Dark side_2015

Certification MEANS:

• Voluntary programs

• Third-party monitoring

• Public disclosure is optional

Introduction (1/2)

Since 1996 more than 250,000 organizations worldwide have certified their EMS to ISO 14001

Research focused on its benefits:

Delmas (2001; 2002)

Darnall (2006); Darnall & Edwards (2006)

Potosky and Prakash (2005)

Russo (2009)

…

Introduction (2/2)

What about its disadvantages???

Drawing on RBV, TI and TCT, we discusses the negative side of ISO 14001

What about profitability and

symbolic adoption of ISO 14001???

1) To review theoretically main criticisms of ISO 14001

2) To analyze the links between thecriticisms of ISO 14001 and…

Environmental performance

Business performance

Objectives

Resource-based View (1/2)

Competitive advantage as an outcome of the development of valuable organizational capabilities

(Barney, 1991; Wernerfelt, 1984)

ISO 14001 represents an intangible and valuableresource due to the development of:

commercial skills

organizational skills

stakeholders-related skills

But… what about environmental skills??

IMPROVEMENTS IN ENVIRONMENTAL

PERFORMANCE

CRITICISM 1

Since the standard is processes-focused(instead of performance-focused), ISO 14001

adoption could be not usually associatedwith the development of abilities that allow

organizations to achieve significantreductions in environmental impacts

Resource-based View (2/2)

The influence of institutions exerts onorganizations and persuade them to behaveaccording to several formal and informal rules

(DiMaggio y Powell, 1983; Meyer and Rowan, 1977).

The ISO 14001 adoption is mainly motivated bynormative pressures signaling, legitimation.

But… what about symbolic adoption???

Institutional Theory (1/2)

CRITICISM 2

The exclusive purpose of legitimate businesspractices could generate a superficial or

symbolic adoption

Institutional Theory (2/2)

Signaling: activities that attempt to demonstrate that the firm owns specific features that are otherwise hidden to external parties (Spence, 1973)

Asymmetric information: when the information about a transaction between a supplier and a buyer is not provided equally (Akerlof, 1970)

ISO 14001 is considered as a way to solve the problems of asymmetric information by means of signaling.

But … ISO 14001 as a reliable sign??

Transaction Cost Theory (1/2)

CRITICISM 3

Symbolic adoption affects negatively thelegitimacy of ISO 14001 as a signal,

especially when this symbolic adoption isnot accompanied by improvements on

environmental performance

Transaction Cost Theory (2/2)

Our Classification

Ferrón, Darnall and Aragón

(Forthcoming)

Resource-based View

Low

comprehensive

High

comprehensive

Institutional

Theory

&

Transaction

Cost Theory

High

Visibility

Wannabes

(symbolic

approach)

Movers and

Shakers

Low

VisibilityPassivists

Backroom

Operators

Hypothesis 1

• Symbolic adoption is strongly associated withwannabes

• Backroom operators are mainly focused on legal environmental requirements

• Movers and shakers are interested not only in appearing environmentally responsible, but also in effectively being

Compared to passivists, movers and shakers

are more likely to be associated with

reductions on environmental impacts

than wannabes or backroom operators

Hypothesis 1

Hypothesis 2

• Due to their less comprehensive adoption, wannabes could not benefit from the internalimprovements of ISO 14001

• As backroom operators are not certified firms, they could not benefit from the reputationaladvantages of ISO 14001

• Movers and shakers have developed both theefficiency-related abilities as well the reputationalskills

Compared to passivists, movers and shakers are

more likely to be associated with positive

business performance than wannabes or

backroom operators.

Hypothesis 2

Data: OECD Survey (response rate = 24.7%)

n = 652 facilities

Dependent variable H1: Reductions on negativeenvironmental impacts (i.e., environmental performance)

Dependent variable H2: Business performance

Explanatory variables: Wannabes, Backroom Operators, Movers and Shakers (Passivists is the reference category)

Control variables: size, country, sector

Instrumental variables: STAKEHOLDERS’ INFLUENCES + other control variables.

Method (1/3)

Method (2/3)

Empirics: Multivariate probit estimation

H1 Eq. 1: (prob reduction on environmental performance

= 1) = ƒ (Wannabes, BRO, M&Sh, control variables, εi1 )

Eq. 2: (prob Wannabes = 1) = ƒ (Stakeholders’ influences,

control variables, εi2 )

Eq. 3: (prob Backroom = 1) = ƒ (Stakeholders’ influences,

control variables, εi3 )

Eq. 4: (prob Movers = 1) = ƒ (Stakeholders’ influences,

control variables, εi4 )

Method (3/3)

Empirics: Multivariate probit estimation

H2 Eq. 1: (prob positive business performance = 1) = ƒ

(Wannabes, BRO, M&Sh, control variables, εi1 )

Eq. 2: (prob Wannabes = 1) = ƒ (Stakeholders’ influences,

control variables, εi2 )

Eq. 3: (prob Backroom = 1) = ƒ (Stakeholders’ influences,

control variables, εi3 )

Eq. 4: (prob Movers = 1) = ƒ (Stakeholders’ influences,

control variables, εi4 )

Results

Use of Natural

Resources

Wastewater

effluentsAir pollution

Business

Performance

Wannabes .937 .418 .249 .329

Backroom operators .364 .338 -.162 -.096

Movers & Shakers 1.618*** 1.334*** 1.243*** .583**

Use of Natural Resources Wastewater effluents Air pollution Business Performance

Wannabes BRO M&S Wannabes BRO M&S Wannabes BRO M&S Wannabes BRO M&S

Internal

Stakeholders .247* .026 .369*** .256** .041 .353*** .245** .035 .318*** .242* .030 .330***

Value chain

Stakeholders -.045 -.007 .129* -.072 .019 .110 -.041 .025 .041 -.044 .008 .149*

External

Stakeholders .069 .199* -.074 .082 .188** -.055 .057 .181** -.032 .080 .235** -.132*

Regulatory

Stakeholders -.026 .006 .011 -.021 .001 .017 -.024 .003 .015 -.020 .007 .006

Hypothesis 1 issupported

Hypothesis 2 issupported

For Academia:

Novelty!! Symbolic adoption is not related topositive business performance

For Managers:

What about updated version of ISO 14001??

Under symbolic adoption, trust on certifiers??

Contributions

Regulators are encouraging firms to certify their environmental practices

BUT …

… our findings show that certification may not be enough to improve environmental performance

Implications for Public Policy

Even, in some instances, regulators are reducing environmental fines if firms adopt these VEPs

The weaknesses of external audits

Other criticisms of ISO 14001 which are notdirectly related to firms, such as voluntaryprograms under corruption environments

????

Future Research

Please!! Comments and Suggestions

are welcome

Vera Ferrón Vílchez

University of Granada (Spain)

http://veraferron.wordpress.com