The Promise of Different Types of Environmental Management Systems (EMSs) for Voluntary Governance Paper Prepared for presentation at Environmental Policy: A Multinational Conference on Policy Analysis and Teaching Methods and The Association of Public Policy Analysis and Management, Seoul, Korea, June 2009 June 12, 2009 Younsung Kim, Nicole Darnall George Mason University

What are EMSs? EMSs are systems of management processes that enable organizations to continually reduce their environmental impact Most EMSs involve implementing written environmental policy, training employees, implementing internal audits, and setting environmental performance indicators and goals All EMSs are not designed similarly -Three types of EMSs: Complete EMS, Certified EMS, and Self-Designated EMS

Research Gaps in Previous EMS literature Mixed results about the effectiveness of EMSs -Positive (Arimura, Hibiki, & Katayama, 2008, Potoski&Prakash, 2005a, 2005b; Russo, 2002) -Negative (Dahlstrom, Howes, Leinster, & Skea, 2003; King, Lenox, & Terlaak, 2005) The focus of analysis on the ISO certified EMS rather than uncertified generic EMSs -However, most governments endorse a more generic EMS, not certified EMSs Studies assessing EMS effectiveness in numerous medium and an international setting are lacking

Research Objective To assess firms’ environmental performance across five areas of environmental impacts – natural resource use, solid waste generation, discharge of wastewater effluent, local and regional air pollution, and global pollutants To explore different types of EMSs and their relationship towards improved environmental performance of EMSs

EMSs & Environmental Performance EMSs can help organizations ensure that their management practices conform to environmental regulations by improving their internal operations and achieving greater efficiencies for pollution prevention. EMSs can encourage organizations to adopt more proactive environmental strategies. Hypothesis 1: Organizations that adopt an EMS (of any sort) are more likely to improve environmental performance.

Certified EMSs & Superior Environmental Performance Certified EMSs require third-party audit process Seeking certification can be costly -Actual costs of certification can range from $29-$88 per employee Certification enhances visibility for organizations’ environmental practices Hypothesis 2: Organizations that adopt certified EMSs are more likely to improve their environmental performance than organizations that adopt non-certified EMSs.

OECD Data Survey of manufacturing facilities in 7 OECD countries (Canada, France, Germany, Hungary, Japan, Norway, and the USA) Collected using a modified Dillman (1978) method -Mailed to environmental mangers within facilities -Two follow up reminders Response rate 24.5%, n=4,187 -Consistent with previous studies of firms’ environmental practices (e.g., Christmann 2000; Melnyk, Stroufe,& Calantone 2003)

Measuring Environmental Performance Survey asked the facility: Reduced its environmental impacts in the last 3 years 1.Use of natural resources 2.Solid waste generation 3.Wastewater pollution 4.Local or regional (neighboring countries) air pollution 5.Global air pollution Self-reported measures are coded as binary -1= Decreased significantly / Decreased -0 =No change /Increased / Increased significantly

Measuring EMS Adoption Self-Designated EMS -Survey asked facility managers whether their facilities actually implemented EMSs -1 (=Yes), 0(=No) Complete EMS -Implemented 4 different environmental practices: written environmental policy, training program, internal audits, environmental indicators -1 (=Yes in all four practices), otherwise 0 Certified EMS -Whether or not facilities’ EMS was certified to ISO (=Yes), 0(=No)

Control Variables Regulatory stringency -Asked facilities to describe whether the environmental regime to which they are subject to is stringent or not Facility size -The natural logarithm of the number of employees in a facility Industry dummies -The chemistry sector was the omitted sector dummy Country dummies -The U.s. was the omitted country dummy variable

Model Development But… Unobservable factors may be correlated with both EMS adoption and environmental performance therefore explain their relationship Motivations for EMS Adoption Stakeholder pressures -Regulator -Parent company -Environmental interest group Local government assistance program Controls -Market scope, Market concentration, Publicly traded, facility size, Country & Industry dummies Motivations for EMS Adoption Stakeholder pressures -Regulator -Parent company -Environmental interest group Local government assistance program Controls -Market scope, Market concentration, Publicly traded, facility size, Country & Industry dummies STAGE 1 STAGE 2  Two-stage bivariate probit model (15 estimation models )

Key Results (1) Stage 1- Local government assistance programs and parent company pressures increase the probability of all types of EMS adoption (p<.01) Stage 2 - Complete, self-designated, & ISO certified EMS adoption were associated with positive environmental impacts (p< ) (In support of Hypothesis 1) -Regulatory stringency was positively related with environmental performance (p< )

Key Results (2) Comparing marginal effects of certified & complete EMSs showed that -Certified EMS adoption is associated with a 5.3% greater reduction in natural resource uses -Complete EMS adoption reduces local air pollutants by 8.2% -Reductions in wastewater effluent, solid waste generation, and global air pollutants were similar in both EMSs (little evidence in support of Hypothesis 2)

Discussion & Conclusions This study offers support for EMSs as voluntary governance options While regulatory stringency showed positive relationships with environmental performance, it is uncertain whether facilities will be motivated to adopt EMS (of any sort) in the absence of traditional regulatory pressures Therefore, some reflexive policies and programs, like those that encourage EMS adoption, may achieve equivalent environmental outcomes

Discussion & Conclusions Since externally accredited EMSs are not always related to greater environmental performance, facilities may not need to certify their EMS Therefore, governments have greater confidence in their approach in that they encourage generic type of EMSs Some governments may consider grants and technical assistance to promote EMSs adoption in facilities that have limited complementary resources and capabilities