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January 16, 2007
The Problem with Voluntary Corporate Initiatives Is -- Well, They Are Voluntary
by Bill Baue
A Harvard study identifies the voluntary nature of such corporate social and environmental
initiatives as their pitfall, limiting the ability to gauge their effectiveness.
SocialFunds.com --
Is 2007 the End for Voluntary Standards? So asks the provocatively titled essay by Arvind
Ganesan of Human Rights Watch (HRW) that was
published in December 2006 by Business for Social Responsibility (BSR), a membership organization of companies committed to corporate
social responsibility (CSR). It says this year represents the acid test for whether
nongovernmental organizations (NGOs) and other activists continue to trust voluntary corporate
initiatives that address social and environmental problems, or whether they lose faith and press
for legislation and regulation.
"The Human Rights Watch argument . . . suggests
that the group underappreciates (or finds it advantageous to downplay) the degree to which these
measures are changing business," counters Bart Mongoven of Stratfor, a strategic intelligence firm.
Are voluntary
corporate initiatives changing business--and, perhaps more importantly, changing society and the
environment--for the better? Cary Coglianese and Jennifer Nash of
Harvard's Kennedy School of Government
take up these questions in an empirical study of one such voluntary
corporate initiative: the Environmental Protection Agency (EPA) Performance Track program. While the study looks
specifically at Performance Track, it also notes that the investigation "calls for an inquiry into
voluntary programs themselves."
To participate in Performance Track, companies must
complete a 29-page application for each facility they wish to include, commit to specific
environmental improvements, and report on performance annually. Performance Track seeks to
strengthen environmental performance, both encouraging companies already doing well to continue
improvement and spurring average companies to become top performers. However, Prof. Coglianese and
Ms. Nash note the irony that voluntary initiatives almost by definition cannot accurately identify
top performers because they do not gather information on non-participants and so have no means of
comparison.
"[T]he very nature of a voluntary program means that its participants are
volunteers," the researchers state in perhaps the premiere example of academic lucidity.
"[D]espite some agency claims that Performance Track is designed to recognize 'top' environmental
facilities, the application and admissions process do not directly address whether members'
performance is better than other comparable facilities that have not applied to the program--nor
even whether their progress is in other ways significant."
One of the distinguishing
features of this study, entitled Beyond Compliance: Business Decision Making and the US EPA's
Performance Track Program, is its effort to include non-participating companies in the research
sample. Unfortunately, this results in finding little distinction between the environmental
performance of participants and non-participants, but also that participants' performance may be no
better than it would be in the absence of the program.
"We could find no evidence that
facilities are improving their environmental performance in order to qualify for membership," the
researchers write. "Managers we interviewed did not speak of Performance Track as a vehicle for
improving environmental performance or enabling innovation; indeed, they largely saw it as 'easy'
to join because they were already doing many of the things that the program required."
In
fact, the researchers found that Performance Track incentives to raise the bar even higher for
strong performers actually function as disincentives, discouraging Performance Track participation
(though perhaps not deterring environmental improvement.)
"We found that, as the level of
reward increases, so does the stringency of entry requirements such that adding rewards actually
reduces overall participation," Prof. Coglianese and Ms. Nash state. "Fewer firms want to
assume the increased costs associated with gaining entry to programs with higher stringency, even
when they promise greater rewards."
Interestingly, extroversion played a more significant
role than environmental performance in Performance Track participation.
"Just as
individuals differ in how much they seek to display and call attention to themselves for public
recognition, companies have analogous propensities," the study states. "Facilities that do not
participate may shun, rather than seek, recognition from outsiders, preferring to keep a low
profile and achieve environmental results without fanfare."
"All things being equal,
facilities with more employees and greater support from top-level management reported greater
receptivity toward voluntary programs like Performance Track," it continues. "So too did
facilities that expected new regulations to affect them in the future and facilities that more
often sought out the opinions of outside community and environmental advocacy groups."
While the authors highlight the last point, it perhaps makes more sense to shine a spotlight on
the next-to-last point--that the premonition of regulation spurs participation. Looking more
broadly, voluntary initiatives in general are often held up as preferable to regulation for
promoting social and environmental improvement. However, the study finds that voluntary
initiatives do not necessarily promote social and environmental progress, and in fact, it is the
threat of regulation that pushes participation.
©
SRI World Group, Inc. All Rights Reserved.
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