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"Voluntary programs have become widespread tools for governments and non-governmental actors looking to shape industry behavior. Voluntary programs can be conceptualized as club goods that provide non-rival but potentially excludable benefits to members. For firms, the value of joining an effective green club over taking the same actions unilaterally is to appropriate the club's positive reputation with stakeholders. Our analysis of about 3,800 US facilities indicates that joining ISO 14001, an important non-governmental voluntary program, improves facilities' compliance with government regulations. We conjecture that ISO 14001 's efficacy stems from its relatively open membership standards and its focus on management systems that provide participants with private benefits while addressing the root causes of regulatory non-compliance. Many government sponsored voluntary programs may be designed to fail because their rigid standards exclude all but highly compliant firms and their focus on performance standards ignores key causes of regulatory non-compliance."
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... This range of motivations presents challenges for determining realistic safeguard expectations against which to compare one's own efforts and abilities, a hurdle in achieving more widespread safeguards buy-in. Mechanisms for transparency and assurances that others are following environmental commitments (e.g., as may be achieved via external audits) can encourage more widespread commitment to and motivation for safeguards adoption; actors are less likely to shirk obligations when they trust that others are cooperating as well . As Potoski and Prakash (2005) find, voluntary environmental programs and commitments, particularly those with third-party verification can "spur a virtuous cycle" whereby trust begets more trust  (p. ...
... Mechanisms for transparency and assurances that others are following environmental commitments (e.g., as may be achieved via external audits) can encourage more widespread commitment to and motivation for safeguards adoption; actors are less likely to shirk obligations when they trust that others are cooperating as well . As Potoski and Prakash (2005) find, voluntary environmental programs and commitments, particularly those with third-party verification can "spur a virtuous cycle" whereby trust begets more trust  (p. 246). ...
... Mechanisms for transparency and assurances that others are following environmental commitments (e.g., as may be achieved via external audits) can encourage more widespread commitment to and motivation for safeguards adoption; actors are less likely to shirk obligations when they trust that others are cooperating as well . As Potoski and Prakash (2005) find, voluntary environmental programs and commitments, particularly those with third-party verification can "spur a virtuous cycle" whereby trust begets more trust  (p. 246). ...
Sustainably managed forests and forest products have a well-documented potential to deliver significant climate change mitigation benefits via sequestration, storage, and substitution (the 3Ss) when they are sourced sustainably and substituted for traditional resource-intensive materials. Moving beyond product-specific considerations, a climate-smart forest economy (CSFE) aims to bolster the 3Ss and catalyze broader systemic change to address the climate crisis. In their most successful cases, forest value chain interventions that lead to CSFEs will link secondary and tertiary sectors for greater waste reduction, substitution, innovation, and overall cascading climate benefits. However, interventions that contribute to CSFEs, from small to large scale, will inevitably impact environments and communities, both directly and indirectly. While positive impacts can be thought of as co-benefits and should be encouraged, negative impacts are considered negative externalities, and these should be avoided or minimized wherever possible by safeguarding against harm. The failure to minimize negative externalities will have implications for equity, project longevity, and climate benefits. This paper provides preliminary results of mixed methods research with an aim of identifying and building consensus on the definitions, challenges, and solutions relevant to the assessment, planning, and implementation of CSFE safeguards. While broad and novel CSFE safeguards application faces diverse challenges, this paper explores practical solutions to advance and set a foundation for future dialogue, analysis, and application.
... Existing research on the performance consequences of ESR has found inconclusive results (see Berchicci and King, 2007 for a review). For example, while some studies find that adopting environmental standards such as ISO14001 would improve a firm's financial performance (Nishitani, 2011;de Jong et al., 2014;Ma and Kuo, 2021) and environmental performance (Potoski and Prakash, 2005), others find neutral or even negative effects (King and Lenox, 2001;He et al., 2015;Leiringer, 2020). ...
... These inconsistent empirical findings regarding the effect of ESR on firm performances may stem from theoretical issues and empirical problems (King and Lenox, 2001;Potoski and Prakash, 2005;Prakash and Potoski, 2014). As for theoretical issues, most existing literature has focused on the effectiveness of ESR through market mechanism and firm level factors such as motivation and governance structure (see Büthe and Mattli, 2011 for a review), while only a small number of research has examined the interaction between public and private mechanisms (Büthe, 2010a, b;Cafaggi and Janczuk, 2010;He et al., 2018). ...
... Regarding financial performances, some studies find that adopting environmental standards such as ISO14001 would improve a firm's performance in terms of Tobin's Q, return on assets (ROA), return on sales (ROS), and return on equity (ROE) (Nishitani, 2011;de Jong et al., 2014;Chen et al., 2021), while others find neutral or even negative effects (King and Lenox, 2001;He et al., 2015). As for firm performance with respect to issues addressed by the certifiable standard, some studies have found ISO14000 certification improves firms' environmental performances (Potoski and Prakash, 2005), while others find no effects (King et al., 2005). These inconsistent empirical findings regarding the effect of ESR on firm performances may stem from endogeneity problems (Potoski and Prakash, 2005), divergent research settings (King and Lenox, 2001), and inconsistent implementation of the certification standards due to the lack of monitoring by certification agencies (Christmann and Taylor, 2006;Iatridis and Kesidou, 2018). ...
Environmental self-regulation (ESR) is an increasingly important instrument to solve environmental problems. Although ESR is linked to improved firms' environmental performance, it is unclear whether ESR benefits firms’ long-term survival. We use environmental certifications, an externally certified form of ESR, and operation data of Chinese manufacturing firms from 1999 to 2013 to examine the impact of ESR on firm survival. We find that ESR participation significantly improves firm survival, and this effect is more evident on heavy-polluting firms and non-state-owned firms and in regions and periods with more stringent environmental regulations. Mediating effect analysis shows that this enhanced survival effect is mainly from favorable governmental treatment including lower compliance cost and higher subsidies, instead of from market factors including cost reduction, higher demand, and technology improvement. This study contributes to our understanding of the performance consequences of firm environmental conduct and the underlying mechanisms.
... Delmas and Toffel (2008), for example, note the environmental footprint-based distinction between "clean" industry sectors such as banking and other services and "dirty" industry sectors such as the chemical industry, the automotive industry, and the forestry/pulp/paper and energy sectors, that is traceable to variations across industry sectors in inputs, processes, outputs, and stakeholder salience. In the case of pressure from regulatory agencies, the substantial variation that exists in cross-industry environmental footprints leads regulators with limited budgets (Potoski & Prakash, 2005) to follow and to regulate dirtier industries more intensely, because these industries have appreciably greater negative impacts on the environment. Moreover, more negative consequences of noncompliance with environmental regulations, in terms of enforced penalties, personal lawsuits targeting corporate officers with significant fines and incarceration, and greater likelihood of targeting from NGOs, is consistent with evidence that firms from dirtier industries are more likely to engage in proactive environmental strategies (Henriques & Sadorsky, 1996;Hutchinson, 1996). ...
... Given managerial cognitive limitations and reluctance to divulge relevant information that may well benefit a firm's rivals (Darnall & Carmin, 2005;Potoski & Prakash, 2005), consumers and current and future employees concerned about environmental performance and safety often infer industry-level behavior from the behavior of individual firms, effectively creating a "reputational commons" problem (King et al., 2002) where major disasters at the firm level, such as the Exxon Valdez and BP oil spills, or the Three Mile Island accident, can damage the reputation of the entire industry in which the firms are situated. ...
Using the first ever Newsweek “Green Rankings” of the 500 largest U. S. firms in 2009 as a significant historical event, we test for the stockholder reaction to ratings of corporate environmental performance. Both the conventional null hypothesis significance testing and Bayesian approaches show that stockholders react significantly more positively to corporations with higher ratings of corporate environmental performance and that this effect is stronger in family owned firms. Our findings suggest that majority shareholders do not necessarily appropriate minority stockholders' rents when investing in environmental activities, as would be the case in the presence of “Type II” agency conflicts between majority family owners and minority stockholders. The family ownership effect is also found to be stronger in dirty (heavy polluting) industries as well as in more competitive and more opaque industry contexts.
... In addition to these, other benefits have been pointed out by Potoski Source: (The ISO Survey, 2020). and Prakash (2005); joining ISO 14001 reduces facilities' time spent on compliance, at a broad level, voluntary programs may serve as institutionalised and, therefore, more credible mechanisms for building trust between firms and regulators, as well as joining an effective voluntary program such as ISO 14001 may institutionalise firms' commitment to cooperating with government regulators (Potoski and Prakash, 2005). Despite the undisputed advantages of EMS implementation and certification, some studies gain the reliability of data collected by researchers. ...
The implementation and use of environmental management systems (EMSs) depend on the perceived credibility of their certificates. This study aims to identify and describe factors influencing the importance of certification credibility of EMSs. This study discusses the significance of such systems to enterprise credibility by administering and analysing focus group interviews with 20 representatives from the production industry, education sector, certification bodies, and non-profit associations for environmental protection. The paper concludes that credibility of EMSs' certification depends on the certifying companies, and poor-quality audits facilitate the possession of certification as well as the universality of using certified systems. The positive reception of certified EMSs in companies induces the widespread use of certificates, fashion, and credibility, which can be increased by publication of audit reports. These conclusions emphasise the importance of strict auditing and control systems for certifications.
... 1 Voluntary environmental programs have been conceptualized as clubs in the sense proposed by Buchanan (1965). As noted by Prakash (2000) and Potoski and Prakash (2005), these programs aim at modifying members' behavior in order to produce public benefits. Although belonging to the club entails some costs, it also renders some excludable and nonrivalrous benefits to participating companies, such as affiliation with the club's positive brand name, particularly, when they are signaled with a certification (see also Potoski and Prakash, 2009). ...
The effectiveness of voluntary environmental programs and certifications to render social and private benefits depends on how aware consumers are, so that they can consider such initiatives when making their decisions. Consumers’ awareness has been mostly addressed in developed countries, although the benefits of companies’ environmental actions also take place in developing countries. This study is conducted in a developing country, such as Costa Rica. Using a large sample (n = 1191), consumers’ awareness of environmental certifications is studied at a general level (being able to name some environmental certification or program) and at a specific level (ability to name certified firms). The results show that consumers who are younger, with higher household income, with a university or technical degree and those participating in environmental or community groups are more likely to be aware of environmental certifications on both levels. Moreover, aware consumers tend to be more willing to pay for a certified coffee or a coffee produced by a certified company.
... Importantly, the most related issue of EMS certification is whether it can enhance corporate environmental performance. Some scholars found that EMS certification results in significant improvements to corporate environment performance (e.g., Nishitani et al., 2012;Potoski & Prakash, 2005;Rondinelli & Vastag, 2000). Positive effects may be derived from standardized environment management and innovation used by focal firms in accordance with the effective guidance or green knowledge of ISO 14001 (Song et al., 2020). ...
Although prior research generated inconclusive findings between a firm's environmental management system and firm financial performance, attention to resolve this inconsistency by examining the internal channels is limited. Thus, this study focuses on a firm's access to finance and investigates whether a firm's environmental management system certification (EMS) leads to better access to finance. Based on the organizational legitimacy perspective, we hypothesize that this certification will benefit a firm with stakeholder approval and support and consequently alleviate its financial capital constraints. We further posit that the proposed relationship will be moderated by three types of legitimacy environments pertaining to how stakeholders and investors make the judgment on the environmental management system certification. We document that the proposed relationship, that is, the positive relationship between environmental management system certification and access to finance, will be stronger when the government attaches larger importance to environmental protection (regulative legitimacy), better environmental record (moral legitimacy), and better financial position (pragmatic legitimacy). Empirical analyses provide strong corroborating evidence for our predictions. These findings have important theoretical and managerial implications that are well discussed in this study.
... Firms subject to environmental regulatory pressures are more likely to adopt a relevant VEP (Guenther et al., 2016;Reid & Toffel, 2009). VEP adoption may help forestall future regulation (A. A. King & Lenox, 2000;Lenox, 2006) or to improve government relations under existing regulations (Hong et al., 2019;Potoski & Prakash, 2005). Where regulatory pressures induce VEP adoption, ongoing regulation will drive continued participation (Seok et al., 2021). ...
Voluntary environmental programs (VEPs) offer opportunities for companies and stakeholders to improve environmental outcomes valued by society in the absence of regulatory mandates. Research has addressed numerous antecedents for firm adoption of VEPs, enhancing knowledge of how stakeholders and firms engage on substantive issues of public importance. However, program adoption is dynamic, and stagnant participation rates may threaten program longevity when firms do not realize expected benefits. Prior literature has not sufficiently addressed the factors that compel firms to drop out. In this study I articulate three consequential drivers of firm commitment to VEPs—transparency, effort, and achievement—and empirically estimate their effects on firm disengagement from one such prominent program: CDP (formerly known as Carbon Disclosure Project). Findings indicate that firm transparency and effort represent powerful commitment mechanisms driving continued program participation. This study contributes to theory over multiple literatures related to VEP participation and offers practical guidance for both VEPs and firms.
... ISO 14001 is a globally accepted a plan-do-check-act standard that guides firms regardless of their size and sector to procedurally shape, implement, and improve their environmental response and performance . The growing adoption of ISO 14001 has inspired many researchers to investigate how it influences various corporate outcomes including environmental performance (Boiral & Henri, 2012) and corporate regulatory compliance (Potoski & Prakash, 2005). An important stream of this literature examines how ISO 14001 impacts firms' financial performance, with the results largely positive across many countries. ...
Firms use environmental management standards such as ISO 14001 to reduce the impact of business activity on the natural environment. Though these standards are widely celebrated on moral and ethical grounds, their implication for financial performance and competitiveness is equivocal. Drawing on neo-institutional theory, we conceptualize ISO 14001 as a nonmarket strategy and examine its impact on firm performance within the contexts of three highly polluted emerging markets – China, India, and Pakistan. Employing a rigorous event-study approach, we find that ISO 14001 certification has a negative impact on firms’ operating profitability and market value in both short and long runs. This negative impact appears to be stronger in contexts with weak institutions and poor environmental protection regimes. Further multivariate analyses show that the negative impact of ISO 14001 on firm performance is weaker among socially responsible firms and stronger among politically connected firms. These findings contribute to the environmental management literature. They also have practical implications for managers.
... The literature has indicated general inconsistency between scholars regarding sustainable strategic planning and management's (SSPM) impact on sustainable organisational performance. Several scholarly papers have demonstrated the positive influence of SSPM on a wide range of points, such as an organisation's reputation and image (Strachan et al., 2003;Zaid et al., 2018;Afum et al., 2021), regulatory compliance (Potoski and Prakash, 2005;Solangi et al., 2021) and waste minimisation (Psomas et al., 2011;Shams et al., 2017). In contrast, various studies have shown the positive influence of SSPM on sustainable organisational performance (Zobel, 2016;Alshehhi et al., 2018;Sroufe et al., 2019), contending that SSPM adoption does not necessarily prompt considerable enhancements. ...
The purpose of this article is to comprehensively describe the impact of sustainability strategic planning and management (SSPM) on organisational sustainable performance in a developing country context. A mixed method approach was adopted; data were collected using an interview and a survey targeting 126 organisations operating in the foremost polluting Palestinian manufacturing private sectors. The analyses were conducted employing thematic analysis and Partial Least Squares Structural Equation Modelling (PLS-SEM). The results from data analysis confirm that SSPM had a positive effect on the three dimensions of organisational sustainable performance (i.e. social, ecological and economic). Furthermore, the paper has developed a framework to facilitate integrating SSPM into the business model of manufacturing organisations in a developing country context. This paper is considered among the very few studies exploring the 'questioned' impacts of SSPM on organisational sustainable performance in a developing country.
... For example, some studies in the field of financial accounting suggest that internal control quality is positively related to the quality of reported accruals (e.g., Ashbaugh-Skaife et al., 2008;Doyle et al., 2007). Furthermore, firms improving their internal procedures by instituting ISO 14000-type internal management procedures show improved compliance with environmental regulation (Potoski & Prakash, 2005). However, some research findings point in the opposite direction. ...
Tax authorities increasingly rely on a cooperative approach to support corporate tax compliance. This approach, however, lacks empirical substantiation, and it is unclear whether it delivers on its expected benefits. We identify the underlying principles of this approach using reports and policy recommendations of the Organization of Economic Cooperation and Development (OECD) and formalize these in a working theory. We test this working theory in a sample of large businesses, using a unique combination of survey data and tax audit results from the Netherlands. We find that corporate taxpayers’ perceived procedural justice and transparency from these taxpayers in their dealings with the tax authority are positively associated with the quality of the relationship between taxpayer and tax authority. The increased quality of this relationship affects corporate income tax compliance but not value added tax (VAT) compliance. Furthermore, our results suggest that the quality of internal tax control contributes to taxpayer transparency and compliance, the latter via the prevention of unintentional errors. Overall, our results suggest that the cooperative approach can help improve the way taxpayer and tax authority interact, but that its ultimate contribution to tax compliance can differ between various taxes and various types of non-compliance.
... This remains a hotly debated area in the corporate governance literature. Established research suggests that voluntary programmes do have an effect and can be used to supplement traditional regulation and offset its high implementation costs (Potoski & Prakash, 2005). More recent work has sought to understand possible effects through surveys and experimental designs: for example, Malhotra, Monin, and Tomz (2019) suggest that voluntary commitments by firms could reduce the appetite for environmental regulation amongst key groups (including activists, the general public, and legislators), (Abbott & Snidal, 2009b, p. 66). ...
... Alternative regulatory approaches and the risk of goal displacement Obviously, scholarship has considered various alternative regulatory instruments beyond traditional "command-and-control" and cooperative approaches. Such alternatives include information disclosure (e.g., Coglianese et al., 2004;Karkkainen, 2001), management-based regulation (e.g., Coglianese & Lazer, 2003;Gilad, 2010), market-based instruments (e.g., Stavins, 2003) and voluntary approaches (e.g., Bennear & Coglianese, 2012;Potoski & Prakash, 2005). Related to these developments, regulatory enforcement styles have been diversified (Kagan, 1989;Scholz, 1984). ...
In this conceptual paper, we explore why and how goal displacement might affect public regulatory enforcement agencies. Central to our approach is an analysis of the ambiguity of enforcement goals, arguing that the ambiguity related to the evaluation of goal achievement makes enforcement agencies vulnerable for goal displacement. We conclude that in the absence of a sound tradition of ex-post effect evaluations, goal displacement might be much more prevalent in enforcement agencies than is often assumed.
... Indeed, the current paper contributes to recent research that studies how private-sector enterprises implement voluntary restrictions as substitutes for public regulation  . Past research has noted that private regulatory initiatives generally serve a strategic purpose and are promulgated from the top down because they enhance reputation  , prevent tougher public regulations 17,54,55 , yield compromises among ideologically disparate interests 56 , placate activists 54,57 , ensure self-determination 58 , advance neo-liberalism 59 , and improve competitiveness  . However, in this paper we have shown that individuals might also carry out de facto private regulations in a decentralized, non-strategic manner and these activities can be predicted based on theoretical postulates in basic research concerning cultural evolution. ...
A prominent line of cultural evolutionary theory hypothesizes that religiously inspired prosocial behavior enhances the fecundity of pious groups, causing them to outcompete non-religious communities and spread their prosocial values. We present evidence concerning contemporary workplace safety, in the United States, that unexpectedly tested implications of this cultural evolutionary hypothesis. Avoiding workplace injury requires cooperation and injury influences fitness, thus cultural evolutionary theory would anticipate that religious communities should exhibit fewer workplace injuries. Indeed, we find that the proportion of a community adhering to a religion correlates negatively with rates of workplace injury in its private-sector establishments. This correlation emerges primarily when secular workplace safety authorities are not prominent, thus echoing evidence that religiously inspired prosocial behavior mainly occurs absent “earthly” sanctioning authorities. Furthermore, the percent of religiously affiliated individuals in a community correlates with safety investments, suggesting that workplace injury reductions in religious communities result from individually costly, group-benefitting cooperation.
... The launch of a standard defining the precise objectives and requirements of the proxy voting guidelines, including in terms of materiality, compliance, and monitoring of ESG commitments, could contribute to further disciplining the actors involved in these practices. Although the effectiveness of ISO standards is much debated, several research studies have shown that they tend to play a positive role in the self-regulation of organizations and the improvement of their sustainability practices(Perez et al., 2009;Potoski & Prakash, 2005). Investors contracting proxy voting firms should also verify the qualifications of the agents who are supposed to apply their guidelines. ...
This study explores the challenges faced by responsible investment and shareholder activism practitioners in integrating sustainability by means of proxy voting as shareholder engagement strategy. Proxy voting guidelines that sometimes include sustainability provisions are applied in a very elastic and inconsistent way. Proxy voting agents are expected to follow the guidelines; they explain their non‐compliance by pointing out the guidelines’ vagueness, the opacity of current proxy voting practices, and portfolio managers not necessarily aligned with their clients’ stated sustainability commitments, along with their perceptions of what is in the best interest of the clients. This study sheds new light on processes underlying proxy voting practices for sustainability, which have been largely overlooked in the literature. By opening the “black box” of proxy voting processes, this study challenges the dominant optimism in this area and raises serious concerns regarding the effectiveness of current shareholder activism practices. This paper also contributes to the critical literature on corporate sustainability and neo‐institutional approaches by showing that the use of proxy voting guidelines in this area can be considered as a rational myth based on symbolic commitments divorced from substantial change in the dominant financial logic. This paper has important practical implications for institutional investors, organizations involved in proxy voting practices, and stakeholders in general. Among other things, this article shows the importance of clarifying the commitments included in proxy voting procedures, monitoring their application, and providing training on ESG issues to the actors involved in implementing the guidelines.
How can transaction costs prevent effective monitoring of members in an organization? In this paper I test for a relationship between the cost of monitoring and free riding behavior within a religious organization by using a historical case study: the Cistercian Order in Ancien Regime France. Individuals were required to follow strict behavioral guidelines in order to maintain membership in the monastic order. Two monitoring devices emerged to identify free-riders: (1) an annual visit by the head of a ’supervising’ monastery and (2) attendance at an annual General Chapter meeting. Using digitized maps of transportation networks in eighteenth century France, I estimate travel costs as a proxy for monitoring costs. As a proxy for free-riding behavior in a monastic order, I use the value of agricultural investment since monks were discouraged from engaging in market-orientated behavior such as investment. After matching each property with its owner’s costs, I find that where monitoring costs are higher, monasteries engage in more free riding behavior. The results hold after controlling for characteristics of the monasteries, potential issues of sample selection and bias from major houses.
Tuna support some of the world's largest, most valuable and spatially extensive fisheries, but effective management has been challenging due to their transboundary movements and the need for multilateral decision‐making. To address public concerns of over‐exploitation, fishing companies have sought to differentiate themselves through involvement in “sustainable seafood” eco‐certification programmes. Here, we show that the volume associated with such initiatives for tuna increased 237‐fold between 2007 and 2019. Today, 2.31 million tonnes (47%) of the global tuna catch comes from fisheries holding or seeking Marine Stewardship Council eco‐certification. This is due to a 57‐fold increase in the number of fisheries engaged in the eco‐certification process. Crucially, this growth is also correlated with a concurrent 14‐fold increase in the adoption of harvest strategies by Regional Fisheries Management Organizations (RFMOs). Semi‐structured interviews with a broad range of RFMO stakeholders corroborate that the rapid uptake of harvest strategies is largely attributable to pressure from fishing companies needing to meet eco‐certification requirements; over 90% of respondents had directly observed or speculated on this type of advocacy. These results suggest the tuna fishing industry and associated seafood supply chain actors are now playing an unprecedented role in shaping the international governance of these species.
The increase in electric vehicles as a low‐carbon mobility option has driven interest from many workplaces and local governments to offer charging services for employees, customers and visitors. However, the lack of incentives to limit over‐consumption in shared charging resources has led to congestion issues. In this paper, we use high‐frequency data to study two deterrence mechanisms implemented at one of the largest workplace charging programs in the United States. We study both price and nonprice interventions that encourage adoption of workplace norms and charging etiquette for resource sharing in charging stations. To study these mechanisms, we use a dynamic regression discontinuity design to separately identify treatment effects with digital platform data. Our findings provide new evidence that group norms can play an important role in driving behavioral compliance when setting EV access policies. We also find that workplace norms are complements to dynamic pricing policies. We discuss the implications of this data discovery for the effective management of common pool resources in the context of workplace charging and space‐constrained environments. This article met the requirements for a gold‐gold JIE data openness badge described at http://jie.click/badges
This study explores the effect of environmental self-audits (‘audits’), which represent an important type of environmental management system practice, on the extent of facilities’ compliance with wastewater discharge limits. Previous studies of environmental audits explore either the presence or frequency of audits only, while ignoring the quality of audits and heterogeneous effects across facility types. Our study contributes to the economic literature by examining the role of audit quality, as measured by the comprehensiveness of the audit protocol, and the influence of facility age on the effectiveness of more frequent auditing. These two features prove important especially in combination. Our study empirically examines the U.S. chemical manufacturing sector using survey and publicly available EPA data. Empirical results reveal that more frequent audits improve the extent of compliance but only for older facilities and only when these facilities conduct high quality audits. In contrast, for newer facilities, more frequent high quality audits fail to improve compliance; worse yet, more frequent low quality audits sadly undermine compliance. Both sets of results are consistent with our hypotheses.
New digital tools for monitoring forest‐ and land‐cover change have made it easier for civil society actors to call firms to account for deforestation. In response, companies in deforestation‐linked global value chains (GVCs) have turned to these technologies themselves. In contrast to many case analyses of technology in GVCs, which focus on how technology changes production processes, forcing governance to adapt, forest‐monitoring technologies change governance directly. Synthesising work on transaction characteristics and power relations in GVCs to address this novel situation, we argue that monitoring technologies’ effects on GVCs will likely depend on their accessibility. Proprietary technologies favour large‐scale operations and already established lead firms, while open technologies could support democratization. Treating forest‐ and value‐chain information as a public good could support more inclusive, equitable and sustainable value chains.
This study contributes to a theoretical and empirical understanding of whether and how administrative environmental innovations (AEIs)—implemented to help track and manage a firm's environmental impacts—are related to environmental disclosure. Drawing on the Belief–Action–Outcome framework, we posit that the motivation of individuals (employees, managers, and the leadership) within the firm to access, use, and act on the environmental information available to them would be enhanced by the firm's implementation of AEIs, resulting in more extensive environmental disclosure by the firm. Additionally, building on the literature on supply chain networks, we posit that the structural position of the firm vis‐à‐vis its supply network—reflecting information flows, network learning, and status—moderates the AEI implementation–environmental disclosure relationship. To test our hypotheses, we build a multi‐industry dataset of 3,106 firm‐year observations based on 67,809 dyadic cost‐of‐goods‐sold‐based relationships obtained from Bloomberg's supply chain relationships database to construct the supply networks of focal firms. We also draw on Bloomberg's environmental, social, and governance (ESG) data for our AEI implementation and environmental disclosure measures. We find significant evidence to support our hypothesis that AEI implementation is positively associated with the extent of environmental disclosure. However, the implementation of both internal and external forms of AEIs has a more pronounced positive relationship with the extent of environmental disclosure, compared to the implementation of either form alone. With regard to supply network structure, we identify three principal variables—accessibility, control, and interconnectedness—that influence network learning and status of the focal firm and find that they moderate the AEI implementation–environmental disclosure relationship. We provide insights for theory and practice based on our findings.
Using two waves (2013, 2015) of the Micro, Small, and Medium sized Enterprises (MSMEs) survey of Vietnamese manufacturing firms, this paper first explores what drives firms’ decision to have a domestic standards certificate, taking into account a rich number of factors related to the cost and expected benefits of certification as well as institutional factors. It further explores the presence of a positive and significant effect of domestic certificates on firm growth, testing whether these serve as signalling devices for desirable attributes under information asymmetry. Evidence is indeed found for a signalling effect of domestic standards certification, being stronger for female-run businesses. Results hold even when controlling for international certifications.
We meta-analyze research on why firms join voluntary environmental programs (VEP) to assess the impact of program stringency, or the extent to which they have rigorous, enforceable standards on these decisions. Stringency creates trade-offs for firms by impacting programs’ effectiveness, legitimacy, and adoption costs. Most research consider singular programs and lack cross program variation needed to analyze program stringency’s impact. Our meta-analysis addresses this by sampling 127 studies and 23 VEPs. We begin by identifying common institutional and resource-based drivers of participation in the literature, and then analyze how program stringency moderates their impacts. Our results suggest that strictly governed VEPs encourage participation among highly visible and profitable firms, and discourage it when informal institutional pressures are higher, and firms have prior experience with other VEPs or quality management standards. We demonstrate that VEP stringency has nuanced effects on firm participation based on the institutional and resource-based factors facing them.
This paper analyzes the impact of adopting the ISO 14001 standard on firm environmental and economic performance. In particular, it is argued that the degree of environmental awareness of the society (EAS) and firm size are two factors moderating the effect of ISO 14001 on firm performance. A number of hypotheses are formulated and empirically tested on an international sample of 583 listed companies in 46 countries over the period of 2009–2018. The findings show that (i) ISO 14001 adoption contributes to reducing firm carbon emission intensity and increasing firm profitability; (ii) the impact of ISO14001 on profitability is greater for companies from countries with high EAS and for larger firms; and (iii) the impact of ISO 14001 on carbon intensity is greater for headquartered in countries with low EAS. Managerial and policy implications resulting from the widespread adoption of certifiable environmental standards are also discussed.
This paper explores different approaches to regulating corporate social responsibility (CSR) patterns of adopting codes of conduct, and discusses the approach that courts should embrace.
Case studies from various legal systems will be examined. The paper presents new typology relating to different patterns of the Corporate Social Performance (CSP) model, based on aspects of the CSR pyramid, namely, legislative CSR and ethical CSR. Legislative CSR includes adoption of thin codes which reflect compliance within current legal standards of the criminal code, while ethical CSR includes codes reflecting ethical norms and corporate social citizenship beyond mere compliance. The paper also includes the interplay of different patterns of CSR and three approaches to regulation regarding these patterns.
Both the Israeli negative CSR regulatory approach and the American legislative CSR regulatory approach present difficulties.
The paper introduces a theory for regulating CSR within criminal law, drawing on the pyramid of CSR. It presents an original discussion of distinct approaches to regulation of corporate liability, while further developing the institutional theory of CSR and the interplay of regulation and CSR. The paper suggests a novel solution regarding the regulation and acceptance of CSR: the granting of protection from criminal liability to corporations who adopt CSR.
Achieving sustainable consumption and sustainable living is a response to the scientific and international communities’ concern that the world is living beyond its ecological systems, facing a potential crisis with regard to its environmental and other resources. All individuals, firms and communities, in relation to production of housing, transport and food consumption decisions must unite to develop sustainable change and well being. They all have a role to play in creating and promoting sustainable community development. Sustainability is an umbrella term that incorporates sustainability’s environmental, social and economic dimensions and takes on such ideas as reducing environmental impact, enhancing quality of life, minimising waste, taking a life cycle approach and looking at ecological preservation for future generations. From a business perspective sustainable green practice incorporates all elements of business from inputs procurement, manufacture, packaging design and marketing. To ensure the process of sustainable business is successful and ethical the goals of sustainability and good governance need to be managed in business practice. This chapter offers an overview of current implementation of green governance systems that relate to regional sustainability programmes and green firm’s practices. This work offers credibility to the field of sustainability research and practice by identifying and discussing all actors in the business community and how they interact with sustainability. From a regional perspective innovative primary producers and resource stewards often take up green initiatives with little or no knowledge of the governance quality and legitimacy of the schemes they are seeking to implement. This chapter looks at market-based sustainability initiatives, investigates the strengths and weaknesses of two timber certification programmes, and identifies some key governance requirements to improve green practice at the global, regional and local levels
Private regulatory programs, such as certification schemes, seek to control market access by providing greater certainty about products' credence attributes, including sustainability features of production processes. This article contributes to the literature that assesses the verification processes that determine whether private rules are being followed sufficiently by applicant rule‐targets (usually companies), and the regulatory intermediaries (auditors, assessors) that perform verification functions. By examining variation in the duration of verification processes of applicant rule‐targets, we question the assumption that within the context of a given program's design the efficiency of the verification process is invariant across time and space. We argue that the verification process can impose hurdles that are independent of rule‐targets' sustainability and their adherence to a private program's rules. Our analysis of 312 fisheries seeking Marine Stewardship Council certification shows that variation among intermediaries and objections to their certification decisions explain differences in the time it takes fisheries to receive market access.
The dogma of conscious environmental behavior has laid the paradigm for sustainable consumer behavior. Modern-day corporates have introduced innovative business models to add a new value to manage fluctuations in consumer behaviors and rejuvenate their financial performance. Similarly, in fashion industry, textile firms have warmly embraced the new business models and widely adopted environmental management systems (EMSs) to contribute to environmental sustainability. This research aims to explore eco-consumerism and its impacts on the financial performance of textile firms in Malaysia. The secondary data of textile firms’ performance from 2013 to 2015 were collected from an online database and annual reports of firms’ web portals. The findings reveal that the textile firms which successfully adopted EMS such as ISO 14001 show significant changes in performance compared with firms which are yet to adopt EMS certification. Moreover, eco-consumerism directly impacts EMS-adopted firms’ performance. Our findings are robust for practical, research, and managerial implications to classify and understand the impacts of consumers’ green behavior on corporate performance. This study contributes to understand the influence of consumers’ eco-behavior to adopt EMS and its impact on the financial performance of textile firms in Malaysia.
This research investigates whether an obligation to meet a Renewable Portfolio Standard (RPS) target in U.S. states affects the policy effectiveness, which is defined as the RPS-related renewable electricity capacity additions. A voluntary RPS target can serve as a political device for signaling commitment to certain goals, though there is no penalty if the goal is not met. Alternatively, mandatory RPS targets have varying stringency and uneven enforcement. Our results indicate that the compulsoriness of a state RPS is an insignificant determinant of RPS-related renewable electricity capacity additions. Factors other than whether an RPS target or goal is compulsory are more important in influencing renewable electricity development, including policy stringency. If a state seeks a modest level of renewable electricity development, setting a voluntary goal can sometimes be effective and more efficient. Nonetheless, a mandatory RPS may be required to accomplish a more significant level of renewable electricity deployment.
Multinational firms operate in multiple national jurisdictions, making them difficult for any one government to regulate. For this reason the firms themselves are often in charge of their own regulation, increasingly in conjunction with international organizations by way of public-private governance initiatives. Prior research has claimed that such initiatives are too weak to meaningfully change firms’ behavior. Can public-private governance initiatives help firms self-regulate, even if they lack strong monitoring or enforcement mechanisms? I take two steps toward answering this question. First, I introduce a new measure of firms’ performance on ESG (environmental, social, and governance) issues: the extent to which the firms issue public responses to claims of misconduct from civil society actors. Second, I argue that public-private governance initiatives allow firms to benefit from the legitimacy of their public partners, lowering the reputational cost of transparent response. Employing novel data on firm responses to human rights allegations from the Business and Human Rights Resource Center, I find that membership in the largest and most prominent initiative, the United Nations Global Compact, significantly increases firms’ propensity to respond transparently to stakeholder allegations. These results suggest a limited but important role for public-private initiatives in global governance.
Coercive pressure has forced firms to take up environmental measures in the last two decades in emerging economies. Under normative pressure, large firms with farsightedness take up the environmental practices as industry leaders. In a little mature emerging economy, such as India, where triple bottom line awareness is growing, the government facilitates the firms to operate in an environment-friendly ecosystem. We investigate how do environmental compliance and environmental practices influence the overall firm performance? The performance was measured in terms of financial, customer, internal business process, and learning and growth performance. A survey instrument was designed using well-established scales and administered to the middle to top-level corporate management executives to gather 240 data from the Indian firms. A rigorous statistical validity, diagnostics, and SEM were used to test the hypotheses. The environmental practices showed a full mediation effect on the effect of environmental compliance on performance. The examination of mediation relationships in an environmental context is limited in the reported literature. This paper is among the initial works that deal with complicated mediation relationships drawn from institutional theory propositions. The study established and argued that environmental practices' ecosystem would turn firms towards voluntary environmental compliance and eventually enjoy the long-term performance.
Corporate social responsibility (CSR) has steadily grown in importance. We show government regulation on corporate reporting of CSR, aimed to spur its growth and increase transparency, has grown in tandem. Such reporting regulation is more readily observable than CSR itself and can be used as a proxy for the latter. We show that larger economies with higher institutional capacity find it easier to develop reporting regulations, and that international influences and local pollution increase concerns are important contributing factors. We show that such regulation also increases CSR, even after accounting for common unobserved factors that may affect both.
This paper analyzes firms' incentives to engage in environmental corporate social responsibility (ECSR) in an international market under imperfect competition. We find that in the absence of environmental taxes firms do not adopt ECSR. However, the implementation of environmental taxes by governments encourages firms to adopt ECSR under local damage. Consumers, producers, and environmentalists are better off if firms decide to be environmentally responsible than if they decide not to. We also find that the decision to adopt ECSR depends on transboundary pollution. Under global damage firms engage in ECSR only if they are highly concerned about the environment. This means that the existence of transboundary pollution negatively affects the incentives of firms to be environmentally friendly. Finally, we find that when governments cooperatively determine their environmental taxes, firms engage in ECSR under both local and global damage. Thus, under global damage firms have greater incentives to be environmentally friendly when governments cooperate on environmental policies than when they do not.
Governments promote pro-environmental behavior explicitly, through regulatory provisions, or implicitly, by setting general environmental objectives without explicit requirements. Shared values and commitment to government objectives supposedly help towards greener behavior. We argue that the lack of explicit guidance counteracts, especially if green options are perceived as conflicting with strict regulatory requirements on other issues. In Russian public procurement, organizations are subject to either a rigid procurement law, or a flexible law, or both; neither law formalizes environmental priorities or approaches. We design a survey on practices of green procurement, collecting 223 responses from the whole range of organizations subject to public procurement regulation. Results from probit regressions, robustified on further 800 responses from an additional survey and 250,000 official procurement records, show that regulatory rigidity hinders green practices. Federal authorities are more likely to apply environmental criteria than local governments, but this is rather due to the expertise of their staff than to their commitment to governmental objectives. Publicly funded institutions are less likely to adopt green procurement than state corporations. Caution and avoidance of unintended contraventions seem to impede adoption of green procurement. Provision of information, guidance and improved expertise can help overcome this effect.
Multinational enterprises operating global value chains are being increasingly pressured to source from suppliers that adopt green private standards. Likewise, public policymakers are also pressured to reduce national pollution levels to contribute to sustainable development initiatives. In this context, while there is extensive debate on how domestic, country-specific environmental regulations interact with private standards (adopted by firms) in reducing national pollution levels, less is known about the role of international trade policies, which have recently embraced an array of sustainability issues. Our paper seeks to extend our understanding of the extent to which ISO environmental certifications affect a country’s level of emissions of greenhouse gases and air pollutants, and whether the European Union’s environmental protection (EP) standards – as mediated through trade agreements – condition this response. Prior research provides mixed evidence on the impact of the adoption of ISO-14001 on pollution reduction. Based on prior literature and using institutional theory and environmental stewardship perspectives, we expect that membership of trade agreements with EP provisions would complement the effect of ISO-14001 uptakes in reducing national pollution levels. Our arguments and results emphasize the complexity between private and public regulations on pollution reduction.
This contribution presents the findings from a two-stage systematic review. It relied on PRISMA’s methodical protocol to capture and analyze high-impact articles, that were fo-cused on the International Standards Organization’s ISO 14001 - Environment Management Systems. Whilst stage 1 shed light on the most cited publications since 1995, stage 2 nar-rowed down the search results between 2015 and 2021. The findings suggest that the use of this certifiable standard may result in operational efficiencies through better utilization of resources and waste management systems. It provides opportunities for practitioners to re-conceive their license to operate and to enhance their credentials with stakeholders. It considered potential pitfalls like high certification costs, time constraints as well as an in-crease in paperwork and red tape. Moreover, it recognizes that managers and employees may not be willing to implement changes as they may prefer the status quo or could not be knowledgeable enough to integrate the standard’s environment management systems with existing practices.
Prior research has documented involvement of government and civil society actors in governance processes, but has largely neglected a key player: corporate business interests. Combining insights from social-ecological systems, organizational systems theory, theories of governance and power, interest group rule-making participation, and non-state alternative environmental governance, we examine corporate involvement and power in environmental governance systems. Drawing on a sample of Twitter messages about fuel economy standards, posted between 2012 and 2020, we offer a sector-level discourse analysis of corporate power and its interaction with the sociopolitical environment. The results suggest that business interests are gaining increasing power in the participation arena of U.S. fuel economy governance processes. The results likewise indicate corporations’ response to a changing political landscape in the U.S. Taken together, our analysis advances current scholarship on power dynamics in governance processes and on empirical assessment of power, offering implications for governance system design and implementation.
The pollution of landscapes and coastal environments with plastic shopping bag litter is an escalating global problem. The introduction of plastic bag tax aimed at addressing this challenge achieved limited success in South Africa. This study explores South African shoppers’ perceptions towards social marketing anchored retailer voluntary initiatives, which is an emerging plastic bag policy option.
Adverse environmental and social effects of plastic shopping bags are discussed. Retailer voluntary initiatives used to de-market plastic shopping bags, including jurisdictions where they were implemented, are also reviewed. The focus is on retailer anti-plastic bag initiatives such as ‘reusable shopping bags’ and ‘plastic bag-free’ shops.
This study is situated within a constructivist research paradigm and a qualitative methodology. Data were collected from a sample of 31 grocery shoppers recruited from retailer outlets in South Africa’s metropolitan cities, Johannesburg and Pretoria. In-depth interviews were conducted to explore shoppers’ perceptions towards retailer-driven anti-plastic bag voluntary initiatives. Thematic content analysis was used to analyse interview data.
The findings of this study highlight shoppers’ negative perceptions towards retailer anti-plastic bag voluntary initiatives. Shoppers perceived retailer anti-plastic bag voluntary initiatives as forms of green capitalism, green entrepreneurship, symbolic corporate social responsibility, strategic business posture, commandeered green consumerism, measured environmental morality, masked green washing and calculated pre-emptive behaviour. Future studies may seek to extend the generalisability of these findings by using a larger sample size.
The study’s findings highlight the trust deficit associated with retailer anti-plastic bags voluntary initiatives and the importance of enhancing market acceptance and legitimacy. Mistrust and cynicism directed towards retailer anti-plastic bag voluntary initiatives point to the importance of consumer education aimed at emphasising the negative effects of single-use plastic shopping bags. This study concludes that reliance on retailer self-regulation may not be the best approach to solve the escalating problem of plastic bag litter. We argue that national governments need to implement interventions that strike a balance between environmental sustainability and economic development.
We examine whether and how CEO foreign experience affects firm’s green innovation. Using a sample of Chinese public companies and hand-collected CEO foreign experience data, we document a positive association between CEO foreign experience and corporate green innovation. Furthermore, consistent with the view that CEOs with foreign experience would play a more significant role when provided with more resources, we find that the positive relationship is more pronounced in less financially constrained firms, in state-owned enterprises, and in less competitive industries. Additional analyses indicate that enhanced environmental ethics and general competency are two potential mechanisms through which CEO foreign experience affects corporate green innovation. Finally, we find that CEO foreign experience is positively related to green innovation quality and internationalization. Collectively, these findings suggest that CEO foreign experience is a significant factor for corporate green innovation in emerging markets.
Voluntary approaches to environmental policy can contribute to stemming environmental degradation in developing countries with weak institutions. We evaluate the role of a lack of awareness of a law in explaining the voluntary adoption of environmental certification by small and medium enterprises (SMEs) in the food and beverage industry in Vietnam. We find that firms, where owners or managers were unaware of the law were 38 percentage points less likely to receive environmental certification. Moreover, this effect is larger for firms that exported, had internet access or paid bribes, and it is weaker for household enterprises. Our results suggest that increasing legal awareness can weaken informational constraints for SMEs, where weak institutions and a lack of information often hamper the uptake of environmental policy initiatives.
This paper investigates the combined effect of internal environmental management (IEM) and green human resource management (GHRM) on corporate reputation (CR), environmental performance (EP) and financial performance (FP). The paper further explores the indirect effects of CR and EP between the direct paths.
Data are garnered from 164 firms from three industries in Ghana. Partial least square structural equation modeling (PLS-SEM) is the methodological technique used to test the hypothesized relationships.
The result demonstrates that unlike IEM which has a significant effect on FP when implemented in isolation, GHRM does not have a significant effect on FP. However, the joint implementation of IEM and GHRM can provide better results in terms of improved CR, enhanced EP and significant FP improvement. CR and EP were further found to mediate the relationship between the direct paths.
The results suggest that the joint implementation of IEM and GHRM is critical for firms that seek to enjoy superior reputation, enhance their environmental sustainability and achieve financial gains. Consequently, managers are strongly encouraged to create a sustainable and vibrant company via significant and rational investment in green initiatives like IEM and GHRM.
This study happens to be one of the first to develop a research model that investigates the joint effect of IEM and GHRM within the context of CR, environmental sustainability and FP.
This study investigates the participation of China and Russia in the Clean Energy Ministerial (CEM). In which policy initiatives have these two countries participated? In which initiatives have they taken the lead? Building on the club theory and international relations literature, we approach the research questions by offering an in-depth analysis of the policy dynamics inside the CEM. From a theoretical viewpoint, we posit that China has been more active in the CEM than Russia, which our empirical analysis confirms. However, Russia has also been involved in several CEM initiatives. Concerning leadership, China has demonstrated a greater interest in playing that role than Russia. We conclude that, overall, China makes a better strategic use of the CEM in terms of gathering information and developing networks with other member states as well as private actors in order to implement measures for overcoming the challenges of clean energy transition.
Being a greener enterprise is the final goal of obtaining sustainable supply chain management, achieving environmental management (EM) and ensuring environmental performance. To provide scholars with knowledge of research trends of green enterprises, we carried out this research project, took 1142 articles as research objects and three methods to review the whole picture of green enterprises research. We found that this field is mainly concentrated in three areas. While small and medium-sized enterprises’ (SMEs) greening, EM and pollution emissions have been the enduring topics, green innovation has received the most attention from researchers. Furthermore, we found that scholars pay a great amount of attention to China-related research and Italian scholars have played a leading role in the future green enterprise research.
JEL classification: Q57
It is well documented that China faces massive water challenges relating to both scarcity and pollution following decades of industrial development. As the country embarks on a path of balancing economic growth and environmental management in building an ecological civilisation, where do non-state actors fit and how do they contribute to resolving these challenges? In this chapter, Michael Spencer and Zhen Zhen Xu discuss their experience building and engaging government, industry and civil society in a non-state water stewardship program. The Alliance for Water Stewardship (AWS) is itself only a relatively new global program that seeks to engage industry in good water stewardship. China has been one of its most successful areas of work. This chapter provides a context for the global development of AWS and the national context for water stewardship in China before drawing on new research to understand motivations and constraints for industry participation.
In der Literatur herrscht weitgehend Einigkeit, dass sich das Verhältnis von Nichtregierungsorganisationen (NGOs) und privaten Unternehmen in den vergangenen Jahren erweitert hat. Dennoch sind vergleichende Studien zur Interaktion zwischen beiden Akteursgruppen über verschiedene Politikfelder hinweg bislang selten. Gemeinsame Strukturen und Trends bleiben somit unterbeleuchtet. Der vorliegende Aufsatz untersucht daher das Verhältnis von NGOs und dem Unternehmenssektor in der globalen Umwelt‑, Menschenrechts- und Sicherheitspolitik. Die Analyse zeigt, dass einige Entwicklungen politikfeldspezifisch sind. So fällt der Protest von NGOs gegenüber der privaten Sicherheitsbranche relativ zahm aus. Zugleich beobachten wir einen politikfeldübergreifenden Trend, der sich in einer graduellen Funktionserweiterung von NGOs im Bemühen um normkonformes Unternehmenshandeln äußert. NGOs agieren dabei zunehmend als Ko-Regulierer, indem sie mit Unternehmensvertreter*innen in Multi-Stakeholder-Initiativen gemeinsame Regeln erarbeiten, deren Einhaltung überwachen und für deren Umsetzung sorgen. Unsere Analyse mündet in der These, dass dieser Wandel durch die Diffusion eines globalen Skripts begriffen werden kann, das die Einbindung privatwirtschaftlicher Akteure zur Lösung globaler Probleme vorsieht.
Our study mainly focuses on the major challenge faced by organizations while controlling the emission of greenhouse gases via the carbon management system (CMS), keeping in view the complexity of climate change, which is considered as one of the major challenges of present times. We narrow our focus to the factors related to the emission of carbon within this system. We assess the quality of the CMS using the guidelines provided by Tang and Luo (2014), Australian Accounting Review, 24(1), 84-98. The data for this research include the carbon emission-based data of the multinational companies, which disclose their carbon footprint. Based upon the empirical findings, we came to understand that the law of material balances prevails as carbon emission has a negative co-relationship between the carbon emissions and CMS, meanwhile the effects are not eminent. The adverse impact of such emissions has become obvious within 2 years. The quality of the CMS is determined by Target, Project, GHG (greenhouse gases) accounting, and disclosure. Our study has important policy implications for researchers, policymakers, and accounting companies because the role of the CMS is becoming integral. K E Y W O R D S accounting, carbon emission, carbon management system, coastal areas, intensity
This is the introduction to a special issue on ‘Sustainable Commodity Governance and the Global South.’ A broad range of transnational governance initiatives have emerged to respond to social and environmental challenges caused by commodity production. These initiatives – like voluntary sustainability standards and certifications – tend to target commodity producers in the Global South, but are overwhelmingly initiated and managed by organizations from the Global North. The agency and initiative of Southern actors in addressing sustainability challenges in their own backyards remains under-examined. In this introductory paper, we outline a typology of how commodity producers, civil society groups, and governments in the Global South have responded to the challenge of sustainable commodity production. Drawing inductively on the contributions to this special issue, we argue that Southern actors either participate in transnational governance, reinterpret it in their own context, or create their own initiatives entirely. The capacity of actors in the Global South to exert meaningful influence over sustainable commodity governance is relevant to ongoing debates in ecological economics about whether environmental and social goals can be achieved by working within global value chains or whether a wholesale reconfiguration of the global economy is required.
The scope of the current chapter is to provide a contemporary literature review on corporate environmental responsibility (CER) by offering a comprehensive theoretical framework and a timeline on its development within the corporate world. Also, the chapter will present a brief discussion on the motivation for firms to adopt CER activities via environmental management tools (EMTs). The final section of the chapter is devoted on discussing the main empirical findings on the literature regarding the association of CER with accounting and financial issues relating to financial performance, innovation, capital structure decisions, firm risk, cash holdings, payout policies and the quality of published accounting information (value relevance, earnings management, and accounting conservatism).
The relationship between adopting EMS certificate and resource efficiency is examined empirically using a panel sample of 1333 manufacturing SMEs in Vietnam for the (2011-2013) period. Applying an instrumental variable approach, the results indicate that certification leads to resource savings reflected by less use of electricity, fuel and water for each unit of output. Additionally, there is a heterogeneous effect of certification on the extent of resource saving depending on the sector of operation. The paper also highlights determinants of certificate adoption among SMEs which should be considered in the promotion of environmental certificates, especially in developing countries. To successfully roll out the adoption of environmental certificates on a larger scale, better knowledge among business owners on potential competitive and environmental sustainability gains from EMS must be disseminated.
Many firms conduct "environmental audits" to test compliance with a complex array of environmental regulations. Commentators suggest. however, that self-auditing is not as common as it should be, because firms fear that what they find will be used against them. This article analyzes self-auditing as a two-tiered incentive problem involving incentives both to test for and to effect compliance. After demonstrating the inadequacy of conventional remedies, we show that incentives can be properly aligned by conditioning fines on firms' investigative effort. In practice, however, the regulator may not be able to observe such effort. Accordingly, we propose and evaluate the use of three observable proxies for self-investigation: the manner in which the regulator detected the violation: the firm's own disclosure of violations; and the firm's observed corrective actions. Each method has its own efficiency benefits and informational requirements, and each is distinct from EPA's current audit policy. Copyright 2000 by Oxford University Press.
Last July, the Environmental Protection Agency publicly recommitted itself to its reinvention efforts in a report titled Aiming for Excellence: Actions to Encourage Stewardship and Accelerate Environmental Progress. One of the 'actions' continues the agency's search for workable and effective programs that use incentives to inspire and reward those businesses achieving environmental performance beyond what is required by law or regulation. This proposal would create a 'dual track' regulatory system. The new Performance Track would invite facilities to meet certain voluntary requirements, in return for which they would receive a mix of regulatory, financial, and other benefits. The remaining facilities would stay on the other track-the existing compliance-oriented system.
This article examines the emergence of local cooperative institutions-watershed partnerships-that resolve collective action problems involved in the management of natural resources. the political contracting approach to institutional supply suggests that watershed partnerships are more likely to emerge when potential benefits outweigh the transaction costs of developing a maintaining new institutions. We analyze the impact of social, political, economic, and ecological features of watersheds that affect benefits and transaction cost on the emergence of 958 watershed partnerships in the more than 2100 watershed in the United States. Our findings demonstrated that watershed partnerships are most likely to emerge in watersheds confronting severe pollution problems associated with agricultural and urban runoff, with low levels of command-and-control enforcement, and containing the resources to offset transaction costs.
Many firms conduct 'environmental audits' to test compliance with a complex array of environmental regulations. Commentators suggest, however, that self-auditing is not as common as it should be, because firms fear that what they find will be used against them. This article analyzes self-auditing as a two-tiered incentive problem involving incentives both to test for and to effect compliance. After demonstrating the inadequacy of conventional remedies, we show that incentives can be properly aligned by conditioning fines on firms' investigative effort. In practice, however, the regulator may not be able to observe such effort. Accordingly, we propose and evaluate the use of three observable proxies for self-investigation: the manner in which the regulator detected the violation; the firm's own disclosure of violations; and the firm's observed corrective actions. Each method has its own efficiency benefits and informational requirements, and each is distinct from EPA's current audit policy.
Even when political interests control bureaucratic outputs, the control of policy outcomes is complicated by trade-offs between controllable versus effective implementation strategies. I use a nested game framework to explain why a cooperative strategy can increase enforcement effectiveness in the narrow administrative game and why principal-agent control problems and collective action problems associated with the strategy lead policy beneficiaries to oppose the effective strategy in the broader political games. Analyses of state-level Occupational Safety and Health Administration enforcement provide evidence that cooperation does enhance the impact of enforcement in reducing workplace injury rates but that policy beneficiaries oppose and sabotage cooperation. The interactions between administrative effectiveness and interest group politics in this and other implementation situations require that both be analyzed simultaneously, and the nested game framework can provide a systematic approach to such analyses.
An increasingly common regulatory tool is one that delegates the duty to provide information to the regulated entities, creating new problems in principal-agency models of regulation. Failure to comply with regulations mandating information provision is as much due to ignorance of reporting requirements as to willful evasion. A modified detection controlled estimation model for coverage, violation, and detection of facility compliance with the EPA's Toxics Release Inventory, estimated for facilities in Minnesota in 1991. Violation is better understood by those variables associated with the likelihood that the firm is ignorant of TRI reporting requirements, than by those associated with evasion. Firms in violation tend to be small facilities, releasing or transferring small amounts of toxins to the environment.
Theory: Trust is a critical attitude that extends the duty heuristic developed in Scholz and Pinney (1995). The "trust heuristic" can provide the basis for a contingent compliance strategy capable of sustaining cooperative solutions to collective action problems of governance if two conditions are met. First, compliance with laws must be conditional on levels of trust in specific legal arenas. Second, a citizen's trust in government and trust in other citizens' willingness to obey the law must reflect the costs and benefits associated with obeying laws. Hypothesis: This article tests the first hypothesis in the tax arena: trust in government and in other citizens increase compliance over and above the levels expected from an internalized sense of duty to obey laws and the fear of getting caught by enforcement agencies like the IRS. Method: We test the hypotheses with regression analysis of survey and tax return data from a stratified sample of 299 middle- and upper-income taxpayers, using the newly-developed two-stage conditional maximum likelihood analysis to control for endogeneity. We extend this approach to the analysis of multi-categorical ordered dependent variables. Findings: Both dimensions of trust significantly increase the likelihood of tax compliance, even after controlling for duty, fear, selection bias, and potential endogeneity effects.
Control over agency budgets is a critical tool of political influence in regulatory decision making, yet the causal mechanism of budgetary control is unclear. Do budgetary manipulations influence agencies by imposing resource constraints or by transmitting powerful signals to the agency? I advance and test a stochastic process model of adaptive signal processing by a hierarchical agency to address this question. The principal findings of the paper are two. First, presidents and congressional committees achieve budgetary control over agencies not by manipulating aggregate resource constraints but by transmitting powerful signals through budget shifts. Second, bureaucratic hierarchy increases the agency's response time in processing budgetary signals, limiting the efficacy of the budget as a device of political control. I also show that the magnitude of agency response to budgetary signals increased for executive-branch agencies after 1970 due to executive oversight reforms. I conclude by discussing the limits of budgetary manipulations as a device of political control and the response of elected authorities to adaptive signal processing by agencies.
Ringquist takes a quantum leap forward by critically evaluating and refining traditional methodologies for tapping and integrating different kinds of variables that explain variations in state policy efforts and then by comparing these output levels with their actual outcomes in reducing air and water pollution. In other words, he asks not only why some states are much more active in addressing environmental problems than others but also whether state environmental policies matter, an important contribution to the literature...an excellent text.
The enforcement styles of inspectors are particularly important when a regulatory agency deals with issues that are low in salience and low in complexity In this article, based on interviews with 104 child care in spectors in four states, I distinguish between individual-level and state- level variations in regulatory stringency, regulatory flexibility, and technical support. The evidence suggests a breakdown of democratic accountabil ity but also techniques for restoring it.
Through the 1980s, political science research produced a more dynamic view of how bureaucracies respond to changing political conditions. However, much of this research ignored the complex stimulus environment within which bureaucracies operate, as well as the potentially rich bureaucratic response dynamic that can exist. We extend our previous work on the dynamics of political control of the bureaucracy by developing a model of political-bureaucratic adaptation. The model is tested with output data from four Environmental Protection Agency programs between 1979 and 1988. The results show that political-bureaucratic adaptation is indeed a more complex phenomenon than suggested by earlier research. Stimuli to bureaucratic behavior include discrete events, event progressions, and ''tonal'' shifts in the policy environment; bureaucratic responses can be immediate, delayed, or distributed through time in probabilistic fashion. Substantively, the results offer new insights on how political institutions affect bureaucratic behavior. They also suggest how, why, and to what bureaucracy responds.
Responsible Care is a voluntary code of conduct developed, enforced, and monitored by the Chemical Manufacturers Association. Voluntary codes could be designed and enforced by regulators, nonprofit groups, industry associations, and individual firms. They could vary in their scope, focusing on firms around the globe, in a given region, within a country, or in a given industry. This article focuses on Responsible Care’s self-regulatory services that pertain to establishing, monitoring, and enforcing industry-wide environmental, health, and safety standards. Employing insights from the club theory, stakeholder theory, institutionalist theory, and the corporate social performance perspective, it examines the demand and supply sides of voluntary codes. Finally, it discusses theoretical implications and the key challenges faced by Responsible Care in the future.
While most studies of the determinants of regulatory policymaking have concentrated on national-level issues, state-level regulatory politics represent a productive opportunity to examine the efficacy of competing theories of the regulatory process over variable political, economic, and demographic conditions. In this article we discuss the significance of state-level regulation to broader theoretical understandings of policy-making. We review a broad set of recent empirical work in the context of three models of policymaking: principal-agent theory, Gormley's salience and complexity model, and Lowry's dimensions of federalism model. The relative effectiveness of the three approaches in explaining the dynamics of political controls or influences over state-level regulation is assessed in order to point to future theoretic directions for the field. We conclude by suggesting the need for a greater integration of incentive-based and issues-based explanations of regulatory policy choices in the states.
We exploit differences in European mortality rates to estimate the effect of institutions on economic performance. Europeans adopted very different colonization policies in different colonies, with different associated institutions. In places where Europeans faced high mortality rates, they could not settle and were more likely to set up extractive institutions. These institutions persisted to the present. Exploiting differences in European mortality rates as an instrument for current institutions, we estimate large effects of institutions on income per capita. Once the effect of institutions is controlled for, countries in Africa or those closer to the equator do not have lower incomes. (JEL O11, P16, P51).
Increasing attention to environmental management has raised many new dilemmas for firms. How can managers deal with environmental issues in a competitive situation that is international and heterogeneous? What are the strategic and financial implications of environmental management? How can they cope with regulation, considering the choices which range from compliance to voluntary initiatives? And how do other firms organise their environmental management and communicate with stakeholders? This book examines these different topics, without dogma or prescription. It demonstrates the complexity of an area in which there are often no right or easy answers. The Economics of Environmental Management: 7 shows the links between the main functional areas of a business and environmental management; 7 examines regulation and self-regulation in different countries and worldwide; 7 pays specific attention to multinational enterprises; 7 gives an international state of the art on environmental management systems and standards (especially ISO 14001 and EMAS); on environmental reporting and verification; and on environmental management accounting; 7 contains international case examples and a wealth of annotated references to paper and electronic sources.
Environmental Management Systems (EMSS) represent a new generation of voluntary “beyond compliance” environmental policies that neither set substantive goals nor specify final outcomes. As a result, many stakeholder groups are lukewarm toward them. Since 1993 two major supranational EMSs—ISO 14001 and the European Union's Environmental Management and Audit Scheme (EMAS)—have been introduced. Firms receive formal accreditation after their EMS has been certified by outside verifiers. This accreditation can potentially bestow monetary and nonmonetary benefits on these firms.
Firm-level EMS adoption patterns in the United Kingdom, Germany, and the United States vary, thereby suggesting that national contexts influence firms' responses to them. In Germany and the U.K. a significant number of sites have become either ISO 14001 or EMAS certified, while the take-up of ISO 14001 in the U.S. (EMAS is available only to European sites) has been less enthusiastic.
This article begins with the hypothesis that firms in countries with adversarial economies— where regulators and business are on less than friendly terms—are less likely to adopt EMS-based programs. This hypothesis explains why ISO 14001 take-up has been relatively high in the U.K. and relatively low in the U.S. However, it cannot explain (1) the high rate of take-up of both ISO 14001 and EMAS in Germany, where the stringency of environmental legislation has been a contentious issue between the government and industry and (2) why EMAS has been more popular in Germany than in the U.K. This article argues that the original hypothesis, while largely correct, is underspecified. To better explain the cross-national differences in EMS adoption, one must take into account the type of adversarial economy (adversarial legalism versus prescriptive interventionism) and the nature of the policy regime (procedural versus substantive).
Proponents of federal environmental standards argue that competition for industrial development creates a “race to the bottom” in which states relax their own environmental standards to avoid losing businesses to states with more “business-friendly” regulations. This article presents results from a unique survey of state clean air programs that show—contrary to the race to the bottom—a substantial number of states exceed federal EPA standards in a broad variety of clean air programs. Multivariate analyses of these state policies indicate that states strengthen their environmental programs in response to citizen demands rather than weaken their programs in deference to economic pressures.
Currently, many approaches to solving policy problems seek to create community-based, less coercive solutions that are creating the conditions for the birth of new regional governmental institutions. We argue that networks form the core of these emergent structures and that federal programs can play a positive role in developing local networks. Our empirical work compares networks in estuaries included in National Estuary Program with networks in comparable estuaries that were not. We find that the networks in NEP areas span more levels of government, integrate more experts into policy discussions, nurture stronger interpersonal ties between stakeholders, and create greater faith in the procedural fairness of local policy, thus laying the foundation for a new form of cooperative governance.
Recent globalization discussions have revived the issue of regulatory convergence. Convergence advocates point to the structural pressures of the global economy on countries, while the divergence school points to the embeddedness of domestic regulatory institutions. This paper examines cross-national divergence in adoption rates of ISO 14001, an important international nongovernmental environmental regime developed with the cooperation of multinational firms. ISO 14001 offers a process-based system of voluntary regulation instead of an outcome-based system of public regulation that many firms find cumbersome. Our analysis of data from 59 countries suggests that ISO 14001 adoption rates are likely to be higher in countries whose trading partners have adopted this nongovernmental regime, which are embedded in international networks of nongovernmental organizations, whose governments flexibly enforce stringent environmental regulations with a less adversarial and litigious stance towards firms, and where consumers want mechanisms for identifying environmentally progressive firms.
This book transcends current debate on government regulation by lucidly outlining how regulations can be a fruitful combination of persuasion and sanctions. The regulation of business by the United States government is often ineffective despite being more adversarial in tone than in other nations. The authors draw on both empirical studies of regulation from around the world and modern game theory to illustrate innovative solutions to this problem. Their ideas include an argument for the empowerment of private and public interest groups in the regulatory process and a provocative discussion of how the government can support and encourage industry self-regulation.
Over the last two decades environmental issues have become important in public and business policy. This book asks why firms sometimes voluntarily adopt environmental policies which go beyond legal requirements. It employs a new-institutionalist perspective, and argues that existing explanations, especially from neoclassical economics, concentrate on external factors at the expense of internal dynamics. Prakash argues that ‘beyond-compliance’ policies are due to two types of intra-firm processes, which he describes as power- and leadership-based. His argument is supported by analysis of ten cases within two firms - Baxter International Inc. and Eli Lilly and Company - including interviews with managers, and access to meetings and documents. This book therefore examines the internal working of firms’ environmental policy in a theoretically rigorous way, providing a significant contribution to the theory of the firm. It will be valuable for students of business and environmental studies, as well as political economy and public policy.
This book presents a theoretical treatment of externalities (i.e. uncompensated interdependencies), public goods, and club goods. The new edition updates and expands the discussion of externalities and their implications, coverage of asymmetric information, underlying game-theoretic formulations, and intuitive and graphical presentations. Aimed at well-prepared undergraduates and graduate students making a serious foray into this branch of economics, the analysis should also interest professional economists wishing to survey recent advances in the field. No other single source for the range of materials explored is currently available. Topics investigated include Nash equilibrium, Lindahl equilibria, club theory, preference-revelation mechanism, Pigouvian taxes, the commons, Coase Theorem, and static and repeated games. The authors use mathematical techniques only as much as necessary to pursue the economic argument. They develop key principles of public economics that are useful for subfields such as public choice, labor economics, economic growth, international economics, environmental and natural resource economics, and industrial organization.
This paper uses new survey evidence to analyze the effects of regulation, plant-level management policies, and other factors on the environmental compliance of Mexican manufacturers. In Mexico and other developing countries, many plants avoid complying with regulations because monitoring and enforcement are sporadic. On the other hand, some plants overcomply because their abatement decisions are strongly affected by extra legal factors. We attempt to capture both possibilities in a model of decision making under uncertainty: A plant minimizes expected pollution-related costs by setting emissions intensity (emissions/output) at the point where marginal abatement cost is equal to the expected marginal penalty for polluting. Compliance status is determined by the positive or negative gap between the regulatory standard and the plant's cost-minimizing emissions intensity. Among determinants of the latter, we focus particularly on environmental management policies: the degree of effort to reduce emissions, and the type of management strategy which is adopted. Recognizing that these policies and emissions are simultaneously determined, we use two-stage least squares for econometric estimation. Our results suggest that environmental management has a strong, independent effect on compliance, even after we control for simultaneity and take many other determinants of emissions intensity into account. We conclude that in developing countries with weak regulation, the carrot of subsidized environmental management training may provide a useful complement to the uncertain stick of conventional enforcement.
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.
Theory: Attitudes toward collective obligations adapt in ways that enhance both individual and social well-being. A citizen's trust and duty toward the collective and fear of retribution change in response to changes in costs or benefits associated with the collective. Compliance with collective obligations (e.g., paying taxes) varies with these attitudes, producing an unexploitable strategy capable of maintaining cooperative solutions despite the conflict between collective benefits and individual incentives to free-ride. Hypothesis: Citizens monitor the net benefits gained from collectives by altering their attitudes of trust, duty, and fear. Method: We analyze the natural experiment created by the Tax Reform Act of 1986 to estimate the impact of individual tax changes on attitudes of upper-income taxpayers, using tax returns and two waves of survey data from a national panel of 292 taxpayers. Findings: Trust, duty, and fear increase significantly when taxes decrease, and decrease when taxes increase, thereby adapting as predicted to changes in net benefits. The magnitude of change suggests a modest rate of adaptation that may enhance the stability of cooperative equilibria.
Theory: Government can facilitate cooperation between private parties in collective action dilemmas. Regulatory agencies provide a bargaining arena to establish common expectations, and enforcement activities aid in monitoring cooperative agreements. Hypotheses: We compare two enforcement models of the impact of OSHA inspections on workplace safety. The deterrence model assumes that enforcement rests on coercion, so only inspections imposing sanctions should reduce injuries in inspected plants. The collective action model assumes that enforcement can also facilitate cooperation by providing information, so complaint inspections that signal worker mistrust can decrease injuries even without sanctions. Methods: We test the impact of OSHA inspections on injury rates at 6,842 plants during 1979-85, using maximum likelihood regression analysis to analyze the panel data. Results: Inspections initiated by workers reduce injuries regardless of penalty, suggesting that information rather than coercion is the critical factor in complaint inspections. Regular inspections reduce injuries only when penalties are imposed, which is consistent with both models. We conclude that both coercive and facilitative models are needed to understand regulatory behavior.
"Across the United States and around the world, businesses have joined voluntary environmental codes proposed by governments and nonstate actors. Many codes require firms to establish internal environmental management systems that seek to improve firms' environmental performance and compliance with mandatory regulations. At the same time, governments are also experimenting with programs that provide incentives for business to self-policies their regulatory compliance, and promptly report and correct regulatory violations. In light of these two trends, this paper examines how governments' approach to regulatory enforcement can influence firms' incentives to comply with mandatory environmental laws and to join voluntary codes that could take them beyond compliance. Our inquiry shows that cooperative regulatory enforcement, in which firms self-police their environmental operations and governments provide regulatory relief for voluntarily disclosed violations, yields optimal, 'win-win' outcomes only when both sides cooperate. If firms are likely to evade compliance, governments are better off adopting a deterrence approach. And, if governments insist on rigidly interpreting and strictly enforcing the law, firms may have strong incentives to evade regulations and/or not join voluntary codes. Cooperation, though not easy, is possible if both sides can credibly signal that they will forgo opportunism."
Sumario: In industries such as petroleum and chemicals, which are already plagued with overcapacity, fierce competition, and declining margins, a company's ability to respond to environmental challenges in a cost-efficient manner may well determine its viability. The perceived conflict between environmental protection and economic competitiveness is, in fact, a false dichotomy. Managers might redesign a product so that it uses fewer environmentally harmful or resource-depleting raw materials. If successful, that effort could also result in significant cuts in direct manufacturing costs and inventory savings and appeal to consumers'growing desire for environmentally friendly products
This study exploits the quasi-random assignment of air pollution changes across counties induced by federally mandated air pollution regulations to identify the impact of particulate matter on property values. Two striking empirical regularities emerge from the analysis. First particulate matter declined substantially more in regulated than in unregulated counties during the 1970s and 1980s. At the same time, housing prices rose more in regulated counties. The evidence suggests that this approach identifies two causal effects: 1) the impact of regulation on air quality improvements, and 2) the impact of regulation on economic gains for home-owners. In addition, the results highlight the importance of choosing regulatory instruments that are orthogonal to unobserved housing price shocks that vary by county over long time horizons. It appears that using regulation-induced changes in particulate matter leads to more reliable estimates of the capitalization of air quality into property values. Whereas the conventional cross-sectional and unstable and indeterminate across specifications, the instrumental variables estimates are much larger, insensitive to specification of the model, and appear to purge the biases in the conventional estimates. The estimates imply that a one-unit reduction in suspended particulates results in a 0.7-1.5 percent increase in home values. In addition, it appears that air pollution regulations resulted in real economic benefits to home-owners in regulated counties.
A principal-agent perspective has been employed in recent studies to rediscover the importance of democratic hierarchies in shaping public bureaucratic outputs. I test the robustness of the hierarchy model for explaining outputs from an agency that has often been cast in the image of bureaucratic independence, the Environmental Protection Agency. Examining the effect of the Reagan presidency on EPA outputs for clean air, Box-Tiao models are constructed to explain shifts in the vigor of air pollution enforcements between 1977 and 1985. The analysis shows that the influence of elected institutions is limited when an agency has substantial bureaucratic resources and a zeal for their use. Moreover, under these conditions, bureaucracy can even move outputs in directions completely opposite from what a model of hierarchy would predict. The implication is that for some agencies it is necessary to give greater consideration to the agent in explaining implementation outcomes through time.