Green Clubs and Voluntary Governance: ISO 14001 and Firms' Regulatory Compliance. Revised version

Abstract

"Voluntary programs have become widespread tools for governments and non-governmental actors looking to shape industry behavior. Voluntary programs can be conceptualized as club goods that provide non-rival but potentially excludable benefits to members. For firms, the value of joining an effective green club over taking the same actions unilaterally is to appropriate the club's positive reputation with stakeholders. Our analysis of about 3,800 US facilities indicates that joining ISO 14001, an important non-governmental voluntary program, improves facilities' compliance with government regulations. We conjecture that ISO 14001 's efficacy stems from its relatively open membership standards and its focus on management systems that provide participants with private benefits while addressing the root causes of regulatory non-compliance. Many government sponsored voluntary programs may be designed to fail because their rigid standards exclude all but highly compliant firms and their focus on performance standards ignores key causes of regulatory non-compliance."