Article

Analysis Reducing Toxic Chemical Pollution in Response to Multiple Information Signals: The 33/50 Voluntary Program and Toxicity Disclosures

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Abstract

We study firms' responses to two US Environmental Protection Agency (EPA) information-based interventions. First, the EPA disclosed toxicity information on the chemicals listed in the Toxics Release Inventory (TRI). Second, it grouped 17 of the TRI chemicals in the 33/50 voluntary program and challenged firms participating in this program to aggressively reduce their aggregate emissions. Firms therefore faced "twin" signals: focus on the most toxic chemicals, and focus on 33/50 targeted chemicals. We use a novel set of instruments to estimate the causal effects of these twin signals on chemical releases of U.S. manufacturing firms during the life of the 33/50 program (1991-1995), and after the program ended (1996-2013). We examine both "raw" emissions (in pounds) and "weighted" emissions (weighted by toxicity scores) of both 33/50-targeted and non-targeted chemicals. We find that 33/50 program participants reduced weighted emissions of 33/50-targeted chemicals only, with no effects on "raw" emissions or non-targeted chemicals. We also find that these reductions persisted after the program ended in 1995. These results suggest that firms are not unconditional greenwashers or environmental stewards. Rather, firms strategically invest resources to pursue environmental stewardship while taking into account multiple signals from their key sta-keholders such as the EPA.

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... Again, previous empirical work has found that cumulative participation in 33/50 better captures program impacts (Bi and Khanna, 2012;Innes and Sam, 2008). This is also consistent with recent work by Hoang et al. (2018) suggesting that the 33/50 Program led to innovations that improved environmental performance not only during the program but afterwards as well. Although both of these features could have been included in the theoretical model, we did not include them in the analysis above since we believe that doing so would complicate the theoretical analysis and notation without changing the basic insights from the model. ...
... year of program participation, since program participants did not leave the program once they had joined. 17 Furthermore, voluntary programs typically provide participants with technical assistance over time and can spur innovation that has an impact over time (e.g., Hoang et al. 2018). Thus, it is likely that the impact of the program on releases depends on a facility's participation status as well as the number of years a facility was in the program. ...
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... For instance, Clarkson et al. (2011) investigated the impact of mandatory disclosure on pollution emissions reduction. Kube et al. (2019), Vidovic and Khanna (2007), Khanna and Damon (1999) and Hoang et al (2018) examined the effects of a "voluntary" information disclosure program on environmental performance. In contrast, there is little empirical evidence on the effectiveness of "management-based regulation". ...
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Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time. Institutions are separate from organizations, which are assemblages of people directed to strategically operating within institutional constraints. Institutions affect the economy by influencing, together with technology, transaction and production costs. They do this by reducing uncertainty in human interaction, albeit not always efficiently. Entrepreneurs accomplish incremental changes in institutions by perceiving opportunities to do better through altering the institutional framework of political and economic organizations. Importantly, the ability to perceive these opportunities depends on both the completeness of information and the mental constructs used to process that information. Thus, institutions and entrepreneurs stand in a symbiotic relationship where each gives feedback to the other. Neoclassical economics suggests that inefficient institutions ought to be rapidly replaced. This symbiotic relationship helps explain why this theoretical consequence is often not observed: while this relationship allows growth, it also allows inefficient institutions to persist. The author identifies changes in relative prices and prevailing ideas as the source of institutional alterations. Transaction costs, however, may keep relative price changes from being fully exploited. Transaction costs are influenced by institutions and institutional development is accordingly path-dependent. (CAR)
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Voluntary environmental programs (VEPs) are institutions for inducing firms to produce environmental goods beyond legal requirements. A comparative perspective on VEPs shows how incentives to sponsor and participate in VEPs vary across countries in ways that reveal their potential and limitations. Our brief survey examines conditions under which VEPs emerge, attract participants, and improve participants' environmental performance. We focus on the costs and bene-fits for actors seeking to supply (or sponsor) these governance mechanisms as well as the costs and benefits for firms who are considering joining VEPs and adhering to their program obligations. © 2011 by the Association for Public Policy Analysis and Management.
Article
This paper analyzes the effect of participation in the Department of Energy's Climate Challenge Program on CO2 emission reduction activity of the largest 50 electric utilities east of the Rocky Mountains from 1995 to 1997. Based primarily on regulatory influence theory of voluntary behavior developed by Lyon & Maxwell (1999), a twostage model was developed and tested in which the first stage predicts voluntarism and the second stage uses the predicted values to test how voluntarism contributes to pollution reduction. Findings show a moderate level of support for regulatory influence theory with firms more likely to volunteer if they were located in states characterized by higher levels of environmentalism and if they were subject to higher levels of direct federal and state regulation. Findings also support previous empirical evidence that larger firms are more likely to adopt voluntarism, while larger, high-polluting utilities voluntarily committed to reduce greater quantities of CO2. Nevertheless, adoption of the program seems to have no effect on reduction levels and those firms predicted to volunteer higher reduction levels were found to reduce CO2 emmissions less. It is hypothesized that the ineffectiveness of the Climate Challenge Program, compared with other voluntary programs, such as the 33/50 Program, may be due to the general weakness of the CO2 regulatory regime in the United States. © 2000 by the Association for Public Policy Analysis and Management.
Article
Do shareholders gain when managers disperse corporate resources through activities classified as corporate social responsibility (CSR)? Strategy scholars have recently developed a theoretical model that links such activities to shareholder value when a firm suffers a negative event; we test key portions of this theory of the ‘insurance-like’ property of CSR activity. We posit that such activity leads to positive attributions from stakeholders, who then temper their negative judgments and sanctions toward firms because of this goodwill. We extend the risk management model by theorizing that some types of CSR activities will be more likely to create goodwill and offer insurance-like protection than other types. We delineate several firm and event specific characteristics that we expect to influence the link between CSR activities and an insurance effect. We then test our model using an event study of 178 negative legal/regulatory actions against firms throughout the 11 years from 1993–2003. We find that participation in institutional CSR activities—those aimed at a firm's secondary stakeholders or society at large—provides an ‘insurance-like’ benefit, while participation in technical CSRs—those activities targeting a firm's trading partners—yields no such benefits. We conclude by considering the implications of our findings for future theorizing and research into the economic value of CSR engagement. Copyright © 2008 John Wiley & Sons, Ltd.
Article
Using detailed data on defect rates and quality costs from twelve plants of a Fortune 500 company, we provide the first direct tests of predictions arising from two sets of dynamic quality-based learning models. We find greater support for quality-based learning models that assume learning is a function of both proactive investments in quality improvement and autonomous learning-by-doing, than for models that assume learning is a function of reactive investments in quality improvement alone. We then extend these two sets of models to examine the impact of individual prevention activities and past nonconformance expenditures on defect rates. We find that benefits from different types of prevention expenditures vary, and that past nonconformance expenditures provide learning opportunities that allow the organization to more efficiently cope with future failures, thereby reducing subsequent nonconformance costs. These important implications are absent in current quality-based learning models, providing an opportunity for future theoretical development.
Article
This study explores the hypotheses that implementing effective total quality management (TQM) programs improves the operating performance of firms. The winning of quality awards is used as a proxy for the effective implementation of TQM programs. Changes in various performance measures for a test sample of quality-award winners are compared against a sample of control firms. Our statistical tests provide strong evidence that firms that have won quality awards outperform the control firms on operating income-based measures. Over a 10-year period, from 6 years before to 3 years after the year of winning the first quality award, the mean (median) change in the operating income for the test sample is 107% (48%) higher than that of the control sample. There is reasonably strong evidence that firms that have won quality awards do better on sales growth than the control firms. Over the 10-year period, the mean (median) change in sales for the test sample is 64% (24%) higher than that of the control sample. We also find weak evidence that firms in our test sample are more successful in controlling costs when compared with the firms in the control sample. In addition, the results indicate that firms in our test sample increased their capital expenditures more than the control sample over the time period prior to winning quality awards. Compared with the control sample, the test sample shows higher growth in both employment and total assets.
Book
Can businesses voluntarily adopt progressive environmental policies? Most environmental regulations are based on the assumption that the pursuit of profit leads firms to pollute the environment, and therefore governments must impose mandatory regulations. However, new instruments such as voluntary programs are increasingly important. Drawing on the economic theory of club goods, this book offers a theoretical account of voluntary environmental programs by identifying the institutional features that influence conditions under which programs can be effective. By linking program efficacy to club design, it focuses attention on collective action challenges faced by green clubs. Several analytic techniques are used to investigate the adoption and efficacy of ISO 14001, the most widely recognized voluntary environmental program in the world. These analyses show that, while the value of ISO 14001's brand reputation varies across policy and economic contexts, on average ISO 14001 members pollute less and comply better with governmental regulations.
Article
Voluntary environmental programs are codes of progressive environmental conduct that firms pledge to adopt. This paper investigates whether ISO 14001, a voluntary program with a weak sword-a weak monitoring and sanctioning mechanism-can mitigate shirking and improve participants' environmental performance. Sponsored by the International Organization for Standardization (ISO), ISO 14001 is the most widely adopted voluntary environmental program in the world. Our analysis of over 3,000 facilities regulated as major sources under the U.S. Clean Air Act suggests that ISO 14001-certified facilities reduce their pollution emissions more than non-certified facilities. This result persists even after controlling for facilities' emission and regulatory compliance histories as well as addressing potential endogeneity issues between facilities' environmental performance and their decisions to join ISO 14001. © 2005 by the Association for Public Policy Analysis and Management
Article
Much social scientific inquiry seeks to specify the conditions and mechanisms underpinning the flow of social practices among actors within some larger system. Sociology, rural sociology, anthropology, geography, economics, and communication studies all have rich traditions of diffusion research. 1 Virtually everything seems to diffuse: rumors, prescription practices, boiled drinking water, totems, hybrid corn, job classification systems, organizational structures, church attendance, national sovereignty. Whether viewed as a hindrance to structural-functional analysis, 2 the deposited trace of social structure, 3 or a fundamental source of social control and change, 4 diffusion seems critical to social analysis.
Article
Voluntary programs in which manufacturing plants pledge to reduce their emissions beyond the legal requirement have been promoted as a low-cost way to achieve health and environmental protection. The EPA's Industrial Toxics program is evaluated using an author-assembled GIS-database of manufacturing plants in the 48 contiguous states, controlling for mandated reductions in ozone depleting chemicals and changes in reporting of emissions. I find that, controlling for participants’ self-selection into the program, relative to non-participants, participants do not reduce their health-indexed emissions of target chemicals in several key industries. Where reductions are detected in selected industries, participants’ increased off-site transfers to recyclers give reasons to question whether this program truly reduced emissions. Moreover, the program did not reduce emissions in less politically active communities.
Article
This paper examines the motivations for participation in the voluntary 33/50 Program and the program's impact on the toxic releases and economic performance of firms in the U.S. chemical industry. It demonstrates that the benefits due to public recognition and the potentially avoided costs of liabilities and compliance under mandatory environmental regulations provide strong incentives for participation. After controlling for sample selection bias and the impact of other firm-specific characteristics, this paper shows that program participation led to a statistically significant decline in toxic releases over the period 1991–93. The program also had a statistically significant negative impact on the current return on investment of firms, but its impact on the expected long run profitability of firms was positive and statistically significant.
Article
A key enabler of environmental projects is the ability of the project champion to gain commitment to the project from other stakeholders in his or her organization. This paper develops a model of commitment-gaining success that is based on intra-organizational influence theory. The model also includes project payback, customer pressure, government regulation, top management support and the project champion's position in the organizational hierarchy. The model was tested using survey data from 241 environmental professionals describing their attempts to gain the buy-in of purchasing managers, operations managers, industrial engineers and others for environmental projects. The results (obtained from hierarchical regression analysis) show that intra-organizational commitment is positively associated with the project champion's influence behavior—in particular, the champion's use of three influence tactics (inspirational appeals, consultation and rational persuasion) and avoidance of a fourth tactic (ingratiation). Commitment is also positively associated with project payback and with top management support for the environment and negatively associated with environmental regulation. The paper contributes to the OM knowledge base on environmental project implementation by bringing new theory to bear on the topic, by focusing on individual-level, rather than organization-level, variables and by taking a confirmatory, large sample approach which complements extant exploratory research. In addition, the paper contributes to the OM field by evaluating various antecedents to cross-functional integration. The results also provide specific guidance to those who champion environmental projects within their companies.
Article
We explain why some firms voluntarily overcomply with environmental regulation. In our model all consumers value environmental quality but differ in their willingness to pay which depends on their income levels. Publicly available information on environmental performance of firms enables consumers to identify clean firms. Firms participate in a two-stage duopoly game where they first choose their levels of cleaning technology and next engage in price competition. The market gets segmented by income levels. A minimum standard binding on the dirty firm has the effect of improving the performance of the cleaner firm. A subsidy obtains the same competitive outcome.
Three main analytical insights into the conditions that give rise to path dependence in economic phenomena generally can be applied to answer the question why history matters so vitally to the form and functioning of human organizations and institutions, a question which the ‘new institutional economics’ has not explicitly addressed. The first has to do with the role of historical experience in forming mutually consistent expectations that permit coordination of individual agents' behaviours without centralized direction. The second is concerned with the resemblance between highly durable capital assets and the information channels and codes required by multiperson organizations in order for the latter to function with minimal viable efficiency. The third involves the interrelatedness among the constituent elements of complex human organizations and the constraints on choices about particular rules and procedures, which result from pressures to maintain consistency and compatibility within the larger structure. A concluding consideration of the suitability of applying metaphors from evolutionary biology to the phenomena of institutional development leads to some critical qualifications of the analogies drawn between technological systems and human organizations throughout the discussion.