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The Regulation Dilemma: Cooperation and Conflict in Environmental Governance
Abstract
"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."
... Overall, according to Lee et al. (2016), public disclosure of performance does not make VAs more attractive to companies, even though it can be rewarding for well-performing ones. Darnall and Sides (2008) found that self-reporting is not an efficient way to The CP network has successfully grown, meaning that they have managed to keep participation easy and attractive enough for joining (Potoski and Prakash, 2004;van der Heijden, 2020). However, both participation in events and participation in reporting show that most members are not particularly engaged in being active. ...
... This may indicate situation in which the network concentrates more on recruiting new members than activating the existing ones. While the will to increase the network is understandable (Potoski and Prakash, 2004), a lack of activity and engagement is potentially problematic for the aims of the network. ...
... CP seems to be facing a regulation dilemma (Potoski and Prakash, 2004): they seek to keep the participation threshold low, but then the network does not push the members to be active and adopt ambitious goals. As a result, some companies present very ambitious goals, such as carbon negativity, while others limit their aims at the level of changing light bulbs or decreasing the use of printing paper. ...
Private actors are important for urban climate action, because the public sector can control the carbon footprint of a city only partly. Public-private partnerships have been created through different voluntary approaches, such as city-level voluntary networks for companies with the aim to engage private actors in climate change mitigation and to support learning processes by bringing different actors together. If these processes are to happen, network members should connect with each other through voluntary networking activities. These connections can be studied using methods from network science. As a case example, we study the event-participation-based structures of the Climate Partners network of the City of Helsinki between 2011 and 2018, and develop an index to measure whether active event participation by a company is associated with taking more ambitious mitigation measures. The results show that the network manages to bring together companies from different fields but has difficulties with engaging them and encouraging ambitious climate goals. Our results can help to further develop networking activities. The tools we develop and share allow the replication of the analysis for other data sets, offering a basis for a comparative analysis of different networks. This opens new horizons for studying public-private networking and its effects.
... On the one hand, a vast array of arguments has been put forward in favor of using hard regulation to improve compliance and performance (Gray and Shimshack 2011;May 2005;Mukamel et al. 2012;Wilms 1982;Winter and May 2001). The deterrence-based approach, however, incurs high enforcement and compliance costs, and can lead to confrontation (Mukamel et al. 2011;Potoski and Prakash 2004). On the other hand, numerous studies suggest that soft regulation fosters normative and social motivations for compliance (May 2002(May , 2005Potoski and Prakash 2004;Stafford 2012;Winter and May 2001). ...
... The deterrence-based approach, however, incurs high enforcement and compliance costs, and can lead to confrontation (Mukamel et al. 2011;Potoski and Prakash 2004). On the other hand, numerous studies suggest that soft regulation fosters normative and social motivations for compliance (May 2002(May , 2005Potoski and Prakash 2004;Stafford 2012;Winter and May 2001). Despite its impact, soft regulation has its own limitations, including lower accountability (Girth 2014;May 2005). ...
... Recent trends in government regulation reflect changes from the emphasis on desired actions to desired outcomes; and from regulation administered by the government to indirect regulation relying on third-party entities, information, and self-regulation (Carpenter, Grimmer, and Lomazoff 2010;May 2002). More evidence is needed to evaluate these trends (May 2002;Potoski and Prakash 2004). Thus, there is a need systematically to study various regulatory tools across policy contexts to better understand what combination of mechanisms is effective given the nature of the market and service characteristics. ...
Structuring managerial discretion has been a key government policy tool in contemporary regulation and governance. This article explores how a policy that constrains managers’ discretion in recruitment influences the performance of public services. The National Background Check Program (NBCP) is a federal program aimed at strengthening states’ criminal background checks targeting direct patient access employees in nursing homes, where abuse, neglect and misappropriations have been a persistent concern. We combine secondary administrative panel data on Medicare and Medicaid certified nursing facilities with primary data collected from states on their NBCP efforts. We find that NBCP participation, funding and the implementation of fingerprinting requirement, in particular, are associated with fewer deficiencies and higher star ratings. These findings suggest that, while constraining managerial discretion, government regulation is an important tool that federal and state agencies can use to control the performance of public and private entities in some markets and provide market enhancing signals to consumers.
... This article examines nonprofits' participation in government-sponsored voluntary accreditation in the context of NPM reform. Accreditation programs commonly face "recruitment challenges" in many sectors, including the nonprofit one (Breen 2012;Gugerty 2010;Potoski and Prakash 2013). Low participation jeopardizes the legitimacy and success of any voluntary program which relies on setting standards and promoting normative and behavioral changes (Carter, Scott, and Mahallati 2017). ...
... Voluntary regulatory programs emerged as part of a new era of regulation aimed at correcting the conventional command and control's shortcomings, such as high transaction cost and political backlash (Potoski and Prakash 2004). They are now booming in both the Global North and Global South (Breen et al. 2019;Prakash and Gugerty 2010). ...
... For instance, nonprofits proactively adopt program evaluation or participate in self-regulation to secure external funding (AbouAssi 2015; Carman 2011). Studies of state-sponsored voluntary programs also argue that organizations participate in these programs to gain exclusive material and reputational benefits (Delmas and Toffel 2008;Potoski and Prakash 2004). State initiatives can offer more perquisites than nongovernmental voluntary programs, including regulatory relief, a strong credibility signal through public authority endorsement, and advantageous technical assistance (Amirkhanyan 2009;MacIndoe 2013). ...
Around the world, voluntary programs are an increasingly prevalent regulatory instrument in governing nonprofit organizations. But accounts of mechanisms driving nonprofits’ participation in those programs are underdeveloped. This article combines and expands insights from voluntary regulation and institutional work theories to examine the impact of government’s informal relational work on nonprofits’ regulatory participation. Drawing on interviews and survey data from a random sample of 203 nonprofits in Shenzhen, China, the authors study the country’s pioneering government-sponsored voluntary accreditation program and its varying receptions among nonprofits. The empirical analysis shows that politically embedded nonprofits, those with closer organizational connections with the local government, are more likely to participate in accreditation. Since government agencies rely on existing regulatory networks to conduct relational work at both organizational and personal levels to persuade or cajole nonprofits to participate, they tend to direct their recruitment efforts towards more politically embedded nonprofits. However, these targeted recruitment practices may generate reactions much more complicated than the dichotomy of acceptance versus resistance, which ultimately facilitates some nonprofits seeking accreditation while deterring others.
... The cooperative model stands in contrast to a "coercive" (or deterrence based) approach (cf. Earnhart et al., 2020;Earnhart and Glicksman, 2015;Potoski and Prakash, 2004) that relies on the threat of market exclusion regardless of differences in suppliers' ability to comply. ...
... It relaxes the assumption of perfect information and emphasizes education, innovation and selected enforcement based on specific circumstances of non-compliance (Earnhart and Glicksman, 2015). The most important element underpinning the feasibility of the cooperative model is the ability of regulators and suppliers to collaborate effectively (Clark, 2017;Pires, 2008;Potoski and Prakash, 2004), so that regulators can effectively assess suppliers' compliance and also distinguish their motivations from their abilities to comply (Wilhelm et al., 2016a). ...
... For effective and equitable enforcement to work, actors should be able to credibly signal their willingness to cooperate (Potoski and Prakash, 2004) across tiers, and the development of technologies that enable effective monitoring and dialogue across tiers are key to achieve this. The regulator must be able to interact with suppliers, to monitor suppliers' behavior, and to send credible signals about sanctions. ...
... The cooperative model stands in contrast to a "coercive" (or deterrence based) approach (cf. Earnhart et al., 2020;Earnhart and Glicksman, 2015;Potoski and Prakash, 2004) that relies on the threat of market exclusion regardless of differences in suppliers' ability to comply. ...
... It relaxes the assumption of perfect information and emphasizes education, innovation and selected enforcement based on specific circumstances of non-compliance (Earnhart and Glicksman, 2015). The most important element underpinning the feasibility of the cooperative model is the ability of regulators and suppliers to collaborate effectively (Clark, 2017;Pires, 2008;Potoski and Prakash, 2004), so that regulators can effectively assess suppliers' compliance and also distinguish their motivations from their abilities to comply (Wilhelm et al., 2016a). ...
... For effective and equitable enforcement to work, actors should be able to credibly signal their willingness to cooperate (Potoski and Prakash, 2004) across tiers, and the development of technologies that enable effective monitoring and dialogue across tiers are key to achieve this. The regulator must be able to interact with suppliers, to monitor suppliers' behavior, and to send credible signals about sanctions. ...
To address ongoing deforestation for global food commodities production, companies and governments have adopted a range of forest-focused supply chain policies. In the Brazilian Amazon, these policies take the form of market exclusion mechanisms that aim to disincentivize deforestation by excluding products originating from areas that don't meet legal forest requirements. Strict exclusionary policies are likely to result in negative livelihood effects and leakage if some farmers are not able to comply, and most supply chain implementation strategies fail to deal with farmers' heterogeneous compliance capacities in an equitable manner. A more cooperative model of enforcement that uses flexible and negotiated approaches to compliance management may in principle enable more marginal and disadvantaged farmers to achieve compliance, thereby improving both the effectiveness of supply chain policies and their equity. However, we show that even cooperative models of enforcement are prone to exhibit coercive tendencies in multi-tier supply chains, leading to severe equity shortcomings.
... Zooming in on the relationships between the regulatory framework and implementation agents, research shows that the type of regulatory regime shapes the way private stakeholders, and in this case the implementers, behave. Potoski and Prakash (2004), for example, find that an institutional context which provides regulatory flexibility or relief makes it more likely for companies to join voluntary programs or selfpolice. This participation is then often unevenly distributed among firms depending on their capacity and willingness to contribute (May, 2005). ...
... To summarize, regulatory characteristics and incentives have an impact on company participation in environmental schemes (May, 2005;Potoski & Prakash, 2004). Those instruments can move along a spectrum of mandatory, command and control type tools to more voluntary or flexible initiatives and a combination of both (Sarkar 2008). ...
... The paper draws on research looking at implementation conditions for policy measures. More specifically, the relationship between the regulatory framework and private implementing agents (Coglianese & Nash, 2001;May, 2005;Potoski & Prakash, 2004). To illustrate this relationship between regulation and market structures, private companies and policy goals in the nudging context, the research analyzes European smart meter implementation. ...
Nudging is seen to complement or replace existing policy tools by altering people's choice architectures towards behaviors that align with government aims, but has fallen short in meeting those targets. Crucially, governments do not nudge citizens directly, but need private agents to nudge their consumers. Based on this notion, the paper takes on an institutional approach towards nudging. Rather than looking at the relationship between nudger and nudgee, the research analyses the regulatory and market structures that affect nudge implementation by private actors, captured by the ‘budge’ idea. Focusing on the European energy policy domain, the paper analyses the contextual factors of green nudges that are initiated by Member States, and implemented by energy companies. The findings show that in the smart meter context, there are regulatory measures that affect implementation of smart meters and that government has a central role to ‘budge’, due to the dependence on private agents.
... However, the relationship between IQ and CSP is more vivid in the lower quantile of CSP. Our findings add value to existing corporate governance, sustainability, and public management literature (see also, Kaufmann and Lafarre, 2021;Potoski and Prakash, 2004;Husted and Sousa-Filho, 2017;Azam et al., 2021) by empirically examining the impact of the macro environment on corporate behaviour towards sustainable directions by combining data on national-level IQ with firm-level CSP. The study offers useful insights into how the quality of the macro environment can guide sustainable policies at the micro level. ...
... GE can shape a firm's achievement of CSP in two main ways. First, governmental trends to institutionalize rules and regulations may ensure a firm's social and environmental activities and thereby shape CSP (Potoski and Prakash, 2004). For example, by a government setting of a minimum wage, a certain tax rate, and a limit on CO 2 emissions, a firm's contribution towards society and the environment are measured and monitored periodically (Lee, 2012;van Buren III, 2005). ...
By analysing 796 companies' data from 21 European countries, this research uncovered the nexus between institutional quality (IQ) and corporate sustainable performance (CSP). The relationship was theoretically examined with the lens of institutional theory and then empirically tested. The findings show that IQ has a positive and significant impact in safeguarding CSP, and firms’ characteristics play an essential preamble in this regard. We additionally found the heterogeneous impact of IQ on CSP. To come to a conclusion, we have applied random effect, two-step system GMM and quantile regression models. Our findings are consistent and empirically robust; therefore, the study disseminates key messages to policymakers and practitioners about the role of IQ in safeguarding CSP.
... 24 Various VEPs have emerged as companies proactively take steps beyond compliance with legal requirements to address environmental impacts. [24][25][26][27][28] A common aspect of VEPs is the tendency for companies to join in precompetitive collaboration to address a challenge that extends beyond what any single company can solve. Effective VEPs often have (1) strong membership standards to avoid the risk of members freeriding; (2) excludability, so members are incentivized to participate; (3) monitoring of members' commitments and sanctioning mechanisms to address noncompliance; and (4) motivations for consumers and shareholders to reward members for premium goods produced. ...
... While the impacts of VEPs are notoriously difficult to assess, they are largely characterized by the existence of membership standards and sanctioning mechanisms. 27,115,116 The Ellen MacArthur Circular Economy Foundation (CEF) and Alliance to End Plastic Waste (AEPW) are notable VEPs with memberships committed to addressing the problems of (plastic) waste in precompetitive collaboration. In a broader sense, voluntary commitments made under the auspices of the UN Ocean Conference (2017) (https://oceanconference.un.org/commitments/) https://ourocean2019.no/commitments/) can also be considered in this space due to the voluntary corporate commitment registries associated with these conferences. ...
Plastic pollution has caused significant environmental and health challenges. Corporations that contribute to the manufacture, use, and distribution of plastics can play a vital role in addressing global plastic pollution and many are committing to voluntary pledges. However, the extent to which corporations’ voluntary commitments are helping solve the problem remains underexplored. Here, we develop a novel typology to characterize voluntary commitments to reduce plastic pollution made between 2015 and 2020 by 973 companies, including the top 300 of the Fortune Global 500. We find that 72% of these companies have made some form of commitment(s) to reduce plastic pollution. About 67% of companies participating in voluntary environmental programs (VEPs) and 17% of non-VEP participants made measurable and timebound commitments. However, rather than tackle virgin plastics, most companies target packaging and general plastics and frequently emphasize recycling-related efforts. Growing commitments on plastic pollution are made by large and important companies, but significantly more efforts beyond plastic recycling are required to effectively address plastic pollution challenges.
... This also includes integrating the principles of sustainable development into business strategies that affect the attitudes and behavior of the members of an organization and the community (Carballo & Castromán, 2014). This theoretical framework will help solve various problems derived from inaccurate measurement of the BOER such as certain business ethics dilemmas (Candau & Dienesch, 2016;Potoski & Prakash, 2004). It will also help identify current and future research opportunities and give structure and perspective to the interdisciplinary literature in the field. ...
... Organizations have developed an extensive series of practices to comply with the corresponding regulation that informs their environmental behavior. This development has promoted research that seeks to understand the effects and effectiveness of the regulation (Camisón, 2010;Clemens & Douglas, 2006;McCarthy & Zen, 2010;Potoski & Prakash, 2004;Wilson, Williams, & Kemp, 2012). ...
Business‐oriented environmental regulation is expected to have a fundamental role in mitigating the adverse effects of human activity on the natural environment. However, its effectiveness and efficiency are not well established. A systematic literature review reveals validity and reliability problems in the measurement of business‐oriented environmental regulation. From a sustainable development perspective, we develop a theoretical framework that aims to enhance the measurement and assessment of this kind of regulation. Our theoretical framework proposes that the goals of business‐oriented environmental regulation must articulate a measurement system in a 3 × 3 matrix: three measurement levels (stringency, response, and outcome—in this cause–effect order) and three sustainability dimensions (environmental, social, and economic—in this constraint order). For each cell, we propose a combination of objective and subjective indicators. This theoretical framework expands existing approaches to business‐oriented environmental regulation measurement by integrating a sustainable development perspective into a measurement framework in a structured theory‐driven manner. Not only will this measurement system be useful for improving environmental policy, but it will also allow companies to improve their business strategy and come closer to complying with environmental regulations in order to effectively contribute to solutions for current environmental problems and help achieve a sustainable development.
... The literature has extensively studied the motivations, effectiveness, and respective strengths and weaknesses of each regulatory approach. With governments assuming the leadership, environmental regulatory instruments and the logic Potoski and Prakash (2004) behind them have evolved from mandatory regulations to voluntary programmes, from a centralized, top-down system to value co-creating cooperation with localized support. Table 1 lists the major environmental regulatory approaches discussed in the literature. ...
... Examining the effectiveness of international standards across contexts offers additional insights. For example, empirical investigations of the mostly examined ISO 14001certification were broadly evidenced in both developed and developing regimes (Boiral, 2007;Fryxell et al., 2004;Potoski & Prakash, 2004). ...
There has been growing complexity in the study of environmental regulatory governance. In terms of regulatory approaches, the focus of national styles has gradually shifted to the local level, down to street-level regulators. As for compliance strategies, regulated entities, particularly enterprises, have moved their strategies from the evasion-compliance dichotomy to more progressive ones that are beyond compliance. As environmental watchdogs on behalf of civil society, ENGOs, particularly those in developing and non-democratic political settings, have increasingly found more space for strategizing their active efforts to monitor enforcement agencies and polluting enterprises in the regulatory process. The spilling of regulatory regimes into developing countries has led to an urgent need for regulatory studies in such nations, with a call for new theoretical formulations that are capable of explaining regulatory governance in those countries. Research methodologies adopted have become increasingly sophisticated, moving from using a single method to using mixed methods by integrating qualitative and quantitative ones, with longitudinal studies and panel data analysis as the recent trends. This study aspires to perform a critical review of the existing body of literature on environmental regulatory governance in these major aspects as the basis for a research agenda setting.
... Findings of misconduct measuring the quality of audits relate to the knowledge and expertise of auditors. Meanwhile, the reporting of violations depends on the auditor's encouragement to disclose the violations (Potoski & Prakash, 2004). This encouragement will depend on the independence that the auditor has. ...
The Public Accountant (auditor) profession is like a "double-edged sword", on the one hand auditors must pay attention to the credibility and ethics of the profession, but on the other hand they must also face pressure from clients in various decision-making. must face pressure from clients in various decision-making auditor's decision making. If the auditor is unable to resist pressure from clients such as personal, emotional or financial pressure, the auditor's independence will be compromised. personal, emotional or financial pressure, the auditor's independence has been reduced and can affect audit quality. and can affect audit quality. This study aims to analyze and prove empirical evidence of the effect of experience, knowledge, length of contact with clients, pressure from clients, peer review, and non-audit services provided by KAP on audit quality. provided by KAP on audit quality. The sample used was 79 respondents, namely auditors at 18 KAPs in Semarang City. Meanwhile, to answer the research hypothesis using multiple regression analysis tools analysis tool, after previously testing classical assumptions. Based on the results of the study, it can be concluded that experience in conducting audits, the knowledge of an auditor and the review of fellow auditors (peer review) have a positive effect on audit quality. So that the more deeper and broader the knowledge of an auditor and the more experienced in the field of auditing as well as peer review from fellow auditors (peer review). auditing field as well as peer review from fellow auditors, the better the audit quality will be. better the quality of the audit performed. Meanwhile, the length of the relationship with the client, pressure from clients, and non-audit services provided by KAP.
... The German environmental protection agency defined EB as "a binding bargaining or a non-binding bargaining in the economic field designed to protect the environment, in order to achieve environmental goals, to reduce environmental burden activities or to terminate environmental burden activities". For example, polluting companies make promises to the government and society and agree to carry out environmental governance [27]. The conceptual interpretation of the environmental sector of the European Union pointed out that organizations, including enterprises and groups, make environmental commitments to public rights agencies (including governments) through negotiation [3]. ...
Environmental pollution has become a serious problem in China due to the development of industrialization and urbanization since the reform policies and opening of the economy. Nowadays, ENGOs function as a third party for environmental protection through various awareness and bargaining activities. This study aims to analyze the role of ENGOs in environmental bargaining (EB) and the influencing factors by combining the EB theories. A structural equation model of ENGOs participation in EB was established to compare the role of ENGOs in bargaining the “Kunming PX incident” and the “Nujiang dam incident” in Yunnan, China. The findings show that complex powers and interests play a vital role during EB. The relationship network, media, and human resources are among the most significant factors influencing the role of ENGO out of all the other factors such as funding, openness, knowledge, scale and experience. The strength of ENGO relationship network is crucial for solving environmental problems. This study also suggests that in order for ENGOs to effectively engage in EB, they should be placed in the proper context in the negotiating process. It is necessary to set up efficient public involvement platforms and processes for effective EB.
... Our rationale is that firms which follow ESG reporting guidelines are obligated to follow a reporting template, which provides a clearer understanding of what information firms should disclose. The template also encourages greater reporting around specific sustainability indicators codified in the guidelines (Potoski & Prakash, 2004). While ESG guidelines do not specify the number of pages or words that should be contained in a firm's sustainability report, firms are expected to fulfill the elaborated expectations of guidelines by disclosing specific information about their ESG actions, performance goals, impacts, and leadership. ...
... Firms act to moderate their political environments to improve or defend their competitive advantage (Potoski & Prakash, 2004). For example, in countries without an established legal framework or with little effective law enforcement, circumvention of laws or regulations may be considered a viable strategy. ...
The success of a firm’s supply chain strategy depends on resources in the political environment and the supply network in which it operates. If the political environment is not conducive to a firm’s supply chain strategy, a firm can either change its supply chain strategy or seek a political environment that is more favorable to its supply chain. This paper examines this second alternative. The structure-conduct performance (SCP) paradigm and the competitive dynamics literature are used to explore the relationships between political actions that leverage supply network resources, supply chain strategies, and firm performance. We extend a well-known typology of political actions from the strategic management literature and suggest that beyond influencing or complying with the political environment, firms may choose to moderate the political environment (circumvent or submit) or stay neutral (free ride). An integrated model is developed to explore the relationships between political actions and supply chain strategy, along with a series of propositions outlining how political actions can facilitate supply chain risk management strategies. Finally, suggestions are provided for future research.
... Our rationale is that firms which follow ESG reporting guidelines are obligated to follow a reporting template, which provides a clearer understanding of what information firms should disclose. The template also encourages greater reporting around specific sustainability indicators codified in the guidelines (Potoski & Prakash, 2004). While ESG guidelines do not specify the number of pages or words that should be contained in a firm's sustainability report, firms are expected to fulfill the elaborated expectations of guidelines by disclosing specific information about their ESG actions, performance goals, impacts, and leadership. ...
Environment, social, and governance (ESG) reporting guidelines are institutional rules that can enhance the credibility of firms' publicly disclosed information related to ESG. Reporting is often voluntary and global ESG reporting guidelines typically rely on process‐focused third party verification. However, in developing its reporting guidelines, the Japanese government gave firms the unusual option of pursuing either process‐ or content‐focused verification. This paper draws on the unique Japanese setting to examine whether firms that use ESG reporting guidelines increase their quantity of disclosed sustainability information. Furthermore, it assesses whether, given the option, (1) firms tend to pursue process‐ or content‐focused verification, and (2) which type of verification leads to greater information disclosure. We show that firms that follow ESG guidelines disclose 39% more sustainability information compared to firms that publish sustainability reports but do not follow ESG reporting guidelines. Content‐focused verification leads to greater information disclosure than process‐focused verification in that firms publish 23% more text in their sustainability reports. Moreover, given the option, firms prefer to use content‐ over process‐focused verification. However, most global ESG reporting guidelines endorse process‐focused verification and this verification is less effective than content‐focused verification at encouraging firms' information disclosure. Our findings raise a timely and relevant question about the movement by global ESG standard developers to promote process‐ rather than content‐focused verification. They also suggest that firms that wish to create sustainability distinction by way of ESG reporting may benefit by advocating for more robust forms of verification.
... Firms act to moderate their political environments to improve or defend their competitive advantage (Potoski & Prakash, 2004). For example, in countries without an established legal framework or with little effective law enforcement, circumvention of laws or regulations may be considered a viable strategy. ...
The success of a firm’s supply chain strategy depends on resources in the political environment and the supply network in which it operates. If the political environment is not conducive to a firm’s supply chain strategy, a firm can either change its supply chain strategy or seek a political environment that is more favorable to its supply chain. This paper examines this second alternative. The structure‐conduct‐performance (SCP) paradigm and the competitive dynamics literature are used to explore the relationships between political actions that leverage supply network resources, supply chain strategies, and firm performance. We extend a well‐known typology of political actions from the strategic management literature and suggest that beyond influencing or complying with the political environment, firms may choose to moderate the political environment (circumvent or submit) or stay neutral (free ride). An integrated model is developed to explore the relationships between political actions and supply chain strategy, along with a series of propositions outlining how political actions can facilitate supply chain risk management strategies. Finally, suggestions are provided for future research.
... Our rationale is that firms which follow ESG reporting guidelines are obligated to follow a reporting template, which provides a clearer understanding of what information firms should disclose. The template also encourages greater reporting around specific sustainability indicators codified in the guidelines (Potoski & Prakash, 2004). While ESG guidelines do not specify the number of pages or words that should be contained in a firm's sustainability report, firms are expected to fulfill the elaborated expectations of guidelines by disclosing specific information about their ESG actions, performance goals, impacts, and leadership. ...
ESG reporting guidelines are institutional rules that can enhance the credibility of firms’ publicly disclosed information related to environment, social, and governance (ESG). Reporting is often voluntary and global ESG reporting guidelines typically rely on process-focused third party verification. However, in developing its reporting guidelines, the Japanese government gave firms the unusual option of pursuing either process- or content-focused verification. This paper draws on the unique Japanese setting to examine whether firms that use ESG reporting guidelines increase their quantity of disclosed sustainability information. Further, it assesses whether, given the option, firms tend to pursue process- or content-focused verification, and which type of verification leads to greater information disclosure. We show that firms that follow ESG guidelines disclose 39 percent more sustainability information compared to firms that publish sustainability reports but do not follow ESG reporting guidelines. Content-focused verification leads to greater information disclosure than process-focused verification in that firms publish 23 percent more text in their sustainability reports. Moreover, given the option, firms prefer to use content- over process-focused verification. However, most global ESG reporting guidelines endorse process-focused verification and this verification is less effective than content-focused verification at encouraging firms’ information disclosure. Our findings raise a timely and relevant question about the movement by global ESG standard developers to promote process- rather than content-focused verification. They also suggest that firms that wish to create sustainability distinction by way of ESG reporting may benefit by advocating for more robust forms of verification.
... Broadly, studies show that regulatory arbitrage can be reduced through formal governmental regulations or voluntary, self-regulatory action by firms. Potoski and Prakash argued across a series of papers (see for example, Potoski & Prakash, 2013, Potoski & Prakash, 2004, Prakash & Potoski, 2007, Prakash & Potoski, 2006 that the diffusion of ISO environmental standards has challenged the pollution haven hypothesis. Private regulatory arrangements have attracted considerable academic and policymaking interest, as a wide range of company-sponsored regulatory arrangements have proliferated (Mayer & Gereffi, 2010). ...
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.
... But there is an additional reason for this conspicuous avoidance of clear-cut advice: The decision-maker is generally absent from the model (Purshouse et al 2014). In real world situations, environmental and economic players are subject to the final decision of an upper instance, generally not included in the model 1 , which ultimately takes the decision (government, administrative agencies, etc.) or, at least, accept agreements reached at lower instances (Adger et al 2003, Potoski & Prakash 2004 2 . The direct consequence of the decision-maker's absence from these models is that its own beliefs, viewpoints and management style cannot be modeled, despite their importance for the conflict outcome. ...
... Incentivized regulation rather than coercive rigidity can lead to more cooperative and voluntary policy enforcement [33][34][35]. Coercive state mandates, especially those that omit vertical consistency, can push local actors to deviate from the principal's policy goals [36,37]. Following this logic, we assert that states with supportive policies that align with local interests and encourage cost-effective energy efficiency strategies can motivate municipalities to commit to programs that rely on vertical consistency. ...
The state and local governments throughout the United States interact within a complex system of multilevel governance to advance sustainability. However, we know little about what this hierarchical system of exchanges means for municipalities as they work to achieve energy efficient government operations. Drawing on a perspective of “contested federalism”, we examine how the transaction costs of state–local government relations affect the efforts of U.S. cities to lead by example and promote sustainability within their internal processes. We apply a Bayesian item response theory approach to assess the effects of state-level fiscal and policy interventions on municipal commitments to energy efficiency programs within their internal operations. Our findings suggest that increased fiscal support for state energy programs enhances municipal commitments to government focused energy efficiency. We also find a positive connection between state energy efficiency standards and municipal efforts to enhance energy efficiency within their internal operations. The alignment of state resources and policy efforts with municipal actions can reduce commitment and agency costs that obstruct policy outcomes. The findings speak to the importance of multilevel governance exchanges in municipal efforts to become leaders in sustainability.
... The weak effectiveness of traditional global intergovernmental environmental regulations together with the globalisation of world markets became drivers of the development of voluntary market-based mechanisms of environmental regulation and responsibility, also known as "Non-state Market-Driven (NSMD) Governance Systems" (Cashore, 2002), "voluntary environmental programs (VEPs)" (Potoski, Prakash, 2004, 2011, "transnational private regulation" (Bartley, 2007) and "Market-based voluntary sustainability standards (VSS)" (Meeting Sustainability Goals, 2016), that are an important core part of "global environmental governance" (Auld et al., 2018). Many of the above-mentioned terms have been used to refer to a range of market-based, institutional instruments used to manage environmental and social impacts of production processes. ...
This article examines the current state and drivers of environmental transparency in the Russian Mining and Metals sector. The study is based upon 2016–19 successive annual rankings calculated transparently, using publicly available information and a third-party-verified ranking system. Ranking results reveal a definite in-crease in the transparency level of one of the most closed industries in Russia. The findings from the study show that a company’s presence in the stock markets has a positive impact on its openness in environmental matters. However, a company’s listing on an international stock exchange does not guarantee high environmental transparency. Some evidence of a correlation between ranking positions and participation of diversified financial-industrial groups in the share capital was also found. Overall, our analyses suggest that ESG (envi-ronmental, social and governance) management in the Russian mining and metals sector is only in the process of development. To overcome this, the environmental transparency ranking of mining and metals companies in Russia creates a new mechanism for raising public awareness and dialogue between the public and one of the most closed industries. The ranking initiated calculation of industry-average quantitative impact indicators that, as the sample grows, will transform into an important benchmark for corporate self-assessment when comparing Russian practices with those of the largest international and foreign mining and metal companies across the globe
... Over the years, the agency has developed other mechanisms of education, awareness, regulatory relief, and voluntary programs that have resulted in not only important benefit to human health and the environment, but also benefited the goal of mutual goodwill within communities that were often at odds. 23,58 The policy mechanisms for increasing the supply of innovation to realize systematic and sustainable solutions could include expansion of supplementary environmental projects; 59 60 Demand-side opportunities include standards and eco-labels, economic incentives, procurement and demonstration, as well as information-based programs. 60,61 This range of an "expanded toolbox" to achieve environmental prosperity is an important step in EPA's evolution. ...
The people of the United States and the world owe the United States Environmental Protection Agency (U.S. EPA) a debt of gratitude for preserving, protecting, and defending human health and the environment for the past half century. As we celebrate the 50th anniversary of the founding of the U.S. EPA, there are two truths about the agency that are difficult to deny: (1) U.S. EPA and its people constitute a renowned agency that has greatly improved both environmental and public health in the United States, and has served as the leading model for nations around the world; and (2) the approaches, tools, structures, and legal frameworks that created the achievements of the U.S. EPA must evolve—and grow—to deal with the issues facing the country and the planet in the next 50 years. Building on the creativity, innovation, and brilliance of individuals and groups working at the U.S. EPA over the course of the last half century, we present 10 recommendations organized in three areas: organization, paradigms, and strategies and tools. Underlying these recommendations are the frameworks of sustainability and systems thinking and guiding these recommendations is the goal of evolving the Environmental Protection Agency to the Environmental Prosperity Agency.
... This raises a further question regarding whether corporate voluntary initiatives, such as the SBTi, displace or discourage direct government action towards achieving national mitigation targets. Literature exploring voluntary environmental initiatives has questioned the extent that firms pre-empt government regulation with less-costly voluntary action, aiming to discourage government action [41]. The limitations of the SBTi highlighted in this paper should prompt further research exploring how the SBTi interacts with government policy making to mitigate corporate GHG emissions. ...
Companies are increasingly seeking to align their actions with the goals of the Paris Agreement. Over 1000 such companies have committed to the science-based targets initiative which seeks to align corporate carbon reduction targets with global decarbonisation trajectories. These ‘science-based targets’ are developed using a common set of resources and target-setting methodologies, then independently assessed and approved by a technical advisory group. Despite the initiative’s rapid rise to public prominence, it has received little attention to date in the academic literature. This paper discusses development of the initiative based upon a quantitative assessment of progress against each component of the science-based targets set by 81 early adopters, using information gathered from company annual reports, corporate social responsibility websites and Carbon Disclosure Project (CDP) responses. The analysis reveals a mixed picture of progress. Though the majority of targets assessed were on track and, in some cases, had already been achieved, just under half of the companies assessed were falling behind on one or more of their targets. Progress varied significantly by target scope, with more limited progress against targets focused on Scope 3 emissions. Company reporting practices were highly variable and often of poor quality. This paper concludes with a range of recommendations to improve the transparency, consistency and comparability of targets within this key agenda-setting initiative.
... Legislation can support a more proactive approach to avoid crisis. The role played by central authorities in monitoring and enforcement may also be essential to build trust in the system (Singleton, 2000;Potoski and Prakash, 2004), especially in cases where there is no history of cooperation between sectors. ...
Marine and coastal activities are closely interrelated, and conflicts among different sectors can undermine management and conservation objectives. Governance systems for fisheries, power generation, irrigation, aquaculture, marine biodiversity conservation, and other coastal and maritime activities are typically organized to manage conflicts within sectors, rather than across them. Based on the discussions around eight case studies presented at a workshop held in Brest in June 2019, this paper explores institutional approaches to move beyond managing conflicts within a sector. We primarily focus on cases where the groups and sectors involved are heterogeneous in terms of: the jurisdiction they fall under; their objectives; and the way they value ecosystem services. The paper first presents a synthesis of frameworks for understanding and managing cross-sectoral governance conflicts, drawing from social and natural sciences. We highlight commonalities but also conceptual differences across disciplines to address these issues. We then propose a novel analytical framework which we used to evaluate the eight case studies. Based on the main lessons learned from case studies, we then discuss the feasibility and key determinants of stakeholder collaboration as well as compensation and incentive schemes. The discussion concludes with future research needs to support policy development and inform integrated institutional regimes that consider the diversity of stakeholder interests and the potential benefits of cross-sectoral coordination.
... Continuous environmental improvements can be created by stakeholders who have high proactiveness, and have relevance to the interests of stakeholders [12]. In developing countries including Indonesia, environmental leadership is not related to environmental regulations, but rather the role of voluntary cooperation between companies and governments is required [11]. ...
The rapid expansion of the artisanal and small-scale gold mining (ASGM) industry in developing countries has resulted in occupational exposure to mercury via the gold extraction process. The objective of this study was to assess the knowledge, interest, position, and power of stakeholders for the implementation of the mercury pollution reduction program. This study involved ten stakeholders as representatives from different backgrounds in the Bombana regency. The results of the analysis show that the health department, environmental agency, and village head are stakeholders who have a high level of knowledge and interest in the program. The assessment based on position and partnership indicates that the health department and local university have high-level power/leadership and become the great potential supporter. Stakeholders with the potential to become opponent are traditional land owners, mining companies, and local activists. The priority strategy recommended from this study is to initiate active communication to stakeholders and create a clear guidance on the implementation of the program. Also, an effective approach is needed to create the mutually beneficial cooperation agreement to avoid provocation and conflict.
... While practically all companies that operate global value chains experience sustainability governance fragmentation as governance takers, only a small (but important) group of companies engages in active standard setting etc., thus being governance makers. What is more, however, the dual role of companies as takers and makers of sustainability governance received only scarce attention in the identified research, as merely five publications explicitly highlight both roles of companies as governance makers and takers (Abbott 2012a;Kalfagianni 2014;Potoski and Prakash 2004;. ...
Companies are increasingly expected to take responsibility for negative effects related to their value creation activities. In this doctoral dissertation, the responsibility a business firm has for the harmful social, ecological and economic effects stemming from its value creation activities is subsumed under the notion of value chain responsibility (VCR). Taking value chain responsibility is already a challenging and continuous endeavor. Yet, to complicate matters further, the external environment in which companies are running their value creation activities and VCR efforts is complex and challenging. In more detail, this dissertation focuses on two phenomena in the firm’s environment which considerably affect its VCR activities: the fragmentation of sustainability governance and the changing VCR expectations of stakeholders. Fragmented sustainability governance describes how the regulatory environment in which firms operate their business and conduct VCR activities is increasingly shaped by multiple and different governance actors (such as NGOs and companies) and governance instruments (such as voluntary sustainability standards and schemes). This fragmentation of the ‘rules of the game’ for businesses can have ambivalent consequences for the company’s capability to take VCR. Changing VCR expectations of stakeholders describe how stakeholders draw attention to detrimental social, ecological and economic issues affiliated with the firm’s value chain operations and thus demand action from the firm to resolve precisely these issues. Both phenomena have in common that they a) require the firm to draw attention to changes in its external environment and b) potentially result in or call for internal changes within the firm, e.g. regarding the way a firm manages its business operations and addresses sustainability challenges. Against this background, the overall objective of this paper-based dissertation is to expand our understanding how companies can take value chain responsibility in environments shaped by complexity, fragmented sustainability governance and changing stakeholder expectations. The four individual papers of this dissertation provide distinct contributions for academia and corporate practice: Paper I provides a mapping of the scholarly literature on the phenomenon of fragmented sustainability governance, sheds light on different facets of this phenomenon and illustrates management practices to deal with fragmented sustainability governance. Paper II elaborates on explanatory factors that help us understand the fragmentation of sustainability governance in the empirical case of the global gold sector. Paper III explores how companies as potential governance makers and takers affect and are affected by fragmented sustainability governance. Paper IV sheds light on changing stakeholder expectations and how they might impact the internal structural and functional organization of the firm to take VCR.
... The previous literature has shown that relational motives play an important role in the decision to adopt ISO 14001. It has been found that, by implementing ISO 14001, firms seek to improve their relationships with stakeholders such as the government, civil society, nongovernmental organizations, multinational corporations, or professional associations (Delmas & Montes-Sancho, 2011;Delmas & Montiel, 2008;Delmas & Toffel, 2004;Kollman & Prakash, 2002;Neumayer & Perkins, 2004;Potoski & Prakash, 2004;Qi et al., 2011). Firms that adopt ISO 14001 for relational motives may perceive the standard as a means to achieve legitimacy rather than a management tool for controlling their environmental impact (Boiral, 2011). ...
This study explores whether the association between the aggregate level of ISO 14001 adoption in a country and the reduction of its CO2 emissions differs across national settings. We analyze potential variations in three country features: intensity of competition, inclination of firms to behave ethically, and the importance that firms attach to relationships with stakeholders. Based on a sample of 53 countries for the period 2007–2017, our results show that the connection between the aggregate level of ISO 14001 adoption and lower levels of CO2 emissions is stronger in countries where firms tend to behave ethically but is weaker in countries where there is intense competition or where firms place high emphasis on relationships with stakeholders. These findings expand our understanding about the macrolevel consequences of ISO 14001 adoption.
... The four factors and the policy-making strategy together largely explain why California is at the environmental forefront nationally. The four factors and the policy strategy also help explain why the California experience runs counter to the conventional wisdom that states in a federal system will see it in their self-interest to avoid stringent environmental regulations lest they disadvantage themselves in the competition for economic development and investment, thereby creating a "race-to-the-bottom" in environmental protection (Potoski & Prakash, 2004). In terms of environmental protection, climate change, and energy policies, California is the most notable exception in the United States to this conventional reasoning (Bernstein, 2009;Karapin, 2016;Mazmanian, Nelson, & Jurewitz, 2013;Vogel, 1995). ...
It is a long-held belief among scholars and practitioners that the State of California is a notable subnational leader in environmental and climate change policy. This article focuses primarily on four essential contextual factors that explain why and how within the United States’ federal system of government California has become such an important leader, performing far in excess of the national government and most other states. These essential factors are preferences, authority, capacity, and effectiveness. The article then moves to the multifaceted implementation strategy California policy makers have employed to realize their environmental goals. Finally, despite the history of strong leadership, the state continues to face a host of significant challenges in realizing its ambitious climate change goals for the coming decades.
In its 20 years of operation, the Carbon Disclosure Project (CDP) has been enormously successful as a private governor of corporate climate risk disclosure. Despite an influx of potentially competitive government‐led disclosure initiatives and interventions, the use of CDP's platform has nonetheless accelerated. To explain this outcome, we argue that public interventions augment the value of private governance for firms when the costs of compliance overlap, benefits of compliance with private rules are undiminished, and normalization helps kickstart positive feedback effects. These conditions of complementarity are made possible by private governors leveraging authority, access, and adaptability as public responses materialize. We illustrate our argument with two cases: the Non‐Financial Reporting Directive in the European Union and the G20's Taskforce for Climate‐Related Financial Disclosures. In elaborating the conditions for complementarity beyond a functional division of governing labor, our study helps clarify how public and private governance co‐evolve in a mutually reinforcing manner.
Environmental management literature has extensively explored why the regulated community, particularly private firms, join voluntary environmental programs (VEPs) in which participants promise to regulate “beyond compliance.” However, the notion of locus has been rarely considered a key determinant of a firm's VEP participation. This study examines how regional pressures encourage firms' VEP participation. Drawing on a dataset of over 1000 industrial facilities related to five government sponsored VEPs in Korea, it investigates how three types of regional pressures—regulators, industrial peers, and community members—affect firms' decision to join VEPs. The major findings are that firms located in the same region as their conglomerate peers, as well as firms located in a place where a large amount of odor pollutant is released, are more likely to participate in VEPs. These results demonstrate the impact of social attributes derived from the geographic location of firms on facilities' VEP engagement.
Water resources are indispensable strategic primary resources for sustainable social development. To solve the water shortage problem, promoting the innovation and diffusion of water-saving technology is the key to improvement. In contrast, governmental regulation is a necessary means to promote the innovation of water-saving technology. This study builds a game model with the involvement of governments and businesses. The objective of the game model is to simulate the performance of imposing a tax or a subsidy to promote water-saving technology. In addition, this study introduces the bionic model Lotka–Volterra to investigate the diffusion process of water-saving technology by simulating the performance of the growth rate and competition coefficient. To explain this process more scientifically and intuitively, this paper uses MATLAB to simulate it. The results show that (i) when the subsidy coefficient is between 0.6 and 0.7, the enthusiasm of the government and enterprises to participate in innovating water-saving technology is high; (ii) when the tax penalty coefficient is higher than 0.8, it can not only motivate governmental control but also promote the innovation of enterprises’ water-saving technology; and (iii) the final equilibrium of the diffusion of water-saving technology is irrelevant to the growth rate in the long term, but it is closely related to the competition coefficient. Based on the above conclusions, this paper puts forward some relevant political suggestions to promote the innovation and diffusion of water-saving technology, such as reasonably increasing the water resources tax and government subsidies.
Given the widely heldenvironmental policyimplementing negative perceptions about government bureaucratsbureaucrats, you might cringe at the outset of a story about a government regulatorregulators at a state environmental agencyenvironmental agencies.
The national environmental quality has maintained a momentum of improvement, while the tension between the performance evaluation system and local officials’ behavior has been a significant concern. Based on panel data from 224 prefecture-level cities in China from 2003 to 2018, this paper examined the impact of the characteristics of officials on environmental pollution governance using a fixed-effect model. The empirical results demonstrate an incentive for officials to reduce pollution emissions and improve environmental protection when their native place coincides with the province where they work. The reverse incentive occurs when their native place coincides with the prefecture-level city where they work. Given the fact that eco-policy is the transmission mechanism, a more reasonable assessment system should pay more attention to officials’ characteristics, such as younger female officials are more likely to implement environmental policies, party school education may not be helpful for pollution governance, education level, professional background and working experience has little correlation with environment. Besides, a significant mediating effect shows that officials with hometown identity are encouraged to do more in environmental protection. An official incentive framework on ‘working effort’ should be employed to enhance the effectiveness of environmental governance.
Iran is a vulnerable country to desertification and soil degradation and to respond to this problem, some laws and regulations such as Act on Soil Protection Act, as well as institutional arrangements for environmental protection and soil preservation, have been initiated. However, the efficiency of these instruments in building an effective soil governance system is disputable. This chapter intends to exercise the legal challenges of Iran in soil protection governance. To do so it firstly considers the state of soil degradation and protection in Iran and then examines the development of soil protection governance in its legal system. This chapter, emphasizing on the contribution of institutional efficiency and legal enforcement in soil governance, concludes that Iran’s legal system faces with a body of legal, institutional and social obstacles in development and improvement of soil protection governance pillars, i.e. integrated instruments and cross-sectoral collaboration in multilevel protection.
Do visible industrial accidents damage firms' reputations and depress their stock market returns, and do these penalties spill over to other firms in the industry? On April 20, 2010, the Deepwater Horizon offshore oil rig in the Gulf of Mexico leased by BP exploded and sank, causing 11 deaths and the largest marine oil spill in US history. We examine the impact of this accident on BP's reputation and stock market performance using data from YouGov's BrandIndex and Capital IQ's financial data for the period 2007-2017. We employ a synthetic control analysis to examine the extent and duration of these penalties. We find that in the aftermath of the Deepwater accident, BP's reputation declined by approximately 50% relative to the synthetic control, and this decline persisted through the end of 2017. Yet, in terms of financial market returns, though the stock price dropped drastically in the first two months, we do not find a statistically significant decline in the stock market returns either in the mid-term (1-2 years) or the long term (2-7 years). In terms of spillover effects, we find no evidence of reputational damage or a decline in stock market returns for other oil and gas firms. These findings suggest that while environmental accidents invite swift and lasting rep-utational penalties, they might not depress the stock market performance in the long run. Moreover, the impact either on reputation or stock market returns does not necessarily spill over to other firms in the same industry.
During the last century, many radical changes and innovations have taken place. In particular, during the last five decades, there have been unprecedented advances in development and industrialisation with dramatic economic and technological changes. Such changes have resulted in positive impacts (increase of economic activities, improvements in agriculture, access to energy, and rise of individual average income) but also negative ones (fast population growth, overconsumption, loss of biodiversity, greenhouse gas emissions, and climate change). A number of milestones have been reached since the first definition of sustainability appeared in 1713 by Hans Carl von Carlowitz to reach the current state of sustainable development (SD), e.g. Our Common Future, the Rio Conference, the Johannesburg Conference, and the Sustainable Development Goals (SDGs). As we trace this journey, a number of sustainability perspectives can be found: (1) central focus, (2) substitutability of natural capital, (3) constituency, (4) trends, and (5) scope. These perspectives show that SD is a broad, complex, controversial, open-ended, and challenging notion that is open to different, and in many cases mutually exclusive, definitions and interpretations. This has created much controversy, especially since such characteristics makes sustainability difficult to implement or be of practical value. In many cases, SD is considered to address only the environmental dimension. In other cases, it focuses on the three “pillars” (economic, environmental, and social). For the purposes of this book, SD encompasses four dimensions (economic, environmental, social, and time), as well as their interrelations. SD and sustainability have been used interchangeably, but they are inherently different. SD is the process by which we achieve sustainability, and sustainability is an ideal dynamic state. The terms are also contextual; at the institutional and governmental levels SD is preferred, whereas in the organisational level, sustainability is more widely used.
Chinese provincial governments choose to become active and leading participants in standardization projects rather than opt out of them. As most extant literatures focus on the effect of standardization without government intervention, a research question then arises whether standardization with government's lead could increase the output of innovation product like patent within a region. By investigating the case of China's standardization at provincial level, this study attempts to explore the association between standardization led by government and regional innovation performance. A series of panel data analyses shows the following. (1) Increasing the supply of local standards by provincial government significantly promotes the innovation performances of the cities in this province. (2) Policy of provincial governments to disclose standard content freely also benefit the cities' innovation performances in these particular provinces. (3) The fiscal investment of city government in science and technology positively moderates the effect of provincial government's lead in local standardization on the city's innovation performance. These results suggest that besides financial sponsorship, government could also directly contribute to innovation in a non-financial way by leading standardization. Our study adds to the discussion about government's possible roles in innovation.
The literature on interlocal sustainability has acknowledged that the resources and authority of state governments influence the collaborative sustainability policy actions of local governments. However, there is an absence of empirical evidence that shows how this influence varies across the environmental protection, economic development, and social equity pillars of sustainability. This study uses data from a 2015 national survey of U.S. cities to shed light on the connection between state-level interventions and regional partnerships across the three primary sustainability policy dimensions. With an understanding gleaned from the concept of contested federalism, this analysis employed Bayesian techniques to examine how state fiscal support for sustainability, along with fiscal and functional decentralization in state systems, affect municipal collaborative policy efforts. The findings suggest a positive link between supportive state-level endeavors and local-level collaborations. However, state influences can have different implications across the three pillars of sustainability.
Is state/private co-regulation of industry better than either state regulation or private self-regulation alone? Clearly yes, answers Mr. Ginosar. Using the overall theoretical framework of the “New Governance,” Ginosar compares the regulation of broadcast advertising in Israel and Britain as both case studies and models, and creates a framework for analysis. Ginosar argues that the shift from hierarchical control to pluralistic control is a more effective and efficient way to serve the public interest.
Environmental harms and crimes that affect non-human nature (including animals) have the potential for greater societal impact than the ‘everyday’ crimes that are the subject of mainstream criminal justice and much criminological study. Yet such crimes are often dealt with outside of the mainstream of criminal law and criminal justice. Instead of falling within the remit of the criminal law, some environmental harms are engaged with specifically through the prism of environmental law and within a civil and administrative framework rather than a distinctly criminal justice one.
To address ongoing deforestation for global food commodities production, companies and governments have adopted a range of forest-focused supply chain policies. In the Brazilian Amazon, these policies take the form of market exclusion mechanisms, i.e., immediately dropping suppliers who have cleared their land after a specific cut-off date. Theory suggests that strict exclusionary policies such as these are likely to result in both negative livelihood effects and reduce effectiveness of the policy if some farmers are not able to comply. It is proposed that a more cooperative model of enforcement that uses flexible and negotiated approaches to compliance management may enable more marginal and disadvantaged farmers to achieve compliance, thereby improving both the effectiveness of supply chain policies and their equity. Through our case study of cattle in the Brazilian Amazon, we examine the degree to which a purportedly cooperative supply chain policy exhibits coercive tendencies at different tiers and the degree to which these tendencies influence effectiveness and equity outcomes of the policy. We show that, surprisingly, even cooperative models of enforcement are prone to exhibit coercive tendencies in multi-tier supply chains, leading to severe equity shortcomings. We provide recommendations and a research agenda to mitigate effectiveness-equity tradeoffs in multi-tier, forest-focused supply chain policies in the aim to improve the design, adoption, and implementation of such policies.
Over the past three decades, the relationship between ecology and public policy has changed because of the increasing role of scientific uncertainty in environmental policy making. While earlier policy questions might have been solved simply by looking at the scientific technicalities of the issues, the increased role of scientific uncertainty in environmental policy making requires that we re-examine the methods used in decision-making. Previously, policymakers use scientific data to support their decision-making disciplinary boundaries are less useful because uncertain environmental policy problems span the natural sciences, engineering, economics, politics, and ethics. The chapter serves as a bridge integrating environmental ecosystem, media, and justice into policy for public health and safety. The chapter attempts to demonstrate the linkage between the environmental policy from a holistic perspective with the interaction of air, water, land, and human on public health and safety.
This study investigates the impact of China’s new Environmental Protection Law on the green innovation behaviour of listed companies in high-polluting industries. The implementation of China’s strict and new Environmental Protection Law provides a quasi-natural experimental setting for examining the causal effect of environmental regulation on corporate green innovation. Based on data of the application for environmental patents of high-polluting firms listed in Shanghai and Shenzhen Stock Exchanges from 2010 to 2017, this study analyses the change in the green innovation behaviour of firms after the implementation of China’s new and stringent Environmental Protection Law using the PSM-DID approach. We find that firms tend to file more applications for environmental patents, including patents for inventions and utility models after the implementation of the new Environmental Protection Law. Further analysis shows that while this effect is stronger for state-owned enterprises, it is weaker for firms headquartered in cities where economies depend more on the secondary industry. Firms in concentrated industries have more incentive to file applications for green invention patents than those in competitive industries. The study has important implications for policy makers on better implementing the environmental protection law in developing countries.
State and local governments engage each other in a broad set of complicated interdependent relationships. Yet, there is limited research on what these multilevel governance relationships mean for community-focused sustainability. This study applies a transaction cost federalism framework to examine the hierarchical influences of state fiscal support and policy actions on municipal commitments to sustainability at the community-level. An analysis of U.S. cities reveals that state investments in energy programs encourage municipal efforts for incentivized energy efficiency initiatives for local taxpayers. Larger percentages of state funding directed to energy programs lead to stronger municipal commitments to incentivized sustainability programs such as individual grants, direct loans and tax incentives. The results suggest that stable and supportive multilevel governance systems are key for reducing political transaction costs inherent within vertical systems driven by coercive authority. These findings produce theoretical and practical implications for understanding community-level sustainability within the face of “contested federalism.”
What are the forces that drive increasing adoption of voluntary agreements in the policy field? This paper attempts to answer the question by analyzing the mechanism behind the adoption by 877 entities of the voluntary energy efficiency and GHG reduction agreement (VA) that was in place between 1999 and 2010 in South Korea. We argue that in South Korea's distinct regulatory context, participation in a public voluntary program (PVP), a VA, is a manifestation of participant entities' varied motivations as well as regulatory and social-normative pressures that arise from the institutionalization of the VA program. In addition, aligning the PVP with other policy programs such as eco-labelling program was found to have provided additional incentives for adoption while public ownership, socioeconomic status and environmental management capacity of targeted entities were significant factors. Thus, this study analyzes changes in the motives of participant entities over the course of the program's maturation and demonstrates how government and industries adopt and manage a PVP for policy learning and strategic regulation in the area of energy efficiency management and GHG reduction.
This study focuses on de facto environmental enforcement and tests whether the practice of environmental enforcement discriminates against foreign-invested firms in a developing country. Using original firm-level enforcement data in the Jiangsu province of China, 2012–2014, this article examines the effect of foreign ownership on the enforcement of three regulatory instruments: economic incentives, command-and-control, and naming-and-shaming. After controlling for firms’ environmental performance, I find that firms with foreign ownership 1) pay fewer pollution fees, 2) are less likely to be punished, and 3) are more likely to obtain the highest score in the environmental credit rating system than domestic firms.
In the United States, environmental federalism largely relies on a system for policy implementation that allows the federal government to delegate primary program authority (or primacy) to state agencies. Although it is an ingrained feature of several major federal environmental policies, such as the Clean Water Act (CWA), there is little evidence to indicate what impact delegating authorities has on programs. In order to examine this, the authors use a synthetic control technique to determine how actual CWA program outcomes in five states compare to expected outcomes if EPA retained primary authority. Findings indicate that while there were no significant differences in Texas and Oklahoma, state primacy led to improved program outcomes in Florida, but worse outcomes in Maine and South Dakota. Conclusions suggest that primacy has asymmetrical impacts that largely depend on state implementation systems, which carries important implications for environmental federalism.
The growing reliance on non-state environmental governance (EG) coupled with the current U.S. political environment portends an increasing salience of governing efforts from non-state actors. Among non-state actors, corporations play a substantial role given their market and societal power, their corresponding social responsibilities, and their organizational and institutional adaptability in developing and performing EG solutions. This article proposes a corporate-led environmental governance (CLEG) model. An important distinction between previous iterations of corporate social responsibility (CSR) and corporate governance and the CLEG model proposed here is the active assertion of corporate environmental leadership as state leadership is subject to retrenchment in the United States.
Cambridge Core - European Government, Politics and Policy - Private Governance and Public Authority - by Stefan Renckens
A new global activism is shaming the world's top companies into enacting codes of conduct and opening their Third World factories for inspection. But before you run a victory lap in your new sweatshop-free sneakers, ask yourself: Do these voluntary arrangements truly help workers and the environment, or do they merely weaken local governments while adding more green to the corporate bottom line?
Using data from electric utilities, this study shows that spending on well designed regulations has a positive productivity impact but that spending on less well-designed regulations has a negative effect. Better-designed regulations are flexible and grant firms latitude on how to meet goals, allow them time to deploy new means to meet goals, and set ambitious goals that stretch them beyond current practices.
A good reputation can be an effective bond for honest behavior in a community of traders if members of the community know how others have behaved in the past - even if any particular pair of traders meets only infrequently. In a large community, it would be impossibly costly for traders to be perfectly informed about each other's behavior, but there exist institutions that can restore the effectiveness of a reputation system using much less extensive information. The system of judges used to enforce commercial law before the rise of the state was such an institution, and it successfully encouraged merchants (1) to behave honestly, (2) to impose sanctions on violators, (3) to become adequately informed about how others had behaved, (4) to provide evidence against violators of the code, and (5) to pay any judgments assessed against them, even though each of these behaviors might be personally costly. Copyright 1990 Blackwell Publishers Ltd..
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.
Plan of the Book. Introduction: Environmental Management.Part 1: BETWEEN REGULATION AND SELF-REGULATION.1. Business Perspectives on Regulation. 2. International Policy and Voluntary Initiatives. 3. Strategies and The Environment.Part 2: FROM THEORY TO PRACTICE.4. Environmental Management Systems and Standards. 5. Environmental Reporting. 6. Environmental Management Accounting. 7. Conclusions: Dilemmas of Environmental Management. Bibliography. Index.
Companies in many countries complain of the unfairness of having to compete against foreign rivals facing more lenient environmental regulations. In this article I examine the competitive conditions for firms in such a position. I outline the development of ct new pollution-reduction paradigm centered on lowering costs by reducing pollution and, using twelve scenarios of international differences in environmental regulatory regimes faced by first movers and imitators, make propositions on which factors are important to the maintainability of these advantages.
The term "Prisoner's Dilemma" comes from the original anecdote used to illustrate this game of strategy. Two prisoners, held incommunicado, are charged with the same crime. They can be convicted only if either confesses. If both prisoners confess, their payoff is minus one. If neither confesses, it is plus one. If only one confesses, he is set free for having turned state's evidence and is given a reward of plus two to boot. The prisoner who holds out is convicted on the strength of the other's testimony and is given a more severe sentence than if he had confessed. His payoff is minus two. It is in the interest of each to confess no matter what the other does, but it is in their collective interest to hold out. There is no satisfactory solution to the paradox of this game. Its simplicity is misleading. What seems rational from your own point of view, turns out to be detrimental in the end. This book is an account of many experiments in which Prisoner's Dilemma was played. Analyzing the results, one can learn how people are motivated to trust or distrust their partners, to keep faith or to betray, to be guided by joint or selfish interest. The method represents an important step toward building a bridge between psychology which is based on hard data and reproducible experiments and psychology which is concerned with internal conflict.
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.
Historically. management theory has ignored the constraints imposed by the biophysical (natural) environment. Building upon resource-based theory, this article attempts to fill this void by proposing a natural-resource-based view of the firm-a theory of competitive advantage based upon the firm's relationship to the natural environment. It is composed of three interconnected strategies: pollution prevention, product stewardship, and sustainable development. Propositions are advanced for each of these strategies regarding key resource requirements and their contributions to sustained competitive advantage.
The study of urban politics has undergone considerable change over the last ten to fifteen years. During the 1950s and 1960s the ‘community power’ approach became well-established in American political science as the dominant form of analysis of local politics, although it was less marked in Britain. In contrast, and in part as reaction, to the ecological determinism and naturalistic explanation of the Chicago school in urban sociology that preceded it, power and decision making were seen as key features in explaining urban processes. Intentionality and human action were afforded explanatory dominance. In turn, however, this approach came under sustained critique as part of the ‘anti-behaviouralist’ or structuralist resurgence in Western social science in the 1970s which attributed causal primacy to structural determination and system contradictions, not actors or voluntarism. Yet structural approaches face methodological problems of functionalism and circularity, and in constructing tests of empirical adequacy and falsifiability. Some of the more interesting, recently-published work in urban politics seeks to maintain a non-behaviouralist, more structuralist interpretation of local policy outcomes within empirically-grounded analyses that allow space for politics and power. Dunleavy, Friedland and Saunders provided three of the best examples of such an approach, and have each sought to understand either a particular policy, or a set of policies in a particular locality, through frameworks which in varying degrees incorporate structuralist assumptions. They seek to apply objective cost-benefit analyses of public policies as empirically refutable hypotheses and accept the necessity of objective criteria for assessing whether or not interests have been met in any given situation. This article examines the extent to which these selected ‘non-behaviouralist’ interpretations of urban politics have successfully been applied to empirical contexts. A central element in this examination is a consideration of the way in which business is seen as a major influence in local politics.
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.
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).
This article reports data that contrast with an extended tradition of viewing litigation as incompatible with ongoing relationships. Within the regulatory process at the U. S. Environmental Protection Agency (EPA), nongovernmental actors having the most sustained relationships with EPA are the ones most likely to engage in litigation against the agency. Litigation within regulatory relationships is not explained by existing theory, which treats litigation largely as a function of relationships. A disturbance theory of disputing, which focuses on how litigation interacts with existing relationships, provides a more robust account of litigation generally and of its compatibility with ongoing regulatory relationships.
Environmental policy in the United States has always been characterized by high levels of political conflict. At the same time, however, policy makers have shown a capacity to learn from their own and others' experience. This article examines U.S. environmental policy since 1970 as a learning process and, more specifically, as an effort to develop three kinds of capacities for policy learning. The first decade and a half may be seen in terms of technical learning, characterized by a high degree of technical and legal proficiency, but also narrow problem definitions, institutional fragmentation, and adversarial relations among actors. In the 1980s, growing recognition of deficiencies in technical learning led to a search for new goals, strategies, and policy instruments, in what may be termed conceptual learning . By the early 1990s, policy makers also recognized a need for a new set of capacities at social learning, reflecting trends in European environmental policy, international interest in the concept of sustainability, and dissatisfaction with the U.S. experience. Social learning stresses communication and interaction among actors. Most industrial nations, including the United States, are working to develop and integrate capacities for all three kinds of learning. Efforts to integrate capacities for conceptual and social learning in the United States have had mixed success, however, because the institutional and legal framework for environmental policy still is founded on technical learning.
Compared to other economically advanced democracies, the United States is uniquely prone to adversarial, legalistic modes of policy formulation and implementation, shaped by the prospect of judicial review. While adversarial legalism facilitates the expression of justice-claims and challenges to official dogma, its costs are often neglected or minimized. A survey of existing research, together with a case study of environmental regulation in the Port of Oakland, indicates the extent to which adversarial legalism causes (or threatens) enormous dispute-resolving costs and procedural delays, which in turn distort policy outcomes. Adversarial legalism, moreover, has increased in recent decades, as Americans have attempted to implement the ambitious, socially transformative policies of activist government through political structures, forms of legislation, and legal procedures that reflect deep suspicion of governmental authority.
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.
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.