Voluntary Environmental Programs (VEPs) are very popular these days. Organizations that join these programs agree to voluntarily reduce their environmental impact beyond what is required by law. Examples of VEPs include the U.N.’s “IS0 14001,” the E.P.A.’s “33/50 Program,” the U.S. Chemical Manufacturers Association “Responsible Care,” the National Ski Areas Association “Sustainable Slopes Program,” and the Department of Energy’s “Climate Challenge Program.” But how effective are VEPs? Do they demonstrate that industry can reduce pollution without more stringent government regulation? These questions are posed by a recently released study by Nicole Darnall and Stephen Sides entitled, “Assessing the Performance of Voluntary Environmental Programs: Does Certification Matter?”
VEPs generally fall into two categories: those that are self-monitored and those that require third-party certification of environmental outcomes. Darnall and Sides set out to investigate whether VEPs improve environmental performance (against non-VEP sector members) and whether VEPs that require third-party oversight improve performance (against VEPs that require only self-monitoring). Using data from companies that participate in the above-mentioned programs, Darnall and Sides found that non-participants had better environmental performance and that third-party verification only moderately improved performance. How do we understand this surprising conclusion? What does this mean for managers who participate in VEPs or are considering participating in VEPs?
Darnall and Sides believe that low environmental performance of VEP-participants is due to the following factors:
1-Poor VEP design: Most programs do not require third-party verification and when they do (as is the case with ISO 14001), companies are not required to publicly disclose third-party verification results.
2-No strong sanctioning mechanism. Companies are rarely excluded from membership if they do not meet commitments.
3-Most of the “low-hanging fruit” (or the easiest methods for reducing pollution) had already been picked by participating companies before they joined the VEP.
Does this mean that VEPs are bunk? No. The fact that non-participants had increased their environmental performance means that VEPs had effectively communicated pollution prevention strategies within the industry, not just with participants. In addition, VEPs act as a powerful communication tool with stakeholders, they increase shared learning and capacity development within industry, and they act as innovators for policy-making. Perhaps more importantly, they facilitate a change in norms and management practices within the firm.
It is not enough, however, to simply hire a “Green CEO,” establish an Environmental Management System (EMS), or join a VEP. Companies must demonstrate a continued commitment to improve environmental performance and be willing to verify and publicly disclose the results of their efforts. VEP design should be strengthened to bolster the efforts of companies that want to adopt sustainable practices.
With a U.S. Administration that is weak on corporate environmental regulation, VEPs stand out as the primary instrument for climate governance in this country. Studies like this demonstrate that effective VEP formulation is critical.
Shannon Arvizu is currently completing a Ph.D. dissertation at Columbia University entitled, “The Corporate Response to Climate Change: The Institutionalization of Carbon Measuring, Reducing, and Offsetting.”