Industry Self-Regulation Without Sanctions: The Chemical Industry's Responsible Care Program

INDUSTRY SELF-REGULATION WITHOUT SANCTIONS: THE CHEMICAL INDUSTRY'S RESPONSIBLE CARE PROGRAM

Industry-self regulation = Companies join together to regulate their collective action to avoid a common threat or to provide a common good by establishing a standard code of conduct. External pressures by various stakeholders can result in this.

Will this self-regulation work? Some say: only works when explicit sanctions preventing opportunistic behaviour and sanctions might be replaced by informal means of coercion such as norms or shaming or public exposure, transfer of best practices etc. This article investigates an example of self regulation without sanctions: the Responsible Care Program of the US Chemical Manufacturers Association. This code set standards for inputs but not outputs, which is a link to effectiveness. Also limited coercive power due to anti-trust regulations. CMA seems to act gently.

Three institutional ,mechanisms examined which might influence behaviour in the absence of explicit sanctions:

• Coercive
• Normative
• Mimetic

However, without sanctions there is the threat of opportunism (according to rules but cheat when possible or symbolically)

Managers of large and with high reputation firms may expect that they can unilaterally improve the performance of an industry as a whole and thereby safeguard their own reputation. Thus increasing industry reputation is okay even when some free ride. Thus, larger or better known firms highly benefit of joining.

Dirtier firms may also have as a dominant strategy the calling for participation in industry self-regulation because they can benefit most from the improvements the program provide.

Hypothesis 5. On the average, chemical industry firms that participate in the CMA's Responsible Care Program will improve their environmental performance less than those that do not participate (free riding)

Note that Hypothesis 5 is in direct conflict with Hypothesis 3. This conflict highlights the essence of the debate surrounding Responsible Care: Can the institutional forces initiated by the CMA- informal coercion and shaming, the fostering of new values, and the transfer of best practices- facilitate effective industry self-regulation even in the absence of more explicit coercive mechanisms.

Conclusion mentioned that Responsible Care is difficult because of the nature of pollution. Chemical industry affects a physical commons of clean water and air but the threat to reputation is why they join. In contrast to e.g. fishermen that overfish a sea (they feel the pain), with pollution this first threat doesn’t really matter but reputation does. So probably perception of the problem should be adjusted. This leads to conclude that an agency orso is needed to oversee sanctions taking place. Trade associations is hard and firms as well because this might be due to antitrust movements (dominant firms may abuse their power). So state might in fact be necessary.  Or press or NGO’s.