The Voluntary Environmentalists: Green Clubs, ISO 14001, and Voluntary Environmental Regulations (review)

Businesses are increasingly eager to constrain their freedom to pollute and join non-state institutions that regulate corporate environmental behavior. Scholars and practitioners observe this trend with great interest, debating how voluntary regulation can mitigate collective-action problems and whether it is a promising tool for responding to environmental challenges of the 21^st century. In The Voluntary Environmentalists, Prakash and Potoski argue that research provides no clear answer about the overall efficacy of voluntary environmental programs, acknowledging that while some believe that these programs create a win-win scenario for everyone involved, others see them as pro-business private regimes that lie beyond public accountability. The authors attempt to identify what distinguishes the effective voluntary programs from the ineffective ones, defining effective programs as the ones that are able to induce participants to take progressive environmental action beyond what they would otherwise take unilaterally.

Prakash and Potoski draw on the economic theory of club goods. Voluntary environmental programs are like clubs because they offer their members excludable benefits such as positive image, goodwill, legitimacy and reputation for environmental stewardship. They also produce a broader public good in the form of cleaner environment. As theoretical analysis suggests, such "green clubs" must overcome two collective action problems to be effective. First, they must attract members to join the club and pay the costs of meeting the club's standards. Second, they must prevent members from shirking, for which they may use a variety of enforcement mechanisms. Based on the variation in club standards and enforcement mechanisms, the authors identify four ideal club types: clubs with stringent standards and credible enforcement rules (Mandarins), stringent standards without enforcement (Country clubs), lenient standards with enforcement (Bootcamps), and lenient standards without enforcement (Greenwashes). The authors do not present a comprehensive test of this typology. Instead, they use an impressive multi-method analysis of a single Bootcamp-type club to test the theoretical framework.

The focus of the empirical analysis is ISO 14001, a rapidly growing international certification standard requiring members to establish an environmental management system. With respect to a club's capacity to attract members, an examination of ISO 14001 diffusion across countries and within the US demonstrates (among an array of findings) that business-government relations and sponsoring organizations play an important role in ISO 14001 adoption, and that firms are more likely to join ISO 14001 in countries where laws are stringent and flexibly enforced and where consumers are better able to use the ISO 14001 brand to discriminate among firms. With respect to ISO 14001 program efficacy, a treatment effects analysis indicates that, on average, ISO 14001 certified facilities have lower pollution emissions and better regulatory compliance records than non-certified facilities.

Prakash and Potoski define voluntary environmental programs as green clubs and institutions, which enables them to analytically connect institutional design and efficacy and expose the incentives firms and other stakeholders have in voluntary regulation. The resulting conceptual framework is generalizable enough to account for varying efficacy across programs. It is also applicable to other issue areas, so it can indeed be a foundation for a more systematic treatment of voluntary regulation. From an institutionalist perspective, the theoretical approach is compelling, because it draws from the well-established but evolving institutionalist research agenda, which has focused primarily on state-based regimes; advances it in the areas that it has overlooked; and adds a novel twist to that agenda. The theoretical analysis fits into the broader research on how institutions matter in shaping the behavior of actors in world politics. This analysis can also contribute to the rapidly emerging research within the political economy approach to international environmental governance.

The novel element that green clubs introduce is the focus on institutional brand image as the primary payoff for institutional members to produce public goods. A central observation here is that enforcement rules to mitigate shirking also influence a club's reputation: less shirking means clubs have a stronger reputation for being...