1 Journal of Management Studies 40:4 June Seeing the Need for ISO Ruihua Joy Jiang and Pratima Bansal Richard Ivey School of Business, The University of Western Ontario ABSTRACT Many firms worldwide have adopted environmental management systems, and some have taken the extra step and had their systems certified for the international standard ISO While institutional pressures and market demand often motivate firms to adopt an EMS, the reasons why they certify for ISO are less clear. In this study, we interviewed members of the Canadian pulp and paper industry who had either an EMS or ISO certification to understand why they may have become ISO certified. We found that task visibility and environmental impact opacity lead to differences in a firm s approach to ISO certification in the absence of coercive pressures. INTRODUCTION When ISO was officially published in September 1996, scholars had expected that firms, especially those in developed economies, would quickly adopt it. This standard for an environmental management system (EMS) was expected to confer the legitimacy that comes from being certified with an ISO standard and improve firms environmental performance. However, North American firms operating in similar industries have not responded in the same way to the standard. Some corporations have readily embraced the standard and pushed assiduously towards certification in all their plant facilities. Others have been much less receptive to the standard and some even discouraged their subsidiaries from seeking certification. More interestingly, multinational firms with multiple subsidiaries and facilities have responded differently to ISO in their different sites. Variations in response to the ISO lead to a question: under what circumstances would managers see the need for ISO certification? While the question of why firms are environmentally responsible has been investigated (e.g., Bansal and Roth, 2000), relatively little attention has been given Address for reprints: Ruihua Joy Jiang, Richard Ivey School of Business, The University of Western Ontario, London, Canada N6A 3K7 Published by Blackwell Publishing, 9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
2 1048 R. J. Jiang and P. Bansal to the reasons for the voluntary adoption of ISO Given that many of the benefits of environmental responsibility can be accrued through an EMS, it is not clear why firms would incur the extra time and expense to certify for ISO To answer this question, we developed theory grounded in data (Glaser and Strauss, 1967). From in-depth interviews of environmental managers in 16 Canadian pulp and paper companies, we found that while market demand and institutional pressures pushed firms towards the implementation of an EMS, two contextual factors task visibility and environmental impact opacity were instrumental in pushing firms towards ISO certification. We distinguish two situations regarding ISO certification. One is when firms face direct pressures from their dominant and definitive stakeholders (Mitchell et al., 1997), such as supply chain pressure or customer demand. In this situation, ISO is really not voluntary but necessary based on market pressures. The other situation is when institutional forces favour attention to environmental performance in general, but do not demand firms to certify for ISO We focus on the latter situation because it is more interesting theoretically and explains why firms have differential rates of adoption. In the following sections, we first describe an EMS in general and ISO in particular. Then, we discuss the rationales for corporate environmental practices based on previous research on organizations and natural environment. In the Methodology section, we describe our research context, the Canadian pulp and paper industry and the method we applied in collecting and analysing the data. Testable propositions are then developed by applying grounded theory. We conclude with a discussion of the implications of the findings and offer future directions for research. ENVIRONMENTAL MANAGEMENT SYSTEMS AND ISO An EMS is expected to induce corporate environmental responsiveness because it establishes appropriate organizational structures. While EMSs vary considerably among firms, there are some common elements. An EMS requires that a firm identify general environmental goals and targets and develop an environmental policy. The firm must identify its environmental impacts as well as relevant environmental regulations imposed by various levels of governments and other local authorities. It also needs to set up management and operational control, monitoring and measurement procedures and programmes for its environmental impacts. Meanwhile, employee training programmes are also necessary to ensure that employees are aware of any established environmental policy and objectives, as well as the environmental aspects of their own activities. Moreover, the whole process requires a structured documentation system so that a paper trail will be left to facilitate both management review and auditing. Finally, an EMS often
3 Seeing the Need for ISO involves auditing, either of the system or of the firm s environmental performance. While many firms engage in internal auditing, some firms prefer external auditing because they do not have the internal capabilities or they seek external validation. ISO is the EMS standard developed by the International Organization for Standardization (ISO). It requires a similar set of procedures and structures as the typical EMS we described above. However, while an in-house EMS can be fully customized to meet the needs of the organization, for ISO certification the EMS must be certified by a third-party registrar and so the firm must adhere to all of the elements stated above. External auditing and third party certification incur costs. According to an estimate by the Global Environmental and Technology Foundation (GETF), the initial implementation and certification could cost firms between $24,000 and $128,000, depending on the size of the facility and the procedures. Moreover, maintaining the system could cost about $5,000 to $10,000 annually (GETF, 1996). If a firm already had a sophisticated in-house EMS, the additional costs of certifying and maintaining ISO could be considerably lower. The estimated costs do not seem to present too high a hurdle for firms, and some firms that are experiencing financial difficulties have become certified (Bansal, 2002). Moreover, ISO certified firms may attract customers that they would not have otherwise, such as General Motors and Ford, that are requiring ISO certification of their major suppliers. The higher revenues could offset the costs of ISO certification. Like any effective EMS, ISO is believed to provide a systems approach to environmental issues in a firm. First, it is intended to reduce the firm s negative environmental impacts both through process control and technological innovations. Second, it emphasizes continual improvement, which advocates an attitude or organizational culture that does not stop with compliance to regulations and rules, but rather seeks to exceed the standards. Third, it requires structured processes for identifying and solving problems, and for making improvements, involving, for instance, requirements for employee training programmes, documentation and auditing processes. Training and paper trails aim to reduce systematic variances in environmental practices. Auditing helps to maintain or raise the standards and spot opportunities for further improvements. Finally, an EMS encourages employee participation. A formal process of training, a process of going through every link in the business operations and identifying environmental aspects, and a process of seeking improvements in reducing environmental impacts, often instils environmental awareness among employees. Unlike just any EMS, however, ISO was born with the credibility and authority that come from being a product of International Organization for Standardization (ISO), whose success with the ISO 9000 series of quality management
4 1050 R. J. Jiang and P. Bansal standards has established it as one of the most influential standard setters in the world. In other words, ISO was likely perceived legitimate from the very beginning. REASONS FOR ENVIRONMENTAL RESPONSIBILITY Prior research on organizations and natural environment focused on institutional forces such as regulatory, market and social pressures as the drivers behind firms move towards more environmentally responsible operations (Bansal and Roth, 2000). Researchers have recognized the role of regulatory pressure in pushing firms to be environmentally responsive (Fineman and Clarke, 1996; Lampe et al., 1991; Lawrence and Morell, 1995; Newton and Harte, 1997; Post, 1994). Firms seek to comply with legislation to avoid legal liabilities, penalties, and fines. Firms also proactively or strategically adopt environmentally responsive activities to keep ahead of regulatory changes and remain competitive (Aragõn-Correa, 1998; Clark, 1999; Rondinelli and Vastag, 1996). Market pressures from customers and suppliers, and social pressures from local community, environmental activists, and the general public further help to induce ecological responsiveness from the corporate world (Berry and Rondinelli, 1998; Bucholz, 1991; Fineman and Clarke, 1996; Lawrence and Morell, 1995; Starik and Rands, 1995). Researchers have also explored economic rationales for corporate ecological responsiveness. Bansal and Roth (2000) labelled this as a competitiveness motivation. Often anchored in the resource-based view of the firm, this perspective looks at firms ecological responses, like eco-labelling, green marketing, and EMS implementation, as sources of competitive advantage (Russo and Fouts, 1997; Shrivastava, 1995). Early adoption of these responses were believed to build corporate reputation, pre-empt competition, and create value for firms (Hart, 1995; Russo and Fouts, 1997). Ecologically responsive operations have also been reported to lead to cost reduction, due to lower input and waste, as well as decreased liabilities (Lampe et al., 1991; Porter and van der Linde, 1995). While previous research on organizations and natural environment provides rationales for general corporate ecological responses, it fails to explain: (1) why firms facing similar institutional pressures would respond differently to ISO 14001; and (2) why a firm would adopt a home-grown EMS in one facility, yet certify for ISO in another. Since existing theories could not answer these questions, we applied grounded theory building, seeking to produce theory to further understand the mechanisms behind firms ISO certification decisions. Grounded theory building is appropriate when the nature of the research is exploratory rather than confirmatory, and the purpose is theory building rather than theory testing (Glaser and Strauss, 1967; Strauss and Corbin, 1990). We went to the field without any preconceived hypotheses or models, and let the theory emerge from careful analysis of the data.
5 Seeing the Need for ISO METHODOLOGY Sampling Given that we are interested in explaining differences in responses among firms in similar situations, we selected firms within one industry and one country. We chose the Canadian pulp and paper industry for three reasons. First, the pulp and paper industry has a significant impact on the natural environment. It was important to select an industry in which most firms had evaluated ISO in order to identify the reasons for differential responses to ISO certification. Second, firms in the pulp and paper industry produce relatively similar products. For instance, most of the companies own woodland operations, pulp mills, and paper mills simultaneously, and their main products are pulp, Kraft paper, newsprint, printing and writing papers, boards, and other paper by-products. This makes the firms in the sample more comparable and allows us some control for firm-level variances. Third, the forestry industry is connected tightly to its constituents so that the institutional aspects will be apparent. The forestry industry, of which pulp and paper makes up about 75 per cent of total earnings, is the largest net export industry and the largest industrial employer in Canada, making it important to regulating government bodies, local communities, and the environment-conscious public. The pulp and paper industry includes the following sectors: woodland operations, pulp, paper, converters, and by-products. Woodland operations provide the raw materials, or forestry products, for the processing operations. Pulp manufacturing produces market pulp from wood. Paper manufacturing transforms pulp into paper, which includes newsprint, printing and writing papers, specialty papers and boards. Converters make wrapping and packaging containers from pulp, paper, and recycled materials. By-products from these processes can be used for other products such as alcohol, black liquor, chlorines, and turpentine. Names of the members of Canadian Pulp and Paper Association (CPPA) were obtained from the CPPA s website (www.cppa.org  ). Of the 39 companies listed in 1999, we were unable to reach 15 companies because of wrong contact information or failure to obtain an appropriate contact person. Of the remaining 24, 16 agreed to participate and eight declined our request. Data on sales and employment of both participants and non-participants were obtained from the Canadian Key Business Directory, and independent t-tests did not reveal any systematic differences between the two groups. Interviews We interviewed managers in charge of their respective firm s environmental management activities. Corporate level interviewees had titles like Vice President of Environment or Environmental Director, and were responsible for making
6 1052 R. J. Jiang and P. Bansal environmental policies and strategies for their corporations. Facility level interviewees had titles like Operations Manager, Environment Manager or Coordinator. They were often the point person in making ISO certification decisions when certification was not mandated by corporate policy. The interviews were all conducted by telephone and ranged in length from 45 minutes to one hour and 45 minutes. All but two of the interviews were audio recorded and fully transcribed for data analysis. For the two interviews that were not tape recorded, detailed notes were taken by both authors and transcribed immediately after the interviews occurred. Because of the explorative nature of our study, we kept the interview questions open-ended. We started each interview by introducing the study and assuring absolute confidentiality. Next, we asked the interviewees to briefly describe their companies and their operations, their titles or roles in the firms, and what their firms had done in environmental management. Then, we asked about reasons for adopting certain policies, practices, EMS, and/or ISO We also asked about outcomes of their environmental practices as well as their opinion of EMSs in general and ISO in particular. We kept our questions open-ended and short, in an effort to allow the managers to do most of the talking. Data Analysis The QSR NVivo software package was used to code and organize the data. Using the software, pieces of text could be flagged or marked with one or more codes. Once the transcripts were coded, all of the text associated with a code could be viewed and the codes associated with the text could be refined further into yet more descriptive codes. Using this software is superior to margin coding because of its ability to summarize large amounts of text. It is helpful in applying grounded theory, as the codes can emerge from the text. It also allows the user to keep memos associated with a code or a piece of text as ideas emerge while coding. We initially coded the interviews into three categories: antecedents, practices/ems stage, and outcomes. Managers often did not discriminate between an EMS and ISO at the beginning of the interviews, and offered the same drivers for adopting one or the other (e.g., customer demand, institutional pressure, management control). However, when probed further as to why they had or had not certified for ISO 14001, they mentioned different reasons. We distinguished two different situations regarding the adoption of an EMS or ISO One is when ISO certification was clearly demanded by dominant stakeholders (Mitchell et al., 1997) like customers or governments. In this situation, ISO was no longer truly voluntary but coercive, as firms were in fact forced to satisfy these powerful, legitimate, and urgent demands (DiMaggio, 1988; Mitchell et al., 1997). The other situation was when strong coercive forces did not exist and ISO certification was voluntary. The firms in our sample seemed to per-
7 Seeing the Need for ISO ceive themselves mostly in this second situation. We therefore re-coded the transcripts, discriminating between the motivations for the EMS and the motivations for ISO certification. After several iterations through the interview transcripts, two variables emerged that discriminated between EMS adoption and ISO certification: task visibility and environmental impact opacity. To confirm our suspicions, we developed a table in which the respondent firms EMS and ISO stages were listed by sectors, the results of which are shown in Table I. We then compared the ISO adoption status of the sectors by rearranging the data (shown in Table IV), where sectors were rated on task visibility and environmental impact opacity, based on the comments drawn from the interviews. THE REASONS FOR ADOPTING AN EMS The managers we interviewed generally agreed that environmental management had become a part of their business operations. Respondents varied considerably, however, in their stages of implementation of an EMS. Table I summarizes the stages of EMS and ISO adoption according to firm size, headquarter location, and sector in the pulp and paper industry. Analysis of the data confirmed the basic driving forces behind firms decisions to adopt environmentally responsive practices as uncovered by prior researchers. Three factors stood out from the data: institutional pressures, market demand, and management control. The first two represented external pressures pushing firms towards ecologically responsible practices. The last factor reflected firms strategic choice in handling demands for environmental responsiveness. Exemplary quotes supporting these motivations are presented in Table II. Managers stressed that market pressure was the most influential factor impacting environmental management decisions. They concurred that environmental management was a customer-driven thing. The same reason was given for pursuing an EMS for ISO as well as for not pursuing one or both. One manager said: we re pulp producers so we ship our pulp to paper makers, and paper makers send us all kinds of questionnaires about our environmental performance. Questions they typically ask include Are you environmentally certified? and Are you trying to achieve ISO 14000?. As a result of these customer inquiries, the company started the ISO certification process. The manager of another firm said that his firm was not in a hurry to push for ISO certification, because actually we haven t received any sort of pressure from customers. Our customers are 20 per cent in Canada and 80 per cent in the United States. The impact of market demand on EMS adoption and ISO certification appears to be both direct and strong. This is consistent with accepted theory that says firms respond quickly to demands from dominant and definitive stakeholders that provide essential resources for them to gain exchange legitimacy (Suchman, 1995)
8 1054 R. J. Jiang and P. Bansal Table I. Stages of environmental management by level/size, HQ location and sector Level Facilities in Total HQ Sector/product EMS status ISO status Canada employment Location 1 Corporate 19 mills 13,000 Canada Woodland operations Various stages Will be certified soon Pulp Various, towards corp. wide EMS Compatible only, no certification Paper Various, towards corp. wide EMS Compatible only, no certification 2 Corporate 1 mill 463 Canada Pulp Since 1993 Half way to certification 3 Corporate 13 mills 3,300 Canada Woodland operations No formalized EMS Working on certification Pulp No formalized EMS No Paper No formalized EMS No 4 Facility 80 Canada Sticks Nothing Not considered 5 Division 5 mills 6,000 in 3 USA Pulp and paper Implementing EMS in 1 mill 4 mills close to certification, HQ countries EMS in 4 mills against certification 6 Facility 400 Canada Tissue paper Elements of EMS Won t bother 7 Facility 1,000 Canada Paper/newsprint Elements of EMS Will seek ISO in a year or two, due to corporate mandate 8 Division 5 mills 2,696 USA Pulp All mills certified Paper/newsprint Just started certification 9 Division 5 mills 9,700 USA Pulp and paper Required in all mills by mills certified 10 Corporate 1 mill 190 Canada Converter from Elements of EMS Not in foreseeable future 100% recycled material 11 Division 1 mill 1,100 Canada Paper/newsprint Elements of EMS Compatible only, no certification 12 Facility 17,500 in 33 USA Converter No No countries 13 Division 1 mill, 1 45,000 in 40 Europe Woodland EMS since 1990 Certified in 1998 woodland countries Pulp EMS since 1990 Working on certification Paper EMS since 1990 Working on certification 14 Corporate multiple 5,000 Canada Pulp, paper, All facilities be ISO ready by mills boxwood, and mid-2000, certification left to by-products facilities 15 Corporate 12 mills 3,280 Canada Pulp Yes Will all certify in 2000 Woodland operations Yes Will all certify in Division 28 mills 47,000 in 17 USA Woodland operations Corporate EMS Will all certify by 2002 countries Pulp, paper, veneer Working on corporate EMS Compatible only, no certification
9 Seeing the Need for ISO Table II. Motivations for adopting an EMS Motivation Exemplary quotes Number of times suggested Market That is a customer driven thing. 8 interviewees Demand If we get driven by the customers in the end to pay money to be certified by ISO 14000, we will go. But our customers lately haven t been insisting that we need to have our forest certified or anything like that or we need to Suggested 26 have an EMS in place for them to buy our products. times So, what we are seeing is a big yawn from North American customers saying, ISO for mills, I don t think so, I don t care. What is happening, is there is an ISO pull starting in Japan as you well know and it is rising fast in Europe and probably we are gearing for our export mills to Europe to be ISO certified because we can see that coming but for the North American side we really can t. Institutional Britain has a lot of legislative pressures as well as trade related pressures within the European Union to have something like 8 interviewees Pressure ISO There is a trend out there with the regulators that are looking at ISO as a good way to promote self-regulations. Suggested 20 People who work at these plants live in the community and the last thing you want people to think about you as a member times of the community is that you are a polluter. We see it as a big reputational issue for the company. Social pressure...that s the engine that drives the regulation...social pressure drives the market place too. Management It s like any management tools. It puts rigours in the way of doing things. 5 interviewees Control Certainly we are not doing it because we fear permit violations. We are doing it for good management practices. Just a very good way to sort of encompass all of the aspects of running the mill under a management plan that has got environmental Suggested 8 compliance at heart. times Just a consistent approach with solid paperwork to support actions and... basically, just a further minimization of the risks of violations of any level The plan is that there will be no disasters If it s a system, that means that everybody understands the same thing. So it s really business continuity. Making sure we re doing always the same thing and when we correct things, when we improve, then we improve all from the same basis.
10 1056 R. J. Jiang and P. Bansal and to survive (Mitchell et al., 1997). When this was the case, EMS and ISO was no longer voluntary, but coercive. Institutional pressures arise from overall social pressures that drive regulations, environmental activists, and market demand, that in turn directly affect firm behaviour (Christmann and Taylor, 2001; Fineman and Clarke 1996). As one manager succinctly put it: social pressure...[is] the engine that drives the regulations... social pressure drives the market place too. Several respondents suggested that having an effective EMS helped them to manage and establish a better relationship with regulators and local communities. Institutional pressures seem to explain much of the differences in EMS adoption. As in other studies (e.g., Bansal and Roth, 2000), large firms were further along in their EMS development than smaller ones, especially large firms with multiple manufacturing facilities and those selling to or operating in multiple geographic markets. These firms generally had a corporate-wide environmental policy, environmental officers and/or offices, and some sort of environmental reporting system in place. They often pushed for a corporate-wide formal EMS, while the decision for ISO certification was often left to local facilities. Small firms, on the other hand, were less concerned about environmental management as long as they remained in compliance with regulations. One manager commented that firms of their size had not given a whole lot of thought to environmental issues. Some small companies had no environmental policy, no monitoring, no auditing, nothing whatsoever. This is consistent with institutional theory, which argues that larger firms are more likely to respond to institutional pressures, as they are more visible and often more integrated within their communities (Goodstein, 1994; Greening and Gray, 1994; Meyer and Rowan, 1977; Tolbert and Zucker, 1983). For the same institutional argument, the location of the firm s headquarters seemed to affect the firm s approach to environmental management. A firm we interviewed that was headquartered in Europe established a corporate policy of getting ISO certification for all their divisions and facilities. While most North America-based large corporations started to require their facilities to be ISO ready, they were not pushing for the actual certification. Firms that had exposure to international markets had a more advanced EMS or were more likely to be ISO certified than those that were active only in North America. One manager explained that the reason why they did not bother to seek certification was because their customer base was entirely in North America, so they had not felt any pressure. Respondents attributed the differences in responses across geographical domains to differences in institutional pressures for environmental responsiveness. One manager commented: I think there is a major difference in culture between German countries and American countries, or North American countries, in that the European public are more aware of environmental issues, and hence firms selling to Europe face more pressure for responsible environmental practices.
11 Seeing the Need for ISO Management control is another factor mentioned by managers that motivated them to adopt an EMS. Some managers we interviewed mentioned that adopting an EMS was a proactive way of managing regulatory changes, community relations, and public opinion, as well as a way of ensuring consistent management control on environmental issues. As regulatory requirements became more onerous and complex, regulatory compliance was more difficult. Respondents indicated that an EMS could help firms in that regard because it required systematic monitoring and benchmarking. One manager said that by having an effective EMS, a firm could stay ahead of regulatory changes, so that it would not be hit with changes that require large investments at a time you least want them. The respondents indicated that the structure of an EMS or ISO could bring rigour and consistency to environmental management. One manager commented that they started implementing an EMS to maintain consistency and continuity in environmental management practices and procedures in the face of personnel turnover, so they did not have to reinvent the wheel every time. Consistent with structuration theory (Barley and Tolbert, 1997; Giddens, 1984), managers unanimously mentioned that a significant benefit of having an EMS is the enhanced employee awareness of environmental management issues and the consequent changes in behaviour. Since an EMS involves an all-encompassing structure and specific procedures, it tends to be integrated into the overall management system, rather than just a decoupled window dressing (Weaver et al., 1999). One manager said emphatically: It is not just an environmental management system, it is a management system. Another manager said that the purpose of installing an EMS was to weave environmental management into the organizational fabric. DRIVERS FOR ISO CERTIFICATION In spite of collective consciousness of the importance of an EMS, there was considerable variation in firms responses to ISO certification. One big Canadabased corporation was demanding that all their facilities be ISO ready towards the middle of year 2000 but would not necessarily go for certification. A European company was pushing all its global divisions and subsidiaries towards ISO certification. A US-based company, on the other hand, strongly discouraged its facilities from pursuing certification for fear that the required documentation might actually be used by government agencies against the firm to expose environmental infractions. Several managers indicated that ISO did not offer substantial value over an in-house EMS, and they would not bother to go the extra distance of certifying with ISO unless their customers explicitly asked for it. One manager was very certain that from the effectiveness (perspective) of the implemented EMS, the non (EMS) are better positioned than the ISO ones. And the reason is that the non ones really went after what is important and only
12 1058 R. J. Jiang and P. Bansal after what is important. Several others, who believed that ISO certification did not add much more, echoed this view. This seemed to go against the claim that ISO certification will lend a competitive edge to the adopters (e.g., Davies and Webber, 1998; Ralborn et al., 1999). On the other hand, literature on standardization asserts that standardization leads to uniformity rather than excellence (Brunsson, 2000). According to Brunsson (2000), standardization can disconnect the firm from what is actually done to what is said is being done. As a result, standardization creates uniformity in symbolic elements such as speech and policy papers rather than in substantive ways. Previous studies of voluntary environmental management standards such as Responsible Care and ISO have also revealed similar scepticism (King and Lenox, 2000; Yap, 2000). Managers seemed to believe that most of the functional benefits claimed for ISO could be achieved by an effective EMS. Moreover, firms could implement a completely ISO compatible EMS and self declare compliance without actually obtaining the certification and incurring the costs. If ISO certification did not offer additional functional benefits to an uncertified EMS and there were no coercive forces for it in North America, firms had discretionary power regarding the certification. The question that needs to be asked then, is, under what circumstances would a firm see the need for ISO certification? The data revealed that pulp and paper firms had different environmental policies in their facilities in different sectors. Facilities in woodland operations were more likely to be ISO certified. All five firms that had woodland operations had or were working to have their facilities certified for ISO Facilities in the pulp and paper sectors, on the other hand, were more likely to have only an EMS. The converters were least concerned with having an EMS or ISO As we probed the data for reasons for the differences in the responses to ISO 14001, two factors were revealed: task visibility and environmental impact opacity. A discussion of the reasons why these factors influence certification decisions follows. Exemplary quotes highlighting these concepts are provided in Table III. A summary of firm responses to ISO by sector is provided in Table IV. Task Visibility We define task visibility as the extent to which a particular firm task is easily observable or attracts the attention of the public. A firm s task can be visible because: (1) it is noticeable to the public eye; or (2) the firm itself has a high profile. Firms tasks can be visible because they are completed publicly and the results can be viewed easily. Woodland operations, for instance, were carried out in the forest, open to the public. Everybody can go out and see a tree being cut down, as one manager commented. A firm s tasks can become visible because the firm s high
13 Seeing the Need for ISO Table III. Task visibility, environmental impact opacity, and ISO certification Factors Exemplary quotes Number of times suggested Task visibility ISO on the Woodlands was largely a corporate decision to get external recognition that we are trying to implement 5 interviewees sustainable forest management practices. We felt that we had to have some way of proving, by external means, that the forest practices that we were undertaking Suggested 12 were in fact sustainable and were the right things to be doing. times The forestry sector is a very visual industry in my opinion. Everybody can go out and see a tree being cut down as opposed to gas or oil coming out of the ground. So public perception of that company is very visible. (Why woodland operations get ISO first?) There is much more pressure on our woodlands group in terms of being in the public eye out harvesting in the bush versus someone that just works in the mill. That s very apparent. In the sawmills,...aspects and potential risks are more limited than on the forestry. It is not subjected as much to public scrutiny as it is on the forestry side. Less visible than the forestry for sure. Environmental There is a big problem with explaining to external people how we do things or how things work if you will. (Why ISO 4 interviewees impact certification?) opacity Pulp mills have some key parameters or key indicators that can be measured against companies worldwide to measure Suggested 10 environmental performance from the mill side itself. Forestry, on the other hand, is much more of a softer science. (Why times the woodland operation registered for ISO 14001?) The ecological processes are a lot more complex and so an appearance of something isn t necessarily a bad thing and sometimes what looks like, you know, visually pleasing, may actually be bad forestry in an ecological sense. (Explaining sectorial differences between woodland operations and mills.) They (activists) are a lot, in my view, less technically sophisticated in terms of understanding of either the manufacturing process or the forest management process. Much more in tune to the emotional sort of social-cultural side of it, which are the visual aspects to some degree and the sustainability of old growth harvesting and wildlife habitat and all that kind of side. It s an easy way of communicating that you have a certain standard.
14 1060 R. J. Jiang and P. Bansal Table IV. Comparison of ISO adoption status in different sectors of forest products industry Sector Task Environmental No. of respondents* No. of respondents reported ISO visibility impact opacity having operation(s) status in the sector Will not Will certify Already certify soon certified Woodland High High operation Pulp Medium Medium Paper Medium Medium Converters Low Low and others *Some respondents have operations in more than one sector. profile draws attention to them. A large multinational firm s tree-cutting practices may be under closer scrutiny than a small firm s for this reason. In several cases, a firm s woodland operations were certified prior to other mills, sometimes despite the fact that the overall corporate policy did not impose certification. Forest management activities, like tree cutting or tree-planting, were very visible tasks. One manager said: There is much more pressure on our woodlands group in terms of being in the public eye out harvesting in the bush versus someone that just works in the mill. Another manager said: The forestry sector is a very visual industry. Everybody can go out and see a tree being cut down as opposed to gas or oil coming out of the ground, so public perception of that company is very visible. Task visibility increases the possibility of scrutiny from external stakeholders like regulatory bodies, local communities, green activists, and consequentially increases a firm s need for external recognition. External recognition of good environmental practices is important for a firm to gain legitimacy and procure resources (Pfeffer and Salancik, 1978). Task visibility also increases the urgency of the issue which likely leads to a faster organizational response (Ginsberg and Venkatraman, 1995). Likewise, the visibility of the firm would increase the scrutiny of its tasks, and lead to early actions to gain external recognition. Multinationals, for example, are more visible and also certified early for ISO 14001, which is consistent with the received theory which suggests that larger firms are usually early adopters of practices or structures that cater to institutional pressures (Greening and Gray, 1994; Tolbert and Zucker, 1983). The visibility of the firm can also be enhanced as firms interact with community members by serving their needs or hiring employees. This may explain why IBM, Ford, and GM have been among the first to seek ISO
15 Seeing the Need for ISO certification. Firm size may also enhance the visibility of the firm s tasks as large firms generate more economic wealth and are more closely tied to the community s social health. However, firm visibility is not the same as task visibility as illustrated by two facts (see Table I). First, the five firms that have woodland operations all decided to certify their woodland operations, even though some are medium to small domestic firms with only a few thousand workers. Second, out of the three large firms with more than 10,000 employees, one firm had certified its woodland operations before its mills, and two decided to certify their woodland operations in spite of the fact that their overall corporate policy was not to seek certification. Managers believed that the high visibility of the woodland operation itself demanded different treatment and required extra external recognition. Therefore, task visibility is an attribute of a procedure or operational process, which, although influenced by firm visibility, is nevertheless an independent feature impacting a firm s certification decision. High task visibility increased the need for external recognition. Firms might be doing all the right things for the environment, but to convince the public, a thirdparty verification was effective. ISO 14001, by being an internationally acknowledged EMS standard, provides a means to gain such external recognition and credibility. A Vice President of Environment of a company explained why the firm mandated ISO certification for all the woodland operations but not the mills: ISO on the woodlands was largely a corporate decision to get external recognition that we are trying to implement sustainable forest management practices. While managers often did not believe that ISO offered extra functional benefits to environmental management, they certainly understood its value in being an internationally recognized standard and thus having wider international credibility than a home-grown EMS. ISO was used as a symbol or signal of legitimacy. In our interviews, words like demonstrate, show, prove to the public, verify to people were often used in discussing certification decisions, revealing the fact that ISO was considered as a legitimizing tool when high visibility demanded external recognition. This is consistent with Suchman s (1995, p. 580) notion of procedural legitimacy:... organizations also can garner moral legitimacy by embracing socially accepted techniques and procedures. Therefore, when market and institutional forces favour environmental responsiveness but do not directly demand ISO certification, task visibility of a firm s operation enhances the need for external recognition and pushes the firm towards ISO certification. Hence we propose: Proposition 1: Other things being equal, operations with higher task visibility are more likely to be certified for ISO
16 1062 R. J. Jiang and P. Bansal Environmental Impact Opacity Environmental impact opacity refers to the difficulty with which the environmental impact of a firm s task can be measured and understood by external stakeholders. If the impact is opaque, then there are often no quantifiable criteria or parameters to measure the environmental impact of the operation. As a result, the firm s environmental performance will be more difficult to evaluate, and the firm cannot easily communicate its environmental responsiveness to outside audiences. On the other hand, if the impact is not opaque but easily comprehensible, then there are usually ready-to-use criteria or parameters to measure or evaluate its performance, which can be shown to the external stakeholders for communication purposes. When the former is the case, procedural legitimacy gains salience because standard practices speak for the firm s efforts to act responsibly (Scott, 1992; Suchman, 1995). By achieving ISO certification, the firm signals its sound practices in environmental management. In the case of the forestry industry, pulp and paper sectors have criteria such as emission levels and energy consumption levels that directly measure a facility s environmental performance and help to achieve consequential legitimacy (Suchman, 1995), which refers to legitimacy gained through the outcomes of an action. For instance, in 1999, the CPPA reported that Canadian pulp and paper mills had improved their environmental performance by indicating that water consumption per tonne of pulp is less than half of what it was 20 years ago and that levels of Total Suspended Solids (TSS) and Biological Oxygen Demand (BOD) had dropped more than half since The CPPA also reported that, in 1995, the use of elemental chlorine in bleaching had dropped 87 per cent, and dioxins and the amount of furans in mill effluent was down 99 per cent from 1988 (CPPA, 2001). While an EMS may be necessary to achieve these desirable environmental performance results, ISO certification is nevertheless not a must-have to demonstrate the achievements, since the firm can show the numbers on energy consumption, TSS and BOD emission levels in their communication with the general public or enforcement agencies. No such measure of consequential legitimacy, however, exists for woodland operations. Woodland operations lack direct measurements that signal environmental performance. One respondent explained his firm s decision to register its woodland operations with ISO but not the mills: pulp mills have some key parameters or key indicators that can be measured against companies worldwide to measure environmental performance. Forestry, on the other hand, is much more of a softer science. Another manager expressed a similar idea: In the forest management side...the ecological processes are a lot more complex and so an appearance of something isn t necessarily a bad thing....so what they looked for...is to have other outside experts to look at it and then basically tell them (the public) and verify if what we were doing was satisfactory. Managers felt that there is a
17 Seeing the Need for ISO big problem with explaining to external people how we do things or how things work. To make communication with the public easier, an internationally recognized standard like ISO was useful. Environmental impact opacity can also be determined by the stakeholders technical knowledge of a particular operation. One manager discussed why their paper mills became certified before pulp facilities. The pulp mills, he explained, ship their products to paper mills, whose managers are familiar with the pulp manufacturing process. Therefore, paper manufacturers could assess the environmental performance of the pulp mills just by the technology or equipment being used. The paper mills, on the other hand, sell primarily to newspapers and publishing companies. These customers do not know much about the paper-making process, therefore, its environmental impact is opaque to them. Rather than trying to explain all the details, the paper mills can certify for ISO to show that they are managing the environmental aspects of their operations in an acceptable way. Once again, the ISO standard is not sought after for its functional benefits, but rather, as an effective way of transmitting information to convince the public or stakeholders that things are being done acceptably without having to explain the complexities of the activities involved. To achieve this end, self declaration is not enough; a trusted and recognized third party is needed to verify to the less knowledgeable public (Brunsson and Jacobsson, 2000). ISO was conceived and used as a tool to facilitate communication and consequently gain legitimacy. Therefore, we propose the following: Proposition 2: Other things being equal, operations with higher environmental impact opacity are more likely to be certified for ISO DISCUSSION AND CONCLUSIONS The main thrust of this study was to explore the circumstances under which firms would seek ISO certification when they were not required to do so by the market or regulating institutions. Most respondents believed that ISO certification provided little, if any, additional functional value to an in-house EMS except for external recognition, credibility, and procedural legitimacy. Therefore, if firms did not feel any direct market demand or institutional pressure, they would probably not bother to certify. However, procedural legitimacy was more likely to matter when the organization s tasks were highly visible (i.e., the task was easy to see and the organization was visible), and the environmental impacts were opaque (i.e., they were hard to measure and communicate). Therefore, task visibility and environmental impact opacity increase the probability and speed of ISO certification. These constructs are related to constructs developed by others. Bansal and Roth (2000) identified the importance of issue salience in motivating corporate
18 1064 R. J. Jiang and P. Bansal environmental responsiveness. They argued that issue salience is shaped by the issue s certainty, transparency and emotivity. Issue certainty is defined as the degree to which the impact of the issue on the natural environment can be measured, while issue transparency is easily attributable to a polluting firm (Bansal and Roth, 2000, p. 729), and issue emotivity is the affect that the issue evokes. The resulting impact of their constructs is similar to ours: the issue becomes more visible or salient in the minds of stakeholders, which allows them to see the benefits of environmental responsiveness more clearly, or in our case, task visibility and environmental impact opacity of an operation helps the managers to see the advantages of ISO The construct of task visibility has also appeared in the context of employee social loafing or shirking (George, 1992; Jones, 1984). George (1992) found that perceived high task visibility was negatively associated with social loafing because it would elicit greater supervisor scrutiny, which is similar to the argument that we presented. Task visibility leads to an enhanced level of external attention and impact opacity points to the difficulty of detection or evaluation. The data analysis also confirmed the results of previous studies in finding that factors such as market demand, institutional pressure, and management control were relevant in driving a firm s EMS adoption decision. Firms responded most strongly to the market specifically to demands from dominant and definitive stakeholders (Mitchell et al., 1997) which had an impact on firms immediate survival, profitability, or growth (Banerjee, 2001). Firms also heeded to institutional pressures from society, local community, green activists, and regulatory forces. Obviously, firms in our sample were still at the stage of seeking pragmatic legitimacy (Suchman, 1995) for their environmental management practices, which explains why customer demand appeared to be a most salient factor in firms EMS adoption decision. This is consistent with Banerjee s finding that corporate environmentalism, or a pervasive rationale for it, ultimately follows the economic bottom line (Banerjee, 2001, p. 507). Managers appeared to be deliberate in their thinking towards the standard. They selectively registered their facilities with ISO based on customer demands in the markets served. They weighted the possible costs and benefits of ISO certification, evaluated the legislator s attitudes towards ISO 14001, and responded to different institutional pressures differently. Our findings contribute to research on organizations and the natural environment. We demonstrated the following two points. First, although ISO certification helps with the maintenance and improvement of an EMS, standardization leads to uniformity not excellence. Therefore, claiming ISO certification as a way of gaining and sustaining competitive advantages may not sell with managers, particularly if their intuition leads them to appreciate ISO for its legitimization value rather than for functional benefits.
19 Seeing the Need for ISO Second, although environmental preservation and sustainable development seem to have become accepted values among large portions of society, firms still need to see the need for voluntary environmental standards like ISO Many firms will not certify for ISO if they do not receive clear market or institutional pressures and are not in need of external recognition and communication. Therefore, the most effective way for governments to improve the take-up rate of ISO is to increase supply chain pressure for certification by having large influential firms commit to the standard. This is probably beginning to happen in North America as firms like Ford and GM announced that their suppliers need to be ISO compliant by the end of Our findings regarding ISO certification also provide a new scenario to organizational researchers interested in the emergence and institutionalization of practices and structures. Studies of the diffusion patterns of civil service reforms, the multi-divisional form, financial reporting standards, and CEO long-term incentive plans (Fligstein, 1985; Mezias, 1990; Palmer et al., 1993; Westphal and Zajac, 1994) have come up with a consistent finding that distinguished between early and later adopters: early adopters usually base their decision on efficiency considerations and focus on the substance functional features of the adopted practice, while later adopters tend to subscribe for legitimacy purposes and focus more on the symbolic functions. The special status of ISO as a new yet well-recognized standard, and the co-existence of regular EMSs that share similar functional features led even the early adopters of ISO to value not only its substance but also to a larger extent its legitimatizing benefits. Hence, our research suggests that the symbolic elements of a standard may be relevant to administrative forms, if there are strong connections to existing forms (such as ISO 9000 in this case), or for which the functional benefits are not clearly known. Our insights were gained from an inductive analysis of qualitative interview data. The fact that this was an explorative study of a small sample of firms in a single industry and country makes the findings limited and their generalizability untested. Further research is needed not only to validate, but also to develop our study. For example, managers did not indicate to us that they were mimicking their competitors, or even aware of what others were doing. This finding could be due to the relatively short history of ISO In a few years, we may find isomorphic forces at work in ISO adoption. Future research can also examine other voluntary standards within the environmental management arena to see if task visibility and impact opacity have the same kind of influence in firms efforts to build credibility and legitimacy. NOTE  The Canadian Pulp and Paper Association has recently changed its name to Forest Products Association of Canada (FPAC). Its website address may change as well.
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