Magali A. Delmas

The diffusion of environmental management standards in Europe and in the United States: An institutional perspective

ISO 14001, released in 1996, provides the basic framework for the establishment of an Environmental Management System (EMS) that can be audited and certified. ISO is not only an acronym for the International Organization for Standardization, but is also a term that refers to its Greek meaning: ‘equal.’ The main rationale for the creation of ISO 14001 was that its worldwide acceptance should facilitate international trade by harmonizing otherwise diffuse environmental management standards and by providing an internationally accepted blueprint for sustainable development, pollution prevention, and compliance assurance.However, the implementation of ISO 14001 varies significantly across the globe. A significant number of firms have adopted ISO 14001 in Western Europe and Asia. In December 1999, 52% of the 14,106 ISO 14001 certified facilities were located in Western Europe and 36% in Asia. On the contrary, very few American companies have adopted this voluntary standard. U.S. certified facilities accounted for only 4.5% of the total of ISO 14001 certified facilities in the world in December 1999.The U.S. institutional environment seems acting as a deterrent to ISO 14000 adoption as U.S. companies are fearful of the certification process which lays their performance open to public scrutiny. The opposite is true in Europe, where governments have encouraged the adoption of environmental management standards by setting up a trusted certification system and providing technical assistance to potential adopters.This paper offers a conceptual framework to analyze this variation in adoption rates. It is proposed that the regulatory, normative and cognitive aspects of a countrys institutional environment greatly impact the costs and potential benefits of ISO 14001 adoption and therefore explain the differences in adoption across countries. The analysis is supported by data collected from a phone questionnaire to 140 firms in Europe and a questionnaire mailed to 152 firms in the U.S.

The Drivers of Greenwashing

More and more firms are engaging in greenwashing, misleading consumers about their environmental performance or the environmental benefits of a product or service. The skyrocketing incidence of greenwashing can have profound negative effects on consumer and investor confidence in green products. Mitigating greenwashing is particularly challenging in a context of limited and uncertain regulation. This article examines the external (both institutional and market), organizational and individual drivers of greenwashing and offers recommendations for managers, policymakers, and NGOs to decrease its prevalence.

A Framework for Analyzing Environmental Voluntary Agreements

In the 1990s, Environmental Voluntary Agreements (VAs) involving regulatory agencies and industry have emerged as the promise of the future in environmental policy circles. The collaborative mechanisms of VAs can be conducive to the development of innovative solutions, which regulators or firms would have been unlikely to develop alone. From a business perspective, participation in VAs can reduce the burden of regulation, facilitate the communication of environmental improvements, and allow firms to be ahead of competition for environmental products. However, the benefits of participating in VAs can be outweighed by high transaction and administration costs if VAs are not properly designed. This article discusses when participation in a VA offers strategic opportunities and when joining a VA might turn into a costly enterprise.

Eco-Labeling Strategies and Price-Premium: The Wine Industry Puzzle

Although there is increasing use of eco-labeling, conditions under which eco-labels can command price premiums are not fully understood. In this article, we demonstrate that the certification of environmental practices by a third party should be analyzed as a strategy distinct from—although related to—the disclosure of the eco-certification through a label posted on the product. By assessing eco-labeling and eco-certification strategies separately, researchers can identify benefits associated with the certification process, such as improved reputation in the industry or increased product quality, independently from those associated with the actual label. In the context of the wine industry, we show that eco-certification leads to a price premium while the use of the eco-label does not.

Under the Tip of the Iceberg: Absorptive Capacity, Environmental Strategy, and Competitive Advantage

Although existing research evaluates how the adoption of proactive environmental strategies affects corporate performance, there is little understanding of the organizational mechanisms that link such strategies to competitive advantage. It is, therefore, unclear how environmental strategies relate to other management strategies that could lead to a competitive advantage. In this article, we analyze the organizational capabilities that underlie a firm’s ability to generate competitive advantage from the adoption of proactive environmental strategies. We develop and test a model where absorptive capacity facilitates the development of proactive environmental strategies that result in competitive advantage. Results from a survey of 157 German chemical firms strongly support the model.

Nonprice incentives and energy conservation

Significance We investigate the effectiveness of nonprice incentives to motivate conservation behavior. We test whether tailored information about environmental and health damages produces behavior change in the residential electricity sector. In a randomized controlled trial with real-time appliance-level energy metering over 8 mo, we find that environment and health-based information strategies outperform monetary savings information to drive energy conservation. Environment and health-based messages, which communicate the environmental and public health externalities of electricity production—such as pounds of pollutants, childhood asthma, and cancer—motivated 8% energy savings versus control. This strategy was particularly effective on families with children, who achieved 19% energy savings. However, we do not study the persistence of these behavioral changes after the conclusion of the study. In the electricity sector, energy conservation through technological and behavioral change is estimated to have a savings potential of 123 million metric tons of carbon per year, which represents 20% of US household direct emissions in the United States. In this article, we investigate the effectiveness of nonprice information strategies to motivate conservation behavior. We introduce environment and health-based messaging as a behavioral strategy to reduce energy use in the home and promote energy conservation. In a randomized controlled trial with real-time appliance-level energy metering, we find that environment and health-based information strategies, which communicate the environmental and public health externalities of electricity production, such as pounds of pollutants, childhood asthma, and cancer, outperform monetary savings information to drive behavioral change in the home. Environment and health-based information treatments motivated 8% energy savings versus control and were particularly effective on families with children, who achieved up to 19% energy savings. Our results are based on a panel of 3.4 million hourly appliance-level kilowatt–hour observations for 118 residences over 8 mo. We discuss the relative impacts of both cost-savings information and environmental health messaging strategies with residential consumers.

Information Disclosure Policies: Evidence from the Electricity Industry

A “third wave” of environmental policy has recently emerged that emphasizes information provision as an integral part of the risk mitigation strategy. While theory suggests information programs may correct market failures and improve welfare, the empirical effectiveness of these programs remains largely undetermined. We show that mandatory information disclosure programs in the electricity industry achieve stated policy goals. We that the average proportion of fossil fuels decreases and the average proportion of clean increases in response to disclosure programs. However, the programs also produce unintended consequences. Customer composition and pre-existing fuel mix significantly affect program response, suggesting that effective information disclosure policies may not be efficient.

Measuring Eco-Inefficiency: A New Frontier Approach

Increasing social concerns over the environmental externalities associated with business activities are pushing firms to identify activities that create economic value with less environmental impact and to become more eco-efficient. Over the past two decades, researchers have increasingly used frontier efficiency models to evaluate productive efficiency in the presence of undesirable outputs, such as greenhouse gas emissions. In this paper, we identify critical flaws of existing frontier models and show that under these models eco-inefficient firms can be identified as eco-efficient. We develop a new eco-inefficiency frontier model that rectifies these problems. Our model allows us to calculate, for each firm, an eco-inefficiency score and improvements in outputs necessary to attain eco-efficiency. We demonstrate, through a Monte-Carlo experiment that our eco-inefficiency model provides a more reliable measurement of corporate eco-inefficiency than the existing frontier models. In the simulation experiment we develop a production function of multiple desirable and undesirable outputs that extends the classical Cob-Douglas function of a single output. The multi-output production function allows for greater flexibility in the simulation analysis of frontier models.

Regulatory Commitment to Negotiated Agreements: Evidence from the United States, Germany, The Netherlands, and France

Negotiated Agreements (NAs) are arrangements between firms and regulators in which firms voluntarily agree to reduce their pollution. This article analyzes the institutional features that facilitate or hamper the implementation of NAs. We illustrate the analysis with case studies on the implementation of NAs in the United States, Germany, the Netherlands, and France. We find that NAs are implemented when regulators are able to commit credibly to the objectives of NAs. Institutional environments marked by fragmentation of power and open access in policymaking reduce regulatory credibility and thus hamper the implementation of NAs.

FIRMS' CHOICE OF REGULATORY INSTRUMENTS TO REDUCE POLLUTION: A TRANSACTION COST APPROACH

This paper extends transaction costs economics to analyze relationships between firms and regulatory agencies. It compares the economic efficiency of firm-agency governance structures for dealing with pollution reduction. The transaction costs of three ideal type governance structures are analyzed: command and control regulation, market based mechanisms, and negotiated agreements. We propose that the choice of governance structure will depend on the strategies firms are pursuing given their transaction attributes and market opportunities.