Voluntary agreements to improve environmental quality: symbolic and substantive cooperation

TLDR

The study examines what drives firms’ participation levels in voluntary agreements aimed at influencing government policy. The authors analyze firms’ strategies in the U.S. Department of Energy’s Climate Challenge program (1995–2000) involving national electric utilities. Early joiners in VAs are more likely to pursue substantive cooperation, face higher political pressure, are better connected, and reduce emissions more than nonparticipants, whereas late joiners tend toward symbolic cooperation and invest less, yet overall participants show no significant emission reduction advantage over nonparticipants.

Abstract

Abstract Within the context of environmental voluntary agreements (VAs), this paper analyzes the determinants of the degree of participation by firms in collective corporate political strategies that aim to shape government policy. We demonstrate that substantive cooperative strategies are more likely to be pursued by firms that enter a VA close to its initiation, while symbolic cooperation is more likely behavior by late joiners. We show that late joiners and early joiners within VAs adopt different cooperative strategies because they face different institutional pressures. Our analysis is based on the strategies of firms participating in the Climate Challenge program (1995–2000) established by the U.S. Department of Energy and representatives of the national electric utilities to reduce greenhouse gas emissions. Our results show that early joiners were subjected to higher levels of political pressure at the state level and were more dependent on local and federal regulatory agencies than late joiners were. Early joiners were also better connected to the trade association and more visible. Late joiners had undertaken significantly less investment in environmental improvements than early joiners. Our paper also illustrates the difficulty involved in using VAs to try to induce improved environmental outcomes when there are no sanctioning mechanisms. Although early entrants reduced their emissions more than nonparticipants, our results show no significant difference overall between participants and nonparticipants in the reduction of their emissions. Copyright © 2010 John Wiley & Sons, Ltd.