Association for Public Policy Analysis & Management

Panel: Voluntary Environmental Programs As Environmental Governance Tools

(Natural Resource Security, Energy and Environmental Policy)

Voluntary environmental program (VEPs) are governance tools designed to induce firms to provide positive social and environmental externalities in return for a variety of branding benefits. Widespread government endorsement of VEPs has led to an active and sometimes heated debate about the reasons why firms participate and the benefits obtained by participants and society at large. This panel contributes to the policy debate by presenting the results of four papers that assess the implementation of these initiatives. The first paper examines the extent to which firms are motivated to join a VEP based on different programmatic benefits. It assesses the ability of VEPs to offer branding benefits based on program age. To test this argument, the paper compares winegrape grower participation in four types of California VEPs. It offers evidence that VEP participation in nascent VEPs is driven by social and networking benefits, while participation in more established programs is influenced more by economic benefits. The second paper examines variations in participant motivations to seek certification in Leadership in Energy and Environmental Design (LEED) – a portfolio-based VEP in which participants choose to undertake various green building projects (e.g. energy efficiency, materials savings, indoor environmental quality, etc.). Projects are assigned variable “credits” that when summed determine LEED certification. Using LEEDs’ credit-level data, this paper categorizes participants’ portfolios based on whether they offer excludable economic benefits (e.g. energy savings) or non-excludable environmental benefits to society, and assesses the factors that are related to variations in each. It determines that participants’ portfolio selections vary by industry and sector such that private sector participants are motivated more by excludable economic benefits than those in public sectors. The third paper examines how the excludable economic benefits associated with VEP brands are affected by firms’ performance in individual facility- and community-level VEPs. The paper quantifies the combined price premium for the Certification for Sustainable Tourism (an individual facility level VEP) and the Blue Flag Program (a community level VEP) for 3,500 Costa Rican hotels between 2001and 2008. After correcting for self-selection bias, the paper reveals that firms' price premiums are affected by environmental performance in both facility- and community level VEPs. However, the price premium associated with the community-level VEP disappears if individual firms fail to show superior environmental performance at individual facility level. The fourth paper considers what sorts of voluntary environmental reporting guidelines – rule- or principle-based – are more likely to encourage firms to disclose reliable information, thus reducing information asymmetries between firms and their critical stakeholders. By assessing 202 environmental reports, the paper offers evidence that firms which follow rule-based reporting guidelines tend to report more extensive and credible environmental information, than principle-based guidelines. The findings have important implications for environmental NGOs and governments that are encouraging firms to voluntary disclose their environmental information such that some reporting guidelines appear more effective at reducing information asymmetries than others.