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Part IV Normative Development, Ch.21 Private and Quasi-Private Standard Setting

Jason Morrison, Naomi Roht-Arriaza

From: The Oxford Handbook of International Environmental Law

Edited By: Daniel Bodansky, Jutta Brunnée, Ellen Hey

From: Oxford Public International Law (http://opil.ouplaw.com). (c) Oxford University Press, 2021. All Rights Reserved. Subscriber: null; date: 04 March 2021

Sustainable development — NGOs (Non-Governmental Organizations)

(p. 498) Chapter 21  Private and Quasi-Private Standard Setting


Many, if not most, standards in international environmental law (IEL) are created by states. The most common form of standard setting involves states adopting national legislation and regulations on the basis of commitments made in international or regional agreements. This article concerns a different kind of standard setting—namely that carried out by private or quasi-private entities. Private standards differ from public IEL standards in two major respects. First, the standards are aimed directly at organizations—mostly business organizations (see Chapter 35 ‘Business’) but also in some cases non-profit or public-sector organizations—and are not aimed at states. In other words, they are market-oriented instruments that act directly on producers, and do not originate from intergovernmental agreements or instruments that apply to producers through the intermediation of national law. Second, the standards are not primarily (or at least initially) regulatory. They seek to change behaviour through a complex mix of incentives and do not rely primarily on external, deterrence-based enforcement. Organizations adopt and implement private and quasi-private standards largely as a result of market or reputational incentives, although as we will demonstrate in this chapter, both national regulation and international agreements may also push towards their adoption. These private standards may serve as gap-fillers and/or the technical basis for public law and regulation; may be precursors of subsequent public standards; or may serve for a time to show that industry can solve its own problems and that, therefore, public regulation is unnecessary. Despite these multiple functions, this chapter will illustrate that the distinction between the voluntary versus mandatory nature of private standards is increasingly blurring, as is the conceptual and practical differentiation among private, quasi-private, and public standards.

A number of factors have made private and quasi-private standards increasingly important in international environmental law. However, dissatisfaction with the (p. 500) limits of private standard setting has also led to increasing calls for public oversight and participation in standards-setting processes and for their transformation into mandatory, public standards. Thus, what is emerging is a complex array of standards that defy easy categorization into purely private and purely public—a trend that is likely to continue given the current emphasis on public-private partnerships and the key role of the private sector in sustainable development.

This chapter starts by examining who creates private and quasi-private standards and why. It then tackles the types of private and quasi-private standards, the implications of these standards for public policy, and the ways in which compliance with such standards is enforced. A final section discusses the advantages and disadvantages of private standard setting as compared to public, the links between public, quasi-private, and private standards, and the emergence of a hybrid standard-setting regime governing the behaviour of the private sector.

Who Creates Private Standards?

2.1  Emergence of Private and Quasi-Private Standards

Private and quasi-private standards in the environmental area play a prominent role in the context of globalized business enterprises and trade. As goods move around the world, they are subject to an array of quality, safety, and environmental standards. And as national and/or regional standards have proliferated, they have given rise to efforts to create harmonized international standards that not only facilitate trade across the globe, but also help to reduce unnecessary costs associated with ‘multiple registrations, inspections, certifications, labels and conflicting requirements.’1 Some global corporations with operations in a number of different countries find it useful to standardize their internal operations, allowing them to use the same protocols throughout their organizations independently of local law, either for efficiency purposes or to help minimize environmental risks and liabilities.

In addition to those drivers internal to private actors, external drivers have also pushed towards the creation and adoption of private and quasi-private standards. Over the past two decades, consumers have increasingly linked their values with their spending and investing habits. This shift in economic paradigm now spans a wide variety of decisions, from the certified organic food people eat, to the shoes and clothes they wear, to the financial investments they make for retirement. In part as a result of this emerging change in societal expectations, companies also are beginning (p. 501) to prefer working with suppliers and partners that have a positive track record vis-à-vis their social and environmental practices. Simultaneously serving to drive and respond to this consumer demand, non-governmental organizations (NGOs) (see Chapter 33 ‘Non-Governmental Organizations and Civil Society’) have created multi-stakeholder alliances that have sought to expand concepts of corporate environmental and social responsibility, and have established standards as tools that underpin trade and sustainable development.

Many of these private, market-driven systems that predominate the field today stem from a general dissatisfaction with government-led ‘command and control’ regulatory approaches (see Chapter 8 ‘Instrument Choice’) as well as with the failure of intergovernmental processes of the 1990s and early 2000s to result in meaningful action to advance sustainable commercial practices and protect human rights in the workplace. Consequently, stakeholders external to businesses, including investors, watchdog NGOs, social justice advocates, the general public, and even sometimes regulatory authorities themselves, have increasingly turned to incentive- and information-based approaches to supplement traditional command-and-control environmental regulation at the national level as well as to help differentiate good and bad actors in the market.

These drivers, plus others discussed later in this chapter, have led to a diversity of standard-setting processes. We focus here on three: quasi-private standard setting through the International Organization for Standardization (ISO), standard setting by industry itself and through direct industry-NGO partnerships, and the development of private standards as a result of cooperation between international governmental bodies such as the Organisation for Economic Co-operation and Development (OECD), the International Labour Organization (ILO), and the UN Environment Programme (UNEP), and the private sector, resulting in voluntary standards. These multiple pathways are now common enough that they create a burgeoning problem of proliferation of standards on the same subject matter.

2.2  ISO and Its Sister Organizations

At present, the ISO is perhaps the most recognized, and by and large well respected, international standards institution. Founded in 1946 to facilitate international trade, the ISO today is a worldwide federation of 148 national standards bodies. Membership in the ISO is voluntary and open to any country that wishes to participate. The ISO allows only one member per country. ISO members are the national standard-setting body, which may be a private entity, a government agency, or a hybrid. As a general rule, national standards bodies from industrialized countries tend to be private institutions, while in developing countries they are more often government agencies. The ISO’s unique blend of government and private representation (p. 502) has given it a stand-alone position as perhaps the single-most recognized and accepted developer of international standards, with more than 14,000 standards published over its almost 60-year history. The scope of the ISO’s work covers standards in all major fields except electrotechnical and food standards, which are the responsibilities of the International Electrotechnical Commission (IEC) and the Codex Alimentarius Commission, respectively. The ISO’s stated objective is to promote the development of standardization and related global activities with a view towards facilitating the international exchange of goods and services, and towards developing cooperation in the spheres of intellectual, scientific, technological, and economic activities.

ISO standards are discussed and developed in technical committees (TCs)—some 188 are now active—which are the forums where national standards bodies and their expert delegates provide their input into the standards. National standards bodies are, in turn, composed of producers, users/consumers, government ministries, and departments and academics, among others, and their membership is supposed to ensure a reasonable balance among all interests directly or materially affected by the standard under development. Theoretically, the ISO’s broad spread of interests at the national level gives it the legitimacy to enact standards with public policy implications, however, as discussed later in this chapter, it is questionable whether, in practice, the ISO or its members bodies actually achieve sufficient levels of stakeholder involvement and diversity to warrant such credibility. The international standards produced by the ISO are then further legitimized by typically being adopted by national standards bodies as ‘national standards’.

The ISO’s influence is exercised not only through its size and scope, but also through its status as a producer of some of the world’s ‘trade-legal’ standards as recognized by the World Trade Organization (WTO). The WTO’s Agreement on Technical Barriers to Trade, for example, requires member countries to adopt ‘relevant international standards’, which is an implicit reference to, among others, ISO standards, as the basis for their national standards. An adjunct Code of Good Practice specifically references the ISO, thereby lifting the ISO standards, which states may or may not adopt as their national standards, to the level of international law. This special trade-relevant status derives from the ISO’s quasi-intergovernmental character and from the fact that it was established contemporaneously with other trade-facilitating organizations. Other standards developed, for example, by the NGO-led initiatives discussed later in this chapter, are not afforded the same recognition in the context of the existing international trade regime. Thus, an interesting question arises about the trade implications of ISO standards. So long as such standards are applied by private producers or through private (contractual) agreements, they would seem to be outside the purview of the WTO, but once adopted by governments as the basis for mandatory or even preferential treatment, it is conceivable that non-ISO standards that were more restrictive than the ISO ones could be subject to a WTO challenge. The case, however, has not yet arisen.

(p. 503) Historically, the ISO focused exclusively on the development of product specification standards, including, for example, technical measures pertaining to the height of car bumpers, film sensitivity, and screw size.2 Its first foray into more processoriented general standards came with the quality management series, ISO 9000, which is described in section 3.2 in this chapter. The ISO has expanded its scope over the course of the last decade to encompass environmental issues. With the creation of ISO/TC 207—dealing with environmental management in 1993, the ISO took its most notable step into the public policy arena, extending its influence beyond industry and their customers and into issues of general public interest. And the ISO is continuing (and even accelerating) its pursuit of the development of standards that directly support and advance sustainable development. In its 2003 strategic planning consultation document, ISO Horizon 2010: Standards for a Sustainable World, the ISO expresses its intention to continue moving into the environmental and social arenas, stating that its standards can serve ‘products and services that enter into world trade and that impact on the health, safety, environment and social progress of mankind.’

As a result of the ISO’s unparalleled reach, there is little doubt that any new ISO standards in the social or environmental field will continue to have a sizable (and likely growing) influence on businesses, governments, and civil society around the world. Yet, the ISO’s evolution from an institution that promulgates technical engineering standards to a social and environmental standard-setting body has not been accompanied by a parallel shift in the representation of important stakeholders within the ISO. Recent evidence suggests that developing countries and numerous key stakeholder groups remain underrepresented in the ISO.3 In addition to a lack of civil society and relevant government ministerial participation, small businesses and even some major industrial sectors tend to be underrepresented in environmental standards development, for instance, while consultants and standards bodies apparently have disproportionate influence. Part of the problem stems from the process of standards elaboration, which is done through a myriad of meetings all over the world, with no consistent funding available for NGO or developing country representatives. The language of the ISO is arcane, difficult for environmental or other civil society groups to understand and not often translated from English. Until recently, it was difficult to find environmental groups with the interest (or budget) to follow ISO proceedings consistently. Despite plans and protestations to the contrary, the ISO until the mid-2000s had taken few substantive steps towards greater inclusivity in its environmental and social standard setting.

These procedural limits also condition the rigor of ISO standards. A need for informal ‘consensus’ (roughly defined as the absence of sustained opposition on an (p. 504) issue of substance) to adopt a standard and the ambition to create standards applicable to large and small, developed and developing, and all types of organizations means that substance tends to be watered down to a least common denominator. As discussed in section 3 later in this chapter, these limitations have hobbled the ability of ISO environment management standards to drive sustainable development.

2.3  Non-State Environmental and Social Certification and Labelling Programmes

The perceived need for consumers to be able to distinguish sustainable from unsustainable and environmentally damaging products in the marketplace has led NGOs to create their own standards. Typically, these initiatives have consisted of normative performance and/or management standards that underpin third-party verification and certification/labelling elements. Unlike the ISO’s ‘systems’ standards, these NGO-driven initiatives generally require performance minimums and on-the-ground outcome assessment. Organizations independently assessed as having conformed to the requirements contained in the initiative’s standard(s) are entitled to include the initiative’s trademark/logo on its products, promotional material, and/or facilities. Examples of such standards-based initiatives include the Forest Stewardship Council (FSC), the Marine Stewardship Council (MSC), Social Accountability 8000, and Fairtrade Labelling Organization International, among many others.

For example, the FSC certifies forests (40 million hectares in 73 countries in 2003) based on criteria that address legal issues, indigenous rights, labour rights, multiple benefits, and environmental impacts surrounding forest management. Building on this example, Unilever Corporation and the World Wildlife Fund created in 1997 the MSC to use consumer pressure to drive improved fishing practices. The MSC is now an independent organization with a Stakeholder Council composed of a balance of fisheries, processing, retail, and environmental and social interests. The MSC has to date certified a small number of fish stocks.

It remains to be seen, however, to what extent these certification programs can make inroads into mainstream markets. They assume that consumers will be willing to pay a premium for sustainability, which may only be true of some commodities or of certain luxury goods. Small producers, moreover, may find it difficult to afford the cost of third party certification (or of the implementation of the actual standards, for that matter). They also depend heavily on the credibility of the certifying/labelling organizations—any controversy may spell the end of the certification effort. Yet, it is difficult to consistently balance the many factors involved in certification in a way that satisfies competing audiences.

Over time, successful NGO-initiated standards may change into bodies that look more like formal standards institutions, albeit without the ISO’s link to governments (p. 505) and international public law. For example, the Global Reporting Initiative, discussed later in this chapter, started as an NGO-industry collaboration based at the Coalition for Environmentally Responsible Economies (CERES), but has now created a permanent independent governing structure to develop new reporting initiatives and, eventually, to sell future standards much as the ISO does. Such initiatives may then develop a link to public law through inclusion in national legislation or public international initiatives, and may eventually carve out niches at the intersection of the public and private that are similar to (or in competition with) that of the ISO.

Of course, industry groups often create their own standards. These may range from industry- or company-specific ‘codes of conduct’ applicable only to their own operations to more wide-ranging standards applicable to suppliers or borrowers. The standard-setting process in this case is often quite opaque, although codes borrow heavily from each other, from the public sector standards discussed later in this chapter, and from NGO input (especially where codes are developed in response to public/NGO pressure). In certain high-profile sectors such as chemicals and banking, industry associations have played a key role in developing sector-specific codes.

2.4  Cooperation between the International Public Sector and the Private Sector

Finally, some standards straddle the line between public and private and are created by public international institutions for both public and private use. International financial institutions, for example, can set out substantive emissions and design guidelines to reduce the environmental impacts of bank-funded projects. The World Bank’s Industrial Pollution Prevention and Abatement guidelines, including sector specific protocols, are then used by private financiers as well as the bank and other government agencies. Another example might be UNEP’s 1994 Code of Ethics on the International Trade in Chemicals, which is aimed at private producers, references its compatibility with Responsible Care and other private standards, and yet is the product of a UNEP-convened series of consultations with industry, government, and NGO experts.

Public-private collaborations also result in more general codes of conduct aimed at industry. For example, the OECD’s Guidelines for Multinational Enterprises were created as a result of a set of meetings involving OECD member governments, in consultation with industry and NGOs. The ILO’s Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy emerged from the ILO’s government-worker-employer tripartite structure. Both set out a general set of obligations for private enterprises, which in the OECD guidelines includes both environment and health and safety obligations and, in the ILO case, includes principles on worker health and safety with significant environmental implications. They have more in common with other forms of public international soft law-making in terms (p. 506) of the access of private actors. Both are voluntary. The OECD guidelines, to the extent that they have any enforcement mechanism, use a public international process, in the form of national contact points within government ministries that are to receive complaints of violations, investigate, attempt to conciliate, and, if necessary, publish information regarding violations. The UN secretary-general’s Global Compact similarly sets out a short list of broad principles, three of them concerning the protection of the environment. Private enterprises voluntarily choose to sign up to the Global Compact, which deliberately avoids enforcement machinery and relies instead on creating networks for the transmission of best practices across industry.

What Kinds of Private Standards Exist?

There exist a dizzying array of types of private standards and an even wider range of functions that they attempt to serve in the market today. We adopt the ISO’s definition of standards as documented agreements containing technical specifications or other precise criteria to be used consistently as rules, guidelines, or definitions of characteristics, to ensure that materials, products, processes and services are fit for their purpose. Based on this broad definition, we lay out in this chapter a general (and loose) classification scheme of the types of private standards that are being developed and used today. The reader should be aware that in practice there are few clear-cut boundaries between the categories described here, with many existing standards containing elements of each of them. It is not uncommon, for example, for a single standard to include management/process requirements and performance minimums, in addition to prescriptive measurement and reporting protocols.

3.1  Technical Specifications and Performance Standards

Standard setting initially focused on product specifications, ensuring that devices such as automatic teller machine cards and kitchen appliances operate worldwide. Product specifications exist for environmentally related products such as measuring equipment, and for products and services with environmental hazards. Examples of the latter are the ISO’s standards on construction and materials and engineering technologies. In the environmental arena, the vast majority of performance-oriented standards have focused on limiting an organization’s adverse effects by establishing performance minimums for issues such as energy use or air or water emissions. These can apply to any stage of the product’s life-cycle, for instance, production, use, and/or (p. 507) disposal. Standards addressing performance minimums can be qualitative (that is, minimize toxic wastes or water use) or quantitative (no more than X emissions per widget produced). Performance standards set specific goals but do not require any particular way to meet them. They may apply equally to environmental aspects covered by national regulation, by international treaty or soft law, or to unregulated aspects not covered by any government regulation.

In recent years, best-in-class standards have gained prominence in the environmental standards arena. Often, such standards have been used within the context of certification and/or labelling schemes. Best-in-class standards are typically comparative rather than absolute, in that they benchmark a producer’s performance against others in the same product or service category. They can measure a single attribute (for example, energy efficiency) or they can evaluate and trade-off various attributes to obtain a measure of ‘environmentally superior’ products. Blue Angel in Germany or Greenseal in the United States are examples of eco-labelling schemes founded upon best-in-class performance criteria and standards for products and services. The programs grant the use of their logo to top performers that meet the minimum performance requirements.

3.2  Process and Management System Standards

The international standards developer, the ISO, was the first main player to move beyond the formulation of technical standards when it embarked on an effort to standardize quality management and assurance standards in the 1980s. Known as the ISO 9000 series, these quality management standards represented the ISO’s first attempt to draft normative systems standards, as opposed to technical engineering specifications. The ISO 9000 standards focus on evaluating the procedures a company has in place to manage the quality of the production process, instead of the product itself. While not directly mandating particular ‘quality levels’ for products and services, the widely known and successful ISO 9000 series standards were developed to ensure that all systems that relate to the production of goods and services meet the same minimal quality assurance and quality control provisions.4 To the degree that quality improvements can eliminate or minimize waste (for example, pollution), these standards have been recognized as precursors to a formal environmental management system (EMS), which more explicitly focuses on addressing organizations’ environmental impacts.

Although firms have managed their environmental affairs independently for decades, over the last ten to fifteen years, standardized methods for environmental management have emerged at both the national and international levels. Voluntary (p. 508) private sector standards and industry codes of conduct are examples of initiatives that have sought to harmonize environmental management practices. Developed in the late 1980s and early 1990s, examples of these voluntary environmental standards and codes include the International Chamber of Commerce Business Charter for Sustainable Development, the Chemical Manufacturers Association’s (now American Chemistry Council) Responsible Care programme, and the CERES principles. While most of these codes (especially the industry-generated ones) tend to address only environmental management, some, such as the CERES principles, also focus on environmental results. Although independent of one another, these initiatives represent an evolution of voluntary standards development.5

3.2.1  EMS

The voluntary initiatives and the ISO 9000 standards discussed earlier in this chapter, along with subsequent national and regional EMS standards such as the British Standard 7750 and Europe’s voluntary regulation, the Eco-Management and Audit Scheme (EMAS), served as precursors to the international EMS standard, ISO 14001. ISO 14001 and other EMS frameworks typically consist of a number of elements, such as policy setting, planning, management programs, internal auditing, and operational controls, which collectively constitute an organization’s EMS. Organizations may self-declare conformance to the ISO 14001 standard but, more often, have an outside auditor certify that they meet the standard’s requirements.

As with the ISO’s quality management standards, prescriptive environmental performance levels are not included in ISO 14001, which instead provides a plan-do-check-act continual improvement model for organizations. Standard writers have justified the exclusion of environmental performance measures due to differences in national environmental regulations and the fear that specified levels might stifle continual improvement and innovation as well as limit market access for firms from developing countries. They also have felt that the setting of environmental performance levels, which have human health and other policy implications, falls within the remit of government, not private standard-setting bodies. Moreover, specific requirements would vary substantially among industry sectors and from large to small businesses, and the ambition of these standards was to be useful to all types and sizes of organizations.

Nonetheless, the absence of prescribed performance levels in EMSs such as ISO 14001 has diminished the credibility of the standard in the eyes of some interests external to the organizations adopting the standard. Since ISO 14001 is a systems standard, certification, even if credible, demonstrates only that a management system is in place. Any link to an actual change in the environment is indirect. External parties are primarily interested in the degree to which organizations impact the environment. And thus there has been a long-standing and unresolved (p. 509) debate centring on the link between certified EMSs such as ISO 14001 and improved environmental performance, especially since EMSs contain a combination of regulated and non-regulated environmental aspects and impacts. In recent years, several government-funded empirical studies in North America and Europe have failed so far to unequivocally establish that certified EMSs (ISO 14001 or EMAS) deliver environmental improvements.6 One of the studies also found a lack of confidence in certification bodies, which were perceived as lacking sufficient technical competency and/or spending insufficient time during audits assessing companies’ performance outcomes as opposed to documented policies and procedures. These studies have reinforced the reasons why EMS certifications have been met with scepticism by some government agencies, environmental organizations, and the general public in parts of the world.

3.3  Measurement and Reporting Standards

Another category of environmental standards focuses on measurement and/or disclosure of the social and environmental effects of the organization’s activities. Harmonization of measurement approaches can include standards such as the air and water quality measurement standards developed by the ISO’s Technical Committees 146 and 147, respectively. More recently, efforts have been made to develop greenhouse gas (GHG) accounting and reporting standards. Most notably, these include the Greenhouse Gas Protocol, which was prepared by the World Business Council on Sustainable Development and World Resources Institute (WBCSD/WRI), and the three-part ISO 14064 standard (currently under development), which provides specifications for the quantification, monitoring, reporting, and validation of GHG emissions applicable for organizations and GHG reduction projects. These protocols serve several purposes: they assist in the implementation of international treaty or national public law obligations such as the Kyoto Protocol to the UN Framework Convention on Climate Change and its associated emissionstrading schemes. They can also serve to, in effect, expand these public law schemes even to places where they do not yet apply, as in the application of the GHG protocols by US firms, either in preparation for what they see as eventual regulation or in order to participate in existing greenhouse gas emissions markets. Thus, private measurement protocols facilitate both public and private law schemes simultaneously.

A prime example of a disclosure protocol (and associated metrics) is the Global Reporting Initiative (GRI), a multi-stakeholder process and independent institution (p. 510) whose mission is to develop and disseminate globally applicable sustainability reporting guidelines. These guidelines are for voluntary use by organizations for reporting on the company-level economic, environmental, and social dimensions of their activities, products, and services. The GRI aims to create principles on sustainability reporting that are as well accepted as financial reporting guidelines. Reports prepared using GRI guidelines are expected to follow principles of transparency, inclusiveness, auditability, completeness, relevance, accuracy, comparability, clarity, and timeliness. A GRI report is also supposed to follow specified protocols regarding data presentation, metrics, and content, although organizations have considerable flexibility in adapting the guidelines to their particular audiences and needs. Enterprises may choose to report about all the specified categories provided in the GRI guidelines or to choose less comprehensive reporting, at least during an initial period. The GRI does not attempt to dictate how an organization obtains its information, but instead to give enterprises a useful and credible template, and their multiple audiences some way of using the information to benchmark and compare results. A related facilities reporting project is developing GRI-based indicators for plant-level reporting, allowing disaggregated plant-specific data that may be more relevant to a plant’s neighbours or local regulators, but less important for investors or consumers. The combination of plant- and company-level reporting allows companies to address a wide range of relevant audiences.

3.4  Proliferation of Standards Initiatives

All of these voluntary, private, and quasi-private standards have evolved in the dual context of market competition and the international legal framework. Since the inception of such schemes, government trade officials and some producers have expressed fears about growing confusion in the market place, as well as about the effects that they might have on market access and competitiveness of developing countries, particularly in cases where the programs were developed without their proper participation.7 Regardless, the growing recognition of the positive effects of voluntary environmental and social standard-based certification and labelling systems, such as the role they play in driving market competition and innovation, as well as the potential they hold for opening new markets, has caused many original opponents to change their views and positions.

However, this competition can also have detrimental effects. The success, and even potential success, of certain NGO-led initiatives has prompted the proliferation of a (p. 511) broad array of competing systems that have attempted to build on the momentum and credibility of the certification movement, while offering cheaper and less stringent alternatives. Indeed, it is precisely because NGO-led labelling and certification schemes have had significant bottom-line impacts for businesses in targeted sectors that some in the retailer/brand industries have taken a proactive role in developing competing standards and compliance systems that better suit their needs. This trend is particularly notable in the forest and coffee sectors. However, due to the poor stakeholder balance in some of these nascent industry initiatives, it is unlikely that they will result in standards and/or conformity assessment procedures that are considered meaningful by many civil society organizations. Yet, these industry groups are in the driver’s seat because in many cases they represent such a large percentage of the market, and can bring their marketing and other resources to bear. And as a result, the pressing question confronting the comparatively smaller NGO-led initiatives is how to best influence the newer competing initiatives to ensure the newer initiative’s credibility (and compatibility) with existing systems.

Among the industry-dominated competitors to NGO-led standards, the ISO is a case in point. In the forestry sector, for instance, some companies wanting to externally validate their environmental management practices may end up choosing to pursue ISO 14001 certification over the more rigorous (from an NGO’s perspective) FSC certification. Other areas of possible competition with NGO-led initiatives may emerge when the ISO finishes drafting the GHG accounting and corporate social responsibility standards that are currently under development.

Compliance with Private and Quasi-Private Standards

Private standards are presumably ‘voluntary’ although they are often significantly more consequential than this label suggests. They can be considered voluntary only in that there are no legal requirements for a country to adopt them and in that there is not an entity that regulates or enforces their implementation. However, because countries often adopt private international standards such as the ISO’s as national standards, and because industry norms may mandate conformity to a standard as a condition of business, they can become de facto requirements for competitiveness in the international market.

Participation in the standards development process itself is also not entirely ‘voluntary’. Since the requirements within private standards can have significant implications for market competitiveness, various interests, particularly large multinational corporations, feel compelled to participate in the standards writing process. Requirements contained within a particular standard could have (p. 512) disproportionate economic consequences for a given country, industry sector, or individual company. Therefore, participation becomes virtually obligatory for potentially affected entities. Indeed, the development, diffusion, and implementation of private and quasi-private standards are driven by a swirling current of markets, risk prevention, and regulation. Each operates directly and indirectly through a number of different mechanisms, which we discuss in the next few sections.

4.1  Market Dynamics

Market mechanisms can be both positive and negative. They can take effect through requirements of financiers, investors or insurers, or through buyer specifications and government procurement. For example, after the ISO completes international standards, national standards bodies typically adopt them as national standards. Once nationalized, these standards often become market requirements (even for companies without foreign operations), for instance, as part of government or company procurement criteria, as has happened in the case of the ISO 9000 and ISO 14000 series standards.8 Concerns within the organization about operational efficiency and environmental liabilities also play a role in the adoption of private environmentrelated standards. In the next sections, we discuss in more detail the various market pressures affecting all of these areas.

4.1.1  Drivers Internal to Organizations: Eco-Efficiency, Reducing Liability

Some organizations adopt private environmental standards, especially environmental management standards, for internal purposes, without reference to direct external pressure. They may do so for a number of reasons. In a minority of cases, corporate leadership may be convinced that a sustainable business model includes an environmental stewardship ethic. Such altruistically motivated enterprises, however, remain a small minority. A larger number of organizations, especially those engaged in manufacturing, may adopt private standards as a way to find and exploit savings opportunities and eco-efficiencies or to reduce liabilities. For example, finding ways to reduce hazardous wastes through process redesign or other pollution prevention techniques can save money on disposal costs, lower regulatory costs by obviating the need for certain permits, lower the risk of tort litigation, and reduce the quantities of raw materials used in production. There have been a host of studies over the last two decades demonstrating the economic as well as environmental benefits of such (p. 513) measures, as well as the related concepts of industrial ecology, green building, and the like. Such firms may already be implementing quality control management standards such as the ISO 9000, and it is a small step from there to EMS implementation.

Eco-efficiency and liability rationales are important to making the ‘business case’ for pollution prevention and other environmental protection strategies, but they are also limited. While they may drive the adoption of EMS standards, they are generally not the principal drivers of certification or reporting on environmental impacts, which can have high costs with uncertain short-term, tangible paybacks and are typically driven by external audiences. These internal motivations may lead to significant performance improvements, but it is not clear whether these improvements deal with the most urgent environmental impacts of the firm’s behaviour or whether EMSs that have been adopted for internal reasons will ever lead to environmental improvements that are not deemed cost-effective, even when considering a longterm pay-back period. This uncertainty arises because a central tenet of voluntary environmental management standards is ‘flexibility’—rarely, if ever, will they prescribe specific environmental improvements but rather they will allow organizations to focus on the environmental issues they themselves deem most important.

Eco-efficiency is not the only reason why firms might choose to adopt private environmental standards for their own use, even without any external drivers such as reporting or recognition. Other reasons may include improving compliance with regulatory or legal requirements, attracting or retaining qualified and forwardthinking staff, or benchmarking performance against other plants of the same company or against competitors in the same industry. These reasons merge with other, external reasons for adopting such standards, either market or regulation-based.

4.1.2  Demands of Business Partners and Customers

The adoption of private standards is often driven by the need to satisfy outside audiences. Voluntary environmental and social standards and their related certification, reporting, and labelling systems are increasingly becoming requirements for access to certain markets, especially in Europe and Asia. These may be either built into the contract or take the form of preferences for suppliers who meet certain requirements. Customers may require certain environmental guarantees of probity as a condition of the contract in order to minimize their own reputational exposure. Banks and insurers may be willing to lower rates if certain environmental conditions are fulfilled. In all, the adoption of certain private standards and protocols serves as a shorthand signal of environmental responsibility. For instance, as discussed earlier, while the adoption of an EMS does not guarantee superior environmental performance, it does signal to outside audiences that management is taking the issue seriously and will avoid major disasters that could tarnish the image of associated enterprises.

Government procurement is a classic example of contract-driven adoption of environmental standards. In the United States, Executive Order 13101 requires federal agencies to purchase, where possible, ‘products or services that have a lesser or (p. 514) reduced effect on human health and the environment when compared with competing products or services that serve the same purpose.’ Europe has similar programmes, for example, under EC Directive 2004/18 of 31 March 2004 on the Coordination of Procedures for the Award of Public Works Contracts, Public Supply Contracts and Public Service Contracts, governments may incorporate environmental and social criteria into procurement. Private standards, especially third-party certification, serve as an indicator that a product is environmentally superior, while reducing the government’s cost of obtaining the information—they are useful for both the public and private actors. For example, the Canadian environmental agency prefers goods and services that have been certified under Canada’s EcoLogo labelling scheme for government procurement purposes.9

In the private sector, industry has begun demanding the use of private standards from their suppliers. While the ISO 14001 standard does not require that suppliers be certified, some large corporations are requiring certification from their suppliers or at least from suppliers of environmentally sensitive goods. For example, in 1999, both the Ford Motor Company and General Motors announced that they were requiring ISO 14001 certification from their suppliers. Other large corporations, such as Xerox, IBM, Bristol-Myers Squibb, and Dole Standard Fruit Company have also required (or strongly encouraged) their suppliers to adopt and certify to the EMS standard. Codes of conduct and certification requirements are formalized via supplier agreements and are enforced through questionnaires and occasional on-site visits. These practices illustrate the potential for the market to drive behavioural changes in environmental management even for firms in countries where government regulatory authorities have been unwilling or unable to do so.

Industry associations also impose industry-specific or substance-specific standards on suppliers. For example, a number of large firms in the high-technology sector recently announced the release of the Electronics Industry Code of Conduct (EICC), which was developed to establish and promote unified industry expectations for socially responsible practices across the electronic industry’s global supply chain. Among other things, the EICC harmonizes approaches for monitoring suppliers’ performance across several areas of social responsibility, including labour and employment practices, health and safety, ethics, and the protection of the environment. This industry-wide initiative was developed in response to repeated complaints by suppliers that the proliferation of codes has left them facing multiple, overlapping requirements and burdensome reporting procedures.

Banks and insurers can require the implementation of management or certification programs as a condition of doing business. As of 2004, some 28 global banks, representing more than 75 per cent of international private lending capital, had (p. 515) signed on to the Equator Principles, which is a code of conduct that requires the completion of an environmental and social impact assessment and, where necessary, a management/mitigation/decommissioning plan before project finance will be available. The Equator Principles, in turn, incorporate by reference the standards of the International Finance Corporation (the commercial arm of the World Bank) and the bank itself. In the environmental area, the World Bank’s Pollution Prevention and Abatement Handbook, along with sector-specific guidelines for some forty industries, are incorporated into an evaluation of financing for large projects.10 Thus, standards that originate in the public international arena (which are themselves prompted by NGO and government pressures) may pass by reference into private standards, especially where the private and public functions are similar (large-project lending) and there is a felt need for consistency. Some individual banks have also developed their own principles. The Bank of America, for example, developed principles on environmental responsibility in 2004 that apply to its lending operations worldwide.

Investors also comprise a major constituency for reporting and certification initiatives. By 2003, the field of socially responsible investment (SRI) encompassed 11.3 per cent of all professionally managed investment dollars in the United States, over two trillion dollars, according to the Social Investment Forum.11 While some SRI investments simply screen out objectionable investments such as tobacco, others engage in more complex evaluations of environmental and social records based in part on publicly reported information. Institutional investors, representing state and union pension funds, are particularly active in both seeking out environmentally sound companies, and in pushing their existing holdings to improve their ethical, environmental, and social performance. California’s Public Employees’ Retirement system (CalPERS), for example, has pledged to invest up to US $500 million in environmentally screened stock funds and US $200 million more in private equity to back the environmental technology sector.

Under the rubric of the Carbon Disclosure Project, a group of 155 institutional investors with US $21 trillion in assets asked large companies to provide information on carbon risk factors. In order to do so, the companies will have to use measurement and reporting protocols developed by private organizations (for example, the WBCSD/WRI Greenhouse Gas Protocol and/or the ISO 14064 standard).12 Often, institutional investors turn to NGOs such as the Investor Responsibility Resource Center for an evaluation of a company’s social responsibility profile, while these NGOs, in turn, rely on information generated from certification, labelling, and reporting systems as well as their own research. For-profit analysts have also begun to specialize in identifying environmental leaders (as evidenced by their EMS (p. 516) certifications, compliance record, and performance reporting), seeing sound environmental management as a viable proxy for good management overall.13

4.1.3  Demands of External Audiences: Reputational Incentives

In addition to these contractual incentives and investor and supply chain mandates, a larger, if more diffuse, driver for the adoption of private standards is a sense that they touch on issues important to consumers. In a global economy where small shifts in market share can make all the difference, and where branding and differentiating a company’s products is often key, a company’s reputation as a good (or poor) environmental actor can become significant. Reputational incentives can be primarily negative—that is, an effort to avoid being tarred as an environmental predator—or positive—an effort to gain business advantages by being perceived as an environmental leader. Often companies adopt private standards as a result of both positive and negative incentives. ‘Brand’ industries that are vulnerable to consumer boycotts, high-profile lawsuits, or other public protests, for example, might promulgate or join codes of conduct or certification systems in an effort to avoid becoming targets. The Voluntary Principles on Security and Human Rights, a quasiprivate code of conduct negotiated by the US and UK governments, major extractive industry companies, and NGOs, for instance, was largely an attempt to defuse adverse public perceptions of the security practices of oil and mining companies. Industry associations also sometimes require compliance with private standards as a condition of membership in the association. The most well-known example is the considerable revamping of the chemical industry’s Responsible Care initiative, which now requires all of its members to have an industry-specific EMS in place, and to have by the end of 2007 an initial certification cycle completed by an outside auditor. At the outset, the Responsible Care initiative was largely driven by negative perceptions of the industry’s environmental role. However, over time, it is possible that even though these initiatives begin for defensive reasons, as staff and management perceive that they have benefits, including real improvements in company morale or cost savings, they eventually take on a life of their own and become more substance than window-dressing.

Reputational incentives can also seek to position a company as an environmental leader, in the expectation that such a reputation will attract customers and loyal employees. Many leading companies have signed on to more than one overlapping code of conduct and/or reporting framework, although the willingness to sign on seems to vary with the stringency of the obligations required. Standards-based certification, labelling, and reporting schemes are particularly important in establishing these positive reputational incentives, as they can serve as proxies for good environmental stewardship, making it simpler for interested parties to tell leaders from (p. 517) laggards. Certification and labelling require a generalized trust that the methodology of certification reflects the right issues and addresses substantive performance as well as adequate management systems and that the verifying entity has the qualifications, the independence, and the incentives to rigorously test the participant company’s performance rather than soft-pedal it. These issues have been most salient in the context of self-certification or in cases where third-party certifiers have been large accounting or consulting firms with multiple connections to company management or government trade ministry officials interested in encouraging trade through certification. With the exception of organic food, certification and labelling schemes in the United States and Europe are private with some government oversight, while in the rest of the world they are more often government run. Even well regarded schemes have made controversial decisions, which in the eyes of some audiences have ‘cheapened’ the certification.14

All of these market-driven incentives share the characteristic that it is the perception, as much as the reality, that drives companies to ‘voluntarily’ adopt them. In other words, if producers have the impression that implementing one or more private standard could make them more attractive to business partners, consumers, investors, lenders, or procurers, they will do so even if the actual numbers of decisions that turn on the existence of such standards is limited. A dynamic will then take hold by which companies will adopt standards because their competitors have done so.

4.2  Regulatory Incentives

Regulation, or the threat of regulation, also drives the use of private standards, especially environmental management standards. Regulation may take the form of disclosure requirements, leadership initiatives that seek to reward superior environmental performance, enforcement mechanisms that require offending companies to implement private standards, or international instruments that incorporate private standards into their implementation mechanisms. Even non-existent regulation serves as a spur, by driving companies to employ private voluntary standards to avoid the imposition of more onerous mandatory ones, or as a laboratory of the viability of a policy approach.

4.2.1  Disclosure Initiatives and Private Standards

Many countries now require a public disclosure of environmental and social information through ‘right-to-know’ laws. In the United States, the Toxics Release Inventory requires companies to collect and make public certain toxic emissions (p. 518) data—some states have broader requirements that include not only emissions but also inputs and outputs of toxics in the production process. Pollutant release and transfer registers, and other mandatory corporate disclosure of environmental information, have been incorporated into the legislation of European countries and a number of developing countries, in part driven by European Union (EU) law. The Danish Ministry of Social Affairs has developed a social index for measuring the degree to which companies live up to their social responsibilities.15 Public international law instruments, including a 2003 protocol to the Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters, also increasingly require the creation of pollutant release and transfer registries.

In addition, disclosure requirements are often linked to securities regulation of publicly traded firms. The UK Department of Trade and Industry, for example, mandates operating and financial review reports for quoted companies to include factors, including environmental factors, that significantly affect future operations. These requirements are similar to those of the US Securities and Exchange Commission, which require publicly traded companies to disclose risks and liabilities, including environmental liabilities and potential liabilities. French law requires companies to record in their annual reports the social and environmental consequences of their activities.16 All of these public disclosure requirements stimulate a need for companies to find standardized, and comparable, indicators and measurements, if only to avoid a duplication of effort. Yet, because there are no uniform public standards of this kind in existence, private standards often fill the gap.

4.2.2  Superior Performance and Public Sector Use of Private Standards as Incentives

As new environmental challenges emerge, and some old ones resist further improvement using traditional ‘command-and-control’ regulation, governments have begun to explore complementary approaches to encourage companies to go ‘beyond compliance’. These usually involve promising benefits such as shorter permitting times, multimedia permits, streamlined procedures, fewer inspections or positive public recognition for companies that both meet and substantially exceed compliance with environmental laws. These positive incentive-based efforts are envisioned as providing: (1) a more tailored system that will allow increased innovation by industry leaders; (2) an opportunity for tackling as-yet unregulated problems; and (3) a vehicle for efficiency gains, allowing regulators to focus scant resources on the worst problems and offenders. Opt-in is voluntary, with the existing system remaining as a baseline (p. 519) for companies that choose not to participate. A key theme of most of these leadership-oriented, ‘beyond compliance’ regulatory programmes is the fact that they are underpinned by voluntary private standards, particularly EMS and/or performance measurement and reporting standards.

For instance, in North America and Europe, the centerpiece of most such efforts is the implementation of an EMS, usually but not always modeled on ISO 14001. Most such programmes require an ‘ISO 14001 plus’ (or ‘external value’ EMS)—one that requires compliance with legal requirements, public disclosure, and stakeholder involvement. Examples of voluntary EMS-based regulatory initiatives include Europe’s Eco-Management and Audit Scheme (EMAS) and the US Environmental Protection Agency’s (EPA) Performance Track, as well as US state-level programs in Michigan, Wisconsin, Massachusetts, Texas, and elsewhere. The US EPA is considering providing options within existing regulatory structures for firms employing an EMS.17

4.2.3  Use of Private Standards in Enforcement and Securing Compliance with Regulatory Measures

As discussed earlier, businesses have long put private standards into place as a result of, or in order to avoid, problems with regulatory compliance. Since the mid-1990s, the US EPA’s audit policy has encouraged the use of EMSs to improve compliance by serving as tools that enable early disclosure and the remediation of violations and, thereby, potentially avoiding some civil penalties. In fact, the agency has explicitly stated that criminal sanctions and civil penalties may be reduced or waived if a business can show it has implemented adequate systems for managing its environmental compliance. More recently, the EPA has gone further, requiring some firms to implement EMSs as part of settlements of environmental violation cases, often through the use of supplementary environmental projects (SEPs), in which businesses agree to pollution prevention changes or to the implementation of an EMS as part of the settlement.18

Even for firms that are not now in enforcement proceedings, the threat of compliance enforcement is a powerful lever for the adoption of environmental management standards. So is the potential of private litigation. Once leading industry players start adopting private standards in their operations, other players must worry that these standards will help establish what constitutes due care for purposes of tort litigation. They may adopt the standards to minimize their litigation risk. Still others may preemptively adopt private standards to dampen enthusiasm for mandatory public standards imposition. Indeed, some have suggested that the threat of mandatory (p. 520) public disclosure or corporate conduct regulatory standards motivates much of a business’s enthusiasm for self-discipline and/or voluntary management practices and reporting. During the 1990s, voluntary covenants in the Netherlands and elsewhere created non-interference promises by government if industry successfully regulated itself, although enthusiasm for such bargains seems to have waned somewhat.

Private versus Public—Voluntary versus Mandatory Standards

5.1  Relationship between Public and Private Standards

Neither private nor public standards exist in a vacuum. Private standards have long interacted with, and are often developed in response to, public law-making and regulatory efforts. They can serve as gap-fillers or the technical foundation for existing public laws, as portents and precursors of new public law, or as pre-emptive efforts to retard or derail public regulation. For example, in terms of a technical foundation, under Europe’s ‘New Approach’, quasi-private standards form the underpinnings of much legislation in the EU.19 Under this approach, which was initiated in the 1980s, the European Commission, trying to facilitate expanded regional trade, set only the ‘essential requirements’ for a product or service to be sold throughout the market. The technical specifics were left to voluntary standards developed by private bodies, especially the European standards body CEN (Comité Européen de Normalisation or European Committee for Standardization, known by its French acronym). This approach has been used in EU directives on the energy performance of buildings, the promotion of the use of biofuels in transport, and on waste from electrical and electronic equipment. As for gap-filling, consider measurement protocols. Treaties may specify that states are to monitor environmental impacts, but they may not specify exactly how or with what measurement approaches. Private standards are often aimed at allowing producers, and thus indirectly and ultimately governments, to employ uniform, agreed-upon measurement protocols. The GHG Protocols are a case in point. In both cases, the use of private standards reduces government costs and the time required to implement public law obligations.

Based on the recognition of these realities, government agencies have for decades actively supported the integration of voluntary consensus standards into their policies and activities. In the United States, for example, reliance upon private standards in policymaking and public standard setting goes back to the late 1970s. Voluntary (p. 521) standards were useful, according to the Office of Management and Budget, to: (1) ‘encourage federal agencies to benefit from the expertise of the private sector’; (2) ‘promote federal agency participation in such bodies to ensure creation of standards that are usable by federal agencies’; and (3) ‘reduce reliance on governmentunique standards where an existing voluntary standard would suffice.’20 In order to codify these policies, the US Congress in 1996 passed the National Technology Transfer and Advancement Act (NTTAA) (Public Law 104-13). The act requires federal agencies to use voluntary standards to the extent practicable, to report when they have developed agency-specific standards, and to consult with both domestic and international voluntary consensus standards bodies when developing and adopting government standards. When a voluntary standard fails to address, or is inconsistent with, the mission of a government agency, an exception clause in the NTTAA permits a governmental agency to elect or develop other technical standards.

Private voluntary standards can also presage future national or international regulation. Private standards suggest the recognition of a problem area, an approach to addressing it, and an acknowledgment that industry has both the desire and the capacity to implement controls and to do so in a manner that optimizes economic efficiency. At the international level, private standard-setting processes may be more effective and agile than multilateral negotiations, especially where highly technical protocols are at issue, since they tend to include more of the directly affected parties rather than generalist diplomats. On the other hand, industry may sometimes enter into or advocate standards-creating processes in hopes that a voluntary, private approach will forestall more onerous public regulation at either the national or international level.

An example from the regime for control of marine oil pollution may be instructive. It became clear in the wake of the 1967 Torrey Canyon oil spill that a regulatory regime was in the offing. Oil tanker owners negotiated a private, voluntary Tanker Owners Voluntary Agreement Concerning Liability for Oil Pollution, in part hoping to avoid stricter mandatory controls. However, the existence of a voluntary agreement did not stop the completion of a public convention, but rather showed states that the general approach was feasible and economically viable. Public international regulation of information regarding pesticides and other hazardous chemicals also followed this route from private to public.

Further evidence of this at times strained relationship between public and private standards can be found in the run-up to the 2002 World Summit on Sustainable Development (WSSD), where a coalition of groups led by Friends of the Earth International floated proposals for a multilateral treaty on corporate accountability, which would have committed states to ensuring that corporations doing business in their territory complied with certain minimum standards. While the proposal failed, (p. 522) in large part due to heavy lobbying by industry, the WSSD’s plan of action includes several references to corporate accountability, including the exhortation to:

[e]ncourage industry to improve social and environmental performance through voluntary initiatives, including environmental management systems, codes of conduct, certification and public reporting on environmental and social issues, taking into account such initiatives as the International Organization for Standardization (ISO) standards and Global Reporting Initiative guidelines on sustainability reporting, bearing in mind Principle 11 of the Rio Declaration on Environment and Development).21

The WSSD example is emblematic of the many debates surrounding both the changing nature and scope of private standards as well as their evolving role in public policy. While private standards once typically played only a technical supporting role in government policy, they are now encroaching towards becoming a centerpiece of policy instruments.

It is in this regard that the ISO’s movement towards the standardization of ‘management systems’ (first quality, then environmental) is notable because it has marked a shift in the organization’s focus from technical engineering standards to standards that have greater (and more direct) implications for society and public policy. In other words, while local communities may have little interest in the thread width of a screw used in a company’s product, they are likely to be profoundly concerned about the methods by which an organization manages its environmental risks, given the potential impact on the community’s welfare. In this sense, unlike all other ISO standards, which primarily affect their users (and customers), the ISO 14000 series standards directly affect a much larger set of stakeholders. These stakeholders often carry the burden of environmental ‘externalities’, such as the costs of resource consumption and pollution, while industry stands to enhance profits by ‘externalizing’ environmental impacts.

Likewise, because the ISO 14000 standards aim to tackle issues relating to the environmental performance of companies and sustainable development more generally, they enter realms that are of interest to regulatory authorities, policymakers, and the public. However, given the ISO’s fifty-year history of developing technical standards almost exclusively out of an interest to industry, the institution remains heavily influenced by the private sector. Thus, as discussed earlier, while the ISO’s scope of work has substantially expanded to encompass activities that may have significant societal impacts, there has not been a corresponding increase in the representation of public stakeholders. This fact has been the source of consternation to some government agencies and civil society groups who have expressed a preference for the development of public standards whenever practical and feasible.

A corollary debate has emerged regarding the appropriateness of private voluntary standards to solve pressing public policy challenges. Private voluntary standards, (p. 523) which producers must pledge to abide by and which are enforced by indirect market pressures rather than regulators, have undeniable advantages. They reduce the cost of public regulation and enforcement, shifting enforcement costs to the producers themselves, who must pay for certification or the documentation of compliance. The administration costs of private standards should be lower than for equivalent public standards. Moreover, if the leaders in an industry are conforming to private voluntary standards, regulators can use shrinking enforcement or standards development budgets to greater effect in targeting the laggards. Private standards can often be more easily arrived at and more easily revised than public agreements—contrast the less than three years it can take to develop an ISO EMS standard with the decade or more it can take for the drafting, signing, and entry into force of a treaty. In part, this contrast is due to the less than fully participatory and open nature of the private standards development process, as discussed earlier, and so it is a dubious virtue. Nonetheless, the costs of standards development are at least partially borne by the private sector, and the participation of technical personnel and those from the industries or entities to be subject to the standard may make for quicker as well as more practical and workable arrangements because the ‘real parties in interest’ are directly at the negotiating table.

Moreover, private standards, because they are often self-imposed, allow for more precise tailoring to the needs of a particular enterprise. An enterprise can choose to focus on certain aspects of its environmental management, for example, or choose to report on those issues of greatest concern to inside or outside constituencies. As such, it can, under ideal circumstances, create ‘buy-in’ throughout an organization for the environmental goals espoused rather than having these goals become routine, minimalist exercises in box checking. In theory at least, these efforts will allow for improvement beyond the threshold compliance levels specified in international or local law and will allow those enterprises with the interest and means to do so to pioneer new approaches to as yet unregulated problems.

These strengths of private standards are also their weakness. The very flexibility that businesses appreciate reduces the credibility of these standards with local community, NGO, and regulatory audiences. If enterprises can pick and choose which environmental issues to focus on, which indicators/measures to report and the like, there will be little assurance that major problems are not being swept under the rug. And if the private standards are rigorous enough in design and verification mechanisms to avoid this problem, they will also, by definition, be too rigorous to entice any but a few leading companies into choosing to implement them, despite the incentives for doing so. There is, therefore, an inherent tendency for private standards to be, overall, less stringent than public ones covering the same subject matter.

Moreover, the penalties for non-compliance with management or certification schemes, or false or misleading reporting of environmental protocols, are extremely limited. With respect to ISO standards, the ISO’s Conformity Assessment Committee (CASCO) produces international standards and guides that provide information (p. 524) and general requirements on conformity assessment procedures—that is, deciding whether an organization has successfully implemented the standard. However, it is national accreditation bodies that set the criteria for certifiers. The International Accreditation Forum (IAF) is a world association of national conformity assessment accreditation bodies and other organizations interested in conformity assessment, mainly to ISO 9000 and ISO 14001. Its primary function is to encourage the development of a single worldwide system of mutual recognition of conformity assessment certificates, with an end goal of eliminating non-tariff barriers to trade. Both the IAF and CASCO have developed mutual recognition and other protocols. Nonetheless, harmonization of conformity assessment to private standards generally is in its infancy, as are attempts to set up worldwide standards for the qualification of certifiers, accreditation bodies, and independent standards auditors. It will take some time for these efforts to actually result in credible conformity assessment protocols that are accepted across borders, especially given the pressures on developing country certifiers and accreditation bodies to certify large numbers of companies.

Theoretically, companies can lose their ISO certification, and participants in other private schemes may be ejected from the schemes for continuing non-conformity with the standard. This happens rarely though and only after extensive negative publicity. The most common compliance assurance schemes involve private auditing and accounting firms, but several studies have shown that such audits are often incomplete and biased towards management. And with a few exceptions, such as the revamped Responsible Care programme, most industry standards do not even require external verification. A few attempts at stakeholder/labour/NGO monitoring have taken place in the labour standards context, but they have not become a widely accepted model. One complaint, therefore, is that private standards are for the most part toothless and cannot differentiate good players from bad. Related to this criticism is the more general complaint that all voluntary codes of conduct are enforced only by self-declaration and self-certification, with sporadic NGO denunciations of particularly egregious abuses being the only check.

The tension between stringency and widespread adoption has been a problem given the non-mandatory nature of private standards. With the exception of ‘green’ companies that stake their reputation on environmental probity, and large ‘blue’ companies subject to consumer scrutiny and sensitive to small changes in market share, the uptake of voluntary standards has been limited. Fewer than 25 per cent of large multinational corporations provide public information on their environmental performance, and this number has not grown significantly.22 While most major industrial players now have some version of an EMS in place, very few provide public information derived from the EMS or pursue third party certification. (p. 525) Environmental labelling, while growing, still covers a marginal percentage of goods sold. To truly affect environmental outcomes on a global scale, voluntary private standards are unlikely to be enough.

5.2  Revitalized Push to Create Public Standards

The combination of a lack of oversight, inadequate enforcement mechanisms, and the spotty uptake of private standards, in the midst of increasing perceptions that private enterprises play a key role in sustainable (and unsustainable) development and that states by themselves have insufficient resources to tackle emerging challenges, has led to new efforts to move standard setting for enterprise behaviour into the public realm. These efforts take several forms. First, there is the attempt to open up private/public bodies such as ISO to greater transparency and inclusiveness by providing a more prominent role for civil society organizations, small businesses, and other underrepresented sectors. Second, efforts continue to strengthen and augment existing public voluntary standards on corporate behaviour, including the OECD Guidelines for Multinational Enterprises, the ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, and the UN Secretary General’s Global Compact.

A third effort involves moving beyond voluntary principles, codes of conduct, and private standards towards some form of mandatory international supervision of private sector commitments. A step in this direction might involve international guidelines accompanied by a reporting and/or monitoring mechanism. One such effort includes the UN Commission on Human Rights’s efforts to prepare Norms and Guidelines on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights. A draft version of these norms was approved by the Sub-Commission on the Promotion and Protection of Human Rights in 2003, but it has been prevented by some states and corporate interests from being more formally adopted by the UN to date. The norms include obligations on private corporations to respect national and international law on the protection of the environment, to observe the precautionary principle, and to generally conduct their activities in a manner contributing to sustainable development. The norms create a non-binding guideline recommending that business enterprises internally implement them, use them in their supply chain policies, and report on their progress. In its ongoing effort to advance the norms, the Office of the High Commissioner for Human Rights released a report linking corporate responsibilities to intergovernmental agreements in early 2005. Many of the participants in the UN process, especially NGOs, envision eventually some kind of monitoring and/or complaint system through the UN as well as through states and companies themselves, although the contours of such a system are as yet unclear. In part, the problem (p. 526) stems from the fact that, aside from general exhortations to respect human rights and a limited number of international crimes, such as war crimes, crimes against humanity, and genocide, international law does not impose obligations directly upon private actors.23

5.3  Future of Private Standards

It is evident from this analysis that private standards have played, and will continue to play, a valuable and economically efficient role in addressing pressing social and environmental problems. It is the view of the authors, however, that such private standards can (and should) only be used as a complement and supplement to public standards and that caution must be taken to ensure that they do not evolve into a complete substitute for them. It is more than likely that in coming years increased attention will focus on businesses’ environmental management practices, and certification and reporting standards will almost certainly play an even more prominent role underpinning the global economic system than they do today. Public and private standards will both coexist, mutually reinforce each other, and overlap, and a variety of hybrid standard-setting processes are to be expected. It will also probably be a long-term negotiating process before states reach agreement on the appropriate nexus between public and private standards as well as the precise role private standards should play in advancing sustainable development. Meanwhile private international standards developers are moving aggressively into the sustainability field, and the differences in coverage and rigor between different kinds of private standards—especially those generated by NGO coalitions as opposed to business-led initiatives—are likely to become more salient. It is therefore urgent that those concerned with international environmental regimes consider private standards organizations and their products as an integral part of public environmental policy regimes and factor in the impact of private schemes on public regimes.

Recommended Reading

  • C. Coglianese and J. Nash, eds., Regulating from the Inside: Can Environmental Management Systems Achieve Policy Goals? (Washington, DC: Resources for the Future, 2001).
  • C. Dankers, The WTO and Environmental and Social Standards, Certification and Labelling in Agriculture (Rome: Raw Materials, Tropical and Horticultural Products Service, Commodity and Trade Division, Food and Agriculture Organization, 2003).
  • (p. 527) R.B. Hall and T.J. Biersteker, eds., The Emergence of Private Authority in Global Governance (Cambridge, UK: Cambridge University Press, 2002).
  • R. Krut and H. Gleckman, ISO 14001: A Missed Opportunity for Sustainable Global Industrial Development (London: Earthscan, 1998).
  • W. Moomaw and G. Unruh, ‘Going around the GATT: Private Green Trade Regimes’ (1997) 8 Praxis Fletcher J. Dev. Stud. 67.
  • M. Morikawa and J. Morrison, Who Develops ISO Standards? A Survey of Participation in ISO’s International Standards Development Processes (Oakland, CA: Pacific Institute for Studies in Development, Environment, and Security, 2004).
  • J.I. Morrison, K.K. Cushing, Z. Day, and J. Speir, Managing a Better Environment: Opportunities and Obstacles for ISO 14001 in Public Policy and Commerce (Oakland, CA: Pacific Institute for Studies in Development, Environment, and Security, 2000).
  • N. Roht-Arriaza, ‘Shifting the Point of Regulation: The International Organization for Standardization and Global Lawmaking on Trade and the Environment’ (1995) 22 Ecology L.Q. 3.(p. 528)


J. Cascio, ‘International Environmental Management Standards: ISO 9000’s Less Tractable Siblings,’ ASTM Standardization News, April 1994 at 44.

A partial list of typical technical committees is instructive: TC1—Screw threads; TC11—Boilers and Pressure Vessels; TC35—Paints and Varnishes; TC120—Leather.

See M. Morikawa and J. Morrison, ‘Who Develops ISO Standards? A Survey of Participation in ISO’s International Standards Development Processes,’ Report by the Pacific Institute for Studies in Development, Environment, and Security, Oakland, California, October 2004.

A. Lally, ‘ISO 14000 and Environmental Cost Accounting: The Gateway to the Global Market’ (1998) 29(4) L. and Pol’y Int’l Bus. 501 at 504–5.

J. Nash and J. Ehrenfeld, ‘Code Green’ (1996) 38 Env’t 1.

See ‘EMS Survey Reveals Widespread Concern over Certification,’ Report by Environmental Data Services, December 2003. See also ‘Joint Workshop to Examine Connections between Environmental Management Systems and Permitting, Inspection and Enforcement in Regulation—Including the Formal Launch of the REMAS Project,’ workshop report prepared by the Foundation for International Environmental Law and Development and the Institute for European Environmental Policy, June 2003.

Organisation for Economic Cooperation and Development (OECD), Private Initiatives for Corporate Responsibility: An Analysis (Paris: OECD, 2001); and United Nations Conference on Trade and Development, Report of the Commission on Trade in Goods and Services and Commodities on Its Sixth Session, Geneva, 4–8 February 2002, Doc. TD/B/EX(28)/4—TD/B/COM.1/49 (2002).

J. Morrison et al., Managing a Better Environment: Opportunities and Obstacles for ISO 14001 in Public Policy and Commerce (Oakland, CA: Pacific Institute for Studies in Development, Environment, and Security, 2000).

Environment Canada, ‘Towards Greener Government Procurement: An Environment Canada Case Study,’ in T. Russel, ed., Greener Purchasing: Opportunities and Innovations (Sheffield: Greenleaf Publishing, 1998).

10  For a discussion of ‘green banking’ within the United States, see W.L. Thomas, ‘The Green Nexus: Financiers and Sustainable Development’ (2001) 13 Geo. Int’l. Envt’l L. Rev. 899.

11  Social Investment Forum, 2003 Report on Socially Responsible Investing Trends in the United States (Washington, DC: Social Investment Forum, 2003).

12  See Carbon Disclosure Project 2005 Report (London: Carbon Disclosure Project, 2005).

13  See Innovest Strategic Value Advisors, Corporate Environmental Governance: A Study into the Influence of Environmental Governance and Financial Performance (New York: November 2004).

14  Consider the opposition of Greenpeace International and other environmental groups to the certification of the Alaskan Pollack fishery by the Marine Stewardship Council, given the documented decline of the stellar sea lion population in the fishery and the attention to the impacts on biodiversity required by the MSC certification standards. Environment News Service, 26 August 2004.

15  See Danish Ministry of Social Affairs, Your Tool: The Social Index (Copenhagen: Secretariat for the Social Index, 2005).

16  Law no. 2001-420 of 15 May 2001, J.O., 16 May 2001, at 7776, Article 46.

17  US Environmental Protection Agency (EPA), ‘Strategy for Determining the Role of EMSs in Regulatory Programs,’ 12 April 2004.

18  US EPA Office of Enforcement and Compliance Assurance, ‘Guidance on the Use of EMSs in Enforcement Settlements as Injunctive Relief and SEPs,’ Washington, DC, 10 June 2003.

19  EC Directive 98/34 Laying Down a Procedure for the Provision of Information in the Fields of Technical Standards and Regulations and of Rules on Information Services.

20  US Office of Management and Budget (OMB), ‘Federal Participation in the Development and Use of Voluntary Standards,’ Circular no. A-119.

21  Johannesburg Plan of Implementation, 26 August–4 September 2002, UN Doc. A/CONF.199/20 (2002) at para. 18(a).

22  D. Wheeler and J. Elkington, The Recent History of Environmental and Social Reporting: Business Strategy and the Environment (London: SustainAbility, 2001).

23  For an attempt to do so, see International Council for Human Rights Policy (ICHRP), Beyond Voluntarism: Human Rights and the Developing International Legal Obligations of Companies (Geneva: ICHRP, 2002); and Carlos M. Vasquez, ‘Direct vs. Indirect Obligations of Corporations under International Law’ (2005) 43 Colum. J. Transnat’l L. 927.