise to address climate change by ridding the world of its current oil dependency and ensuring that vehicles can run on electricity. Ferras-Hernandez et al. (2017, p.857) reveal that digitalisation and electrification will revolutionise the automotive industry not only through electric vehicles but also through autonomous vehicles. However, those automotive companies that will be unable to adapt will become extinct. Tesla is a good example of an automotive company that has responded to climate change concerns by implementing disruptive innovations such as electric vehicle production.
           Based on these key developments, two main aspects will be explored namely; environmental regulation and eco-friendly product designs. The former represents the dimensional aspect of the contemporary global business environment while the latter represents the aspect of MNE operations and practices in the automotive industry. 
Environmental Regulation
           Given the current environmental concerns, there has been a shift towards more stringent environmental regulations to protect the environment for future generations. According to Morrison (2020, p.72), one of the key dimensions of the global business environment is the legal environment which is concerned with the national and international laws that MNEs have to abide by. Further, within the legal environment, MNEs have to address legal considerations that are increasingly global to ensure they not only survive in the global legal environment but also do so sustainably. Such legal considerations include the environmental regulation stemming from global efforts and agreements such as the Paris agreement. It is also one of the key issues in the legal environment that MNEs in the automotive industry have had to address carefully.
           In recent years, governments all over the world have become quite involved in protecting the environment and as a result, have created environmental laws to help address the current environmental challenges. Morrison (2020, p.72) indicates that, in fact, environmental issues have become recognized in international law and as such, MNEs must adapt their operations and practices to meet the requirements of environmental law in an international capacity. According to Bharadwaj (2018, p.35), environmental regulation in the automotive industry has not only stemmed from the need to protect the environment but also from the need to ensure the industry evolves with technological advancement and innovation. As a result, many countries have put in place regulations to control greenhouse gases emissions. This has been in the form of mandatory emission targets that each company in the industry must achieve. Such regulations ensure that when manufacturing vehicles, automotive companies use the right inputs to reduce environmental pollution.
An example of such environmental regulation is the United States’ Clean Air Act which put Volkswagen into legal difficulties in recent years. According to Szasz et al. (2021, p.2), in 2015, it was discovered that Volkswag...