Abstract
Multinational enterprises operating global value chains are being increasingly pressured to source from suppliers that adopt green private standards. Likewise, public policymakers are also pressured to reduce national pollution levels to contribute to sustainable development initiatives. In this context, while there is extensive debate on how domestic, country-specific environmental regulations interact with private standards (adopted by firms) in reducing national pollution levels, less is known about the role of international trade policies, which have recently embraced an array of sustainability issues. Our paper seeks to extend our understanding of the extent to which ISO environmental certifications affect a country’s level of emissions of greenhouse gases and air pollutants, and whether the European Union’s environmental protection (EP) standards – as mediated through trade agreements – condition this response. Prior research provides mixed evidence on the impact of the adoption of ISO-14001 on pollution reduction. Based on prior literature and using institutional theory and environmental stewardship perspectives, we expect that membership of trade agreements with EP provisions would complement the effect of ISO-14001 uptakes in reducing national pollution levels. Our arguments and results emphasize the complexity between private and public regulations on pollution reduction.
Highlights
Environmental concerns are increasingly driving both multinational enterprises (MNEs) and regulators to seek less polluting and more sustainable methods of production (Christmann, 2004, Delmas & Toffel, 2004, Hartmann & Uhlenbruck, 2015, Ramus, 2002)
Most prior studies on the impact of International Standards Organization (ISO)-14001 have focused on air pollutants, rather than on greenhouse gas (GHG), such as carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O), which collectively account for approximately 97% of GHGs
For carbon dioxide (CO2) we find that the effect of ISO-14001 on pollution reduction is greater for countries that become part of European Union (EU) trade agreements with environmental provisions, implying a positive interaction effect between the levels of ISO-14001 adoption and the membership of trade agreement with the EU with environmental protection provisions
Summary
Environmental concerns are increasingly driving both multinational enterprises (MNEs) and regulators to seek less polluting and more sustainable methods of production (Christmann, 2004, Delmas & Toffel, 2004, Hartmann & Uhlenbruck, 2015, Ramus, 2002). There remain cross-country differences in terms of environmental regulations and their enforcement, largely due to scientific uncertainties about the consequences of pollution and disagreements about the costs vs the benefits of environmental protection schemes In this context, the adoption of private regulatory standards has been popular, arising both from corporate self-interest (a desire to exploit market-based advantages) and institutional pressures (Kolk, 2016, Prakash & Potoski, 2006). A second important point is that prior research on the joint effect of private and public regulations on pollution reduction has focused primarily on the stringency of ‘domestic’ (or national) regulations (Heyes & Maxwell, 2004, Prakash & Potoski, 2014) and surprisingly little on ‘international’ trade policies, despite private standards (such as the ISO-14001) being the most popular among exporting firms in GVCs (Christmann, 2004, Christmann & Taylor, 2002). The EU has been successful in exporting its regulatory model (Falkner, 2007, Kelemen, 2010): the EU has both a large internal market and a large number of MNEs that lead global value chains and benefits from bargaining power to diffuse both private and public regulatory standards globally (Lavenex & Schimmelfennig, 2009)
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