The Effect of Sustainability Standard Uncertainty on Certification Decisions of Firms in Emerging Economies

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Abstract

Voluntary sustainability standards that establish global rules for firms’ environmental and/or social conduct and allow for verification of firm compliance via third-party certification hold the promise to govern firms’ sustainability conduct in a globalizing world economy. However, the recent proliferation of competing and overlapping global sustainability standards that have been developed by various stakeholders with different agendas, creates uncertainties for firms that likely reduce their propensity to adopt any standard. Without widespread adoption these standards cannot effectively govern firm conduct and in contrast create barriers for firms’ access to export markets. We suggest that the uncertainties associated with competing standards and the effect of these uncertainties on standard certification decisions are especially large for firms in emerging economies because these firms lack access to information about current and future standards and the resources to obtain certifications to multiple standards. We theoretically propose and empirically identify three distinct sources of sustainability standard uncertainty: (i) diversity of customer requirements, (ii) dynamism of customer requirements, and (iii) the unpredictability of the future evolution of standard and propose that each of these sources reduces firms’ propensity to obtain certification to any standard. Our empirical results based on certifications to food safety standards by a sample of 97 Mexican food exporting firms confirm that three distinct sources of sustainability standard uncertainty exist and that all of them negatively impact certification. We discuss ethical implications and offer recommendations for both suppliers as well as standard setting organizations.

Keywords

Certification Emerging economies Global governance Voluntary sustainability standards Sustainability standard uncertainty 
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Notes

Acknowledgments

The authors would like to thank Aina Cabra and Gonzalo Hurtado for their help on the survey data collection. They also thank MexBest, Bryan Husted, two anonymous reviewers and Associate Editor Cory Searcy for their insightful comments on previous versions.

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Copyright information

© Springer Science+Business Media Dordrecht 2016

Authors and Affiliations

  1. 1.Zicklin School of Business, Baruch CollegeCity University of New YorkNew YorkUSA
  2. 2.Rutgers Business School--Newark and New BrunswickRutgers UniversityNewarkUSA
  3. 3.Loyola Marymount UniversityLos AngelesUSA

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