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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.


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.

 

 
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