Business and the environment
Self-regulatory institutions for solving environmental problems: perspectives and contributions from the management literature
A review of the emerging management literature on self-regulatory institutions
Authors:
A. King; M.W. Toffel
Publisher:
Harvard Business School , 2007
This paper discusses how institutions can resolve environmental problems. The paper reviews the emerging management literature on self-regulatory institutions, suggesting that these institutions can provide practical solutions to environmental problems. Firms joining self-regulating institutions appear to believe that participating in these institutions will help them solve real problems, reducing market inefficiencies, reducing asymmetries in information, and facilitating coordinated investment in solutions to common problems. However, the paper notes that there is a need for caution in predicting the effect of self-regulatory institutions, since some self-regulatory institutions may simply be smoke screens deployed to prevent more effective stakeholder or government action.
The paper argues that the pursuit of individual gain plays a central role in the creation of these institutions and determines how they are understood and used. It however suggests that the meaning of these institutions may go beyond that justified by purely economic rationale as the actors observed in the empirical analysis could not predict how institutions would be used, and may even hold inconsistent goals. Participants could not always estimate costs and benefits either in the present or in the future.
The paper recognises that the institutions reviewed do not operate in isolation, but within the context of larger cultures or national regulations. Models that incorporate agents with limited rationality might help to explain how institutions interact. Some self-regulatory institutions are given social or political authority they do not appear to deserve, and the paper questions whether cultural traditions and perceptions might explain why firms are sometimes rewarded for participating in programs that neither improve their performance nor reveal hidden attributes.
The paper suggests that many more questions can be formulated from the literature reviewed and understanding how these problems are resolved will help clarify both the universal and unique aspects of using self-regulation to solve environmental problems.
