5.5. Indirect effects of the existence of government programs that encourage EMS use
Using the estimates and the procedure detailed in Appendix B, we examine the extent to which the existence of government programs that encourage EMS use (hereafter called EXISTPROG) has an indirect impact on ASSESS and REQUIRE. Results based on estimates from Model 3 are presented in Table 5. We find that EXISTTPROG increases the probability of assessing suppliers’ environmental performance by 6.8%, and also the probability of requiring suppliers to undertake specific environmental practices by 7.9%. We further consider how EXISTPROG affects the joint distribution of ASSESS and REQUIRE. We find that EXISTPROG decreases Pr(ASSESS=0, REQUIRE=0) by 7.2% while increasing Pr(ASSESS=1, REQUIRE=1) by 7.4%. However, EXISTPROG does not significantly affect the GSCM practices of facilities with either ASSESS=0 or REQUIRE=0. This suggests that when assistance programs become available, facilities initially with no GSCM practice tend to start both practices, not one practice.
Using estimates from Models 1 and 2, we find that the magnitudes of the impacts of EXISTPROG are slightly larger but are in the same range. Overall, the effects are found to be positive and statistically significant for all specifications. Thus, we conclude that the existence of government programs that encourage EMS use is effective in promoting GSCM practices. If in fact GSCM practices improve the environmental performance of suppliers, our results also suggest that effect of government programs that encourage EMS use on environmental performance should be larger than reported in Arimura et al. [2], who only examine the extent to which assistance programs help reduce the environmental impacts of ISO 14001 adopters.
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. Conclusion
Using Japanese facility-level data, we estimated the effects of ISO 14001 certification on the promotion of more advanced environmental practices, namely green supply chain management. We find that ISO 14001 promotes GSCM practices. Facilities with ISO 14001 are 40% more likely to assess their suppliers’ environmental performance and 50% more likely to require that their suppliers undertake specific environmental practices.
In the presence of the causal link between ISO 14001 and GSCM practices, we have argued that ISO 14001 may positively affect the environmental performance of suppliers by way of GSCM. This argument is valid if suppliers respond to buyers’ environmental performance assessments and requirements that they undertake specific environmental measures. However, there may be reasons why these suppliers’ environmental performance does not improve. For instance, a facility may choose a particular supplier specifically because this supplier already adheres to certain criteria for environmental management. If so, GSCM practices may induce no change in the supplier’s environmental behavior. Even in this case, however, a facility’s change of its supplier to one that is already green would still increase the overall share of the market obtained by clean suppliers, which should provide incentives for other suppliers to change their practices. In this regard, GSCM still has the possibility of being a positive externality or spillover to ISO 14001.
Further, we find that a government policy of encouraging EMS adoption indirectly influences ISO 14001 adopters to implement GSCM practices. Specifically, government assistance programs make it 7% more likely that ISO 14001 adopters will assess their suppliers’ environmental performance and 8% more likely that ISO 14001 adopters will require their suppliers to undertake specific environmental practices. This evidence supports the idea that encouraging facilities to behave in an environmentally friendly way may be effective in addressing environmental problems.
Though our study is the first attempt to shed light on the spillover effects of facilities’ voluntary actions, data limitations make it impossible for us to examine the effects of ISO 14001 on the environmental performance of adopters’ suppliers. Therefore, one fruitful avenue for future research is to examine the environmental performance of facilities operating within the supply chain to determine whether buyers’ GSCM practices lead to measurable improvements among their suppliers. We also hope that demonstrating the relationship between ISO 14001 and GSCM stimulates other scholars to consider whether these relationships exist among other international settings and whether ISO 14001 might encourage other types of advanced environmental practices as well.
GSCM may require an organization’s suppliers to spend additional resources on improving their environmental performance. One may therefore argue that beyond some point, the marginal costs of suppliers reducing their environmental impacts could exceed the overall benefit to the supplier and to society. While this situation seems unlik