Signaling Environmental Stewardship in the Shadow of Weak Governance: The Global Diffusion of ISO 14001

Abstract

This article examines how the quality of domestic regulatory institutions shapes the role of global economic networks in the cross‐national diffusion of private or voluntary programs embodying environmental norms and practices. We focus on ISO (International Organization for Standardization) 14001, the most widely adopted voluntary environmental program in the world, which encourages participating firms to adopt environmental stewardship policies beyond the requirement of extant laws. We hypothesize that firms are motivated to signal environmental stewardship via ISO 14001 certification to foreign customers and investors that have embraced this voluntary program, but only when these firms operate in countries with poor regulatory governance. Using a panel of 129 countries from 1997 to 2009, we find that bilateral export and bilateral investment pressures motivate firms to join ISO 14001 only when firms are located in countries with poor regulatory governance, as reflected in corruption levels. Thus, our article highlights how voluntary programs or private law operates in the shadow of public regulation, because the quality of public regulation shapes firms' incentives to join such programs.

Exploring the dissemination of environmental certifications in high and low polluting industries

“…Contrary to the traditional command and control approach (e.g. EU environmental Directives and Regulations, national environmental laws encompassing orders, permits, licensing), the voluntary adoption of standardized EMSs is often considered as a self-regulatory mechanism (Berliner and Prakash, 2013;Potoski and Prakash, 2005;Prakash and Potoski, 2006;Hillary and Thorsen, 1999;Christmann andTaylor, 2001, 2006). This self-regulatory mechanism is generally associated with the certification process through external auditing, which essentially concerns the two main certifiable EMSs standards.…”

“Bluewashing” the Firm? Voluntary Regulations, Program Design, and Member Compliance with the United Nations Global Compact

“…Firms elect to join these programs to gain benefits including reputation and goodwill (Prakash & Potoski, ). Firms may also face pressures from their supply chains, customers, and even regulators to join these programs (Berliner & Prakash, , ; Cashore, Auld, & Newsom, ; Darnall, Jolley, & Handfield, ; Dashwood, ). While firms may join voluntary programs for such benefits, it is not clear whether they will invest the resources, or make the behavioral changes necessary to fulfill their program obligations.…”

Analyzing the Effect of Corporate Environmental Performance on Corporate Financial Performance in Developed and Developing Countries

“…Firms failing to carry out these environmental requirements are penalized, fined or may even lose their operating licenses [60] in developed countries [13], while the lack of resources to enforce environmental government regulations and monitor business activities in many developing and emerging countries [61,62] could mean that firms with low enforcement of environmental regulation [54], which produce environmental damage, have never been fined [63].…”