Association for Public Policy Analysis & Management

Participation in flexible environmental management programs brings up questions about environmental outcomes. Many programs, including LEED and other voluntary initiatives, seek to certify net changes across myriad mitigation strategies. It can be difficult to compare the end results. It is unclear whether participation leads to equal environmental impacts for all, or whether individual decisions lead to disparate environmental consequences. Understanding the extent to which flexibility is used to participate in unique or similar ways has implications for how we design and measure the impacts of flexible programs.

This paper assesses firm participation in green building programs, analyzing how and why patterns emerge in environmental design. Drawing on a unique, high-resolution dataset of buildings certified under the Leadership in Energy and Environmental Design (LEED) program, we first distinguish two rival theories motivating participation. An economic rationale for voluntary environmental certification is based on product differentiation: by disclosing unique features of a product in a credible way, firms can earn a premium for their product. An institutional perspective explains participation as the result of organizational isomorphism, in which firms mimic observable qualities of industry leaders to gain legitimacy (DiMaggio & Powell, 1983). In practice, both of these explanations may occur within a single market: differentiation among early program participants, and conformity among late adopters. This distinction between early customizers and late conformers has been framed as a dichotomy between substantive and symbolic participation (Darnall & Edwards, 2006), and has been noted in a variety of organizational practices, from total quality management to environmental management system adoption.

Existing theories lead to several hypotheses about green buildings. First, if late adopters participate by imitating visible aspects of competitors, we expect the achievement rate of unobservable practices to fall over time. Likewise, we expect late adopters be less innovative, and focus less on efficiency compared to early certifiers. Second, late adopters have less incentive to achieve more than the minimum requirements of participation.  Third, rental buildings are more likely to make visible improvements, even if they are not the most cost-effective. This expectation is derived from the varying motives to rent versus build-to-own green spaces.

Hypotheses are tested with fundamental statistical tools including Student’s t-test. Findings suggest several implications for researchers and practitioners alike. First, the future environmental outcomes of current programs may be anticipated despite flexibility in implementation across participants.  Second, even symbolic environmentalism may still lead to substantive outcomes, in direct contrast to past results on quality management and ISO participation.  As a caveat, this result is highly sensitive to program design, and other, less credible programs may not uphold this result. Third, the meaning of program participation changes over time as implementation patterns converge on an “iron cage” of institutional norms. The program’s credibility shifts, as consumers understand its meaning in terms of predominant practices. Finally, though learning and isomorphism may lower the costs of participation, this drop in costs may be in direct proportion to a fall in premium after program perception shifts to align with institutionalized practices.