Why Do Firms Voluntarily Adopt Environmental Management Systems? The Case of the Czech Republic

Abstract

We examine why firms voluntarily implement environmental management systems. Employing the ISO 14001 management system and using firm-level data for the Czech Republic, we find that environmental management systems are typically adopted by large firms and by those firms that initially pollute the environment more. These systems are more commonly implemented by firms operating in service industries. On the other hand, we find little support that the adoption of environmental management systems is influenced by the firm’s financial performance and labor costs.

Exploration of the Factors that Influence the Implementation of Environmental Management Systems—The Case of Slovakia

“…These companies try to implement projects, which can be directly valued by revenues. However, the results are also inconsistent, because Horváthová (2020) states that there is no significant impact of indebtedness on the EMS implementation when examining the total debt ratio.…”

“…EMS standards provide guidelines for formulating environmental policy and targets, implementing and monitoring their environmental goals (Horváthová 2020;Morrow and Rondinelli 2002;Verchot et al 2007). According to Ozusaglam et al (2018), voluntary EMSs improve existing products or product lines, reduce input costs, solve efficiency in the management processes and serve as tools to reduce the risk of unexpected incidents concerning a company's physical climate risk.…”

“…Another reason for the size impact on the participation of the company on environmental issues is based on legitimacy theory which explains that larger firms are more "visible" to the public and so are more environmentally active in order to enhance their reputation (Kouloukoui et al 2019a). The company size was in the literature measured using various proxies: assets (Horváthová 2020;Kouloukoui et al 2019a), number of employees (e.g., Nakamura et al 2001;Nishitani 2009;Ozusaglam et al 2018), or even sales.…”

“…Industry classification: several studies find industry effects to be an important determinant of EMS implementation (e.g., Hibiki et al 2003;Horváthová 2020). Industry classification could be based on several aspects, e.g., on level of pollution (Kouloukoui et al 2019a;Muttanachai and Stanton 2012), manufacturing vs. services (Ozusaglam et al 2018), regulated vs. non-regulated (Weinhofer and Busch 2013).…”

“…Industry classification could be based on several aspects, e.g., on level of pollution (Kouloukoui et al 2019a;Muttanachai and Stanton 2012), manufacturing vs. services (Ozusaglam et al 2018), regulated vs. non-regulated (Weinhofer and Busch 2013). Some authors use simple diversification of industries according to NACE Statistical classification of economic activities in the European Community (Horváthová 2020), or another national industry classification codes (Singh et al 2014) for further analysis based on more detailed industry characteristics. As stated by Nishitani (2009), companies with a higher environmental burden generally tend to adopt voluntary EMS.…”