Regression analysis was conducted in order to determine the relationship between ISO 14001 certification and the aforementioned assumptions. Table 1 shows descriptive statistics and correlations.
Standard errors in parentheses ="* p<0.1 ** p<0.05 *** p<0.01"
A negative relation was found checking green organizations’ activities in Taiwan with firms’ adoption of ISO 14001, refuting hypothesis 1a. A possible explanation for this result is the nature of green organizations’ activities in Taiwan, usually comprised of low scale events such as movie screening or classes. Such events seldom receive large media attention and consequently do not become a significant factor on firms’
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and public agenda. We do not believe green organizations activities could actually cause firms not to adopt ISO 14001, and therefore dismiss this hypothesis as irrelevant, both in Taiwan and in Israel. Stats regarding Taiwanese green organizations’
activities show that using the five point scale defined in this research, the annual average of total green organizations activities stands at 24 points per year – a low figure compared with the Israeli one (see appendix 5).
Media coverage of environmental issues, checked by using related articles in the Media was found to have a significant relationship at the p<0.01 level with firms’
adoption of ISO 14001 the following year. This data supports hypothesis 1b, and media influence on firms’ environmental policies. The stats regarding Media coverage show us a high number of articles reporting environmental matters in Taiwan. On average, we see 5–10 articles every day which include the combinations of 2 or more of the keywords chosen. As mentioned earlier though, the UDN database (of early 2011) does not allow separate inquiries for different sections of the paper, and therefore we cannot tell if those articles appear on the local news, national news or other sections of the paper.
Analysis of Taiwanese B2B and B2C firms’ data indicates a weak negative correlation at the p<0.1 level with likelihood of ISO 14001 certification. This data refers to the model which includes all other variables. When data related to hypotheses 3 and 4 is omitted, the results show no correlation between the stats. 75 percent of the firms included in this research are B2C firms, which have at least some of their products sold directly to end users, thus being more exposed to public pressure, according to our assumption. We therefore reject hypothesis 2 in for the Taiwan dataset.
Hypothesis 3 predicted an imitation effect due to institutional pressure within
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industries and existence of “peer pressure” leading to higher rates of ISO 14001 adoption. This hypothesis is supported at the p<0.01 level, expressing the influence of early adopters of ISO 14001 on other firms in the same industrial sector. About twenty percent of all firms included in this research held ISO 14001 certification for at least part of the research time.
The hypothesis regarding firm size (Hypothesis 4) is significant at the p<0.01 level and indicates large firms with more abundant financial resources could indeed more likely to seek and obtain ISO 14001, while smaller firms usually have lower rates of ISO 14001 adoption.
Table 2: Descriptive statistics and Correlations – Taiwan
ISO Green or. Media B2B B2C Peer pr. Size age ROE quite similar to the Taiwanese firms, but for a few points of difference. In similarity with Taiwan, a low negative correlation between green organizations’ activities and public firms’ likelihood of ISO 14001 adoption was found, rejecting the basic assumption in hypothesis 1a. Israeli green organizations’ activities are on a much
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larger scale than Taiwanese ones (see appendix 5), and the average annual activities score, according to the scale used in this research, is over 148, a figure over six times higher than the one measured in Taiwan. Regression results, however, seem similar.
In our opinion, the reason for this might lie in the fact green organizations’
activities are more easily affected on short term basis due to factors such as economic, political or security issues uncertainties. For instance, decline in green organizations’
activities in 2001 in Israel could be attributed to the armed conflict with the Palestinians, which peaked during that year. The fact most, if not all green organizations’ activities are organized by a handful of individuals, leading the way for other members, might mean that if one of those individuals is preoccupied with other issues (for instance, call for military service as part of the reserve forces), the entire organization’s activities might be affected and change drastically. On the other hand, public firms have a more complex hierarchy, in which individuals’ absence usually has a lesser effect on the firm’s performance, which makes their management and work processes more stable, meaning longer processes such as ISO 14001 certification would be less affected.
Table 3: Israel dataset (1, including Green organizations’ activities) model results Model(1) Model (2) Model (3) Model (4) Model (5)
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Table 4: Israel dataset (2, including Media coverage) model results
Model(1) Model (2) Model (3) Model (4) Model (5)
Not in accordance with hypothesis 1b, differing from Taiwan on this matter, no significant correlation was found between the number of environment related issues in Israeli media and the likelihood of ISO 14001 adoption. A similar explanation could be used here too, especially after examining the Ha’aretz database records, and discovering large variance in the annual amount of environmentally related articles published (see appendix 4), variance of up to 40 percent difference between two
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successive years. Factors like editorial preferences and perhaps advertisers’ pressures may have been influential as well, alongside security issues which usually take the front pages when they occur, in creating these large fluctuations. The fact only the Ha’aretz database currently offers online records dating back to 1995 may have created a problem resulting from lack of information, a problem which might have been diminshed were other newspapers’ databases available as well.
Upon seeing the results, we suspected another reason lies in the strong correlation between green organizations’ activities and media coverage of environmental issues. In a dataset like the one examined in Israel, with a low number of environmental news (less than one per day on average) articles discussing green organizations’ activities naturally come in complete correlation to the activity describes, if they sum up to a significant number of articles within a certain year, than we could expect a strong correlation overall. Therefore we separated the data for green organizations’ activities from the Media data. Results, however, were unchanged, and the hypothesis rejected.
Hypothesis 2 predicted B2C firms to have higher ISO 14001 adoption rate than B2B firms. This Hypothesis is supported by the data with positive significance at p<0.05 and p<0.01 levels (the former occurs only when firm size data is added to the regression analysis). About 80 percent of the firms in the dataset are B2C firms, selling their products to end users and/or placing their logo or brand name on the final product, rather than sell parts of a product to other firms. As assumed in Hypothesis 2, such firms could have a stronger tendency to apply and obtain ISO 14001 certification.
The effects of ISO 14001 adoption by firms within the same industry or business
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field were measured in order to examine hypothesis 3. Results show no correlation on the basic model and a significant negative correlation once hypothesis 4 stats were added to the model. The data shows negative correlation on the p<0.05 and p<0.01 levels only after firm size data is added to the regression.
Table 5: Descriptive statistics and Correlations – Israel
ISO Green or. Media
The descriptive statistics and correlation show a significant correlation between peer pressure and firm size, at the p<0.05 level. We suspect this correlation might be the reason for the large differences between the two models, and therefore reject hypothesis 3 for the Israel dataset.
Hypothesis 4 is supported by the data at a p<0.01 level. These stats show a correlation between firms’ size, as expressed and measured by each firm’s reports of total assets on each of the years examined in this research. Larger firms were found to have a higher percentage of ISO 14001 certification than firms of smaller size. At the same time a medium level correlation was found between firm size and peer effect in ISO 14001 adoption.
Two control variables, one regarding firms’ ROE and the other firms’ age were also checked in the analysis. ROE stats proved to have no significant correlation with ISO 14001 while firm age shows a very weak correlation.
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Discussion
We began this paper by introducing past researches exploring motives and incentives for firms to adopt EMS methods. The aforementioned explanations usually stem from a firm’s internal needs and managers’ opinion on whether EMS could improve their firm’s performance, from a need for EMS certifications in order to trade with overseas partners, as a result of the importance of the relations with neighboring communities, or for other – mostly internal – reasons. The hypotheses presented in this paper could be attributed more to the external pressures which bring firms to adopt ISO 14001. Each of the hypotheses tries to examine whether firms can receive external “motivation”, not in the form of financial support or other tangible goods, but through changes in the business environment in which they work. The results suggest such an explanation might be plausible, and that reasons like the ones proposed in this paper could be in fact real incentives for firms, incentives which past research has not thoroughly explored yet.
The statistical data shows us large differences between firms examined in this research in terms of age, size and financial profits, which add to the rather wide range of industries the firms belong to – from chemicals, through home electric appliances to food production – and so emphasizes this research is not restricted to specific industries (keeping in mind only manufacturing firms are included in the dataset).
Three major differences are shown in the results between both countries. The first is the rejection of hypothesis 1b, regarding media coverage of environmental issues. In Taiwan, we found media coverage of environmental issues positively correlated with firms’ application for ISO 14001, while in Israel no such correlation
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was found. The number of articles including the chosen environmental issues related keywords in Taiwan was significantly larger in Taiwan than in Israel (see appendix 4), with several reasons serving as possible explanations for that. An obvious one is the fact that while newspapers in Taiwan are published 365 days a year, in Israel newspapers are not published on Saturdays and Jewish holidays, due to religion status quo reasons, and therefore only publish around 300 issues a year.
Another reason lies in the fact that due to Israel’s size, daily newspapers do not have a daily local news section, but only a weekly supplement of local news and events, which at the time or research did not provide online records of past articles.
Taiwanese papers do have a separate and independent section for each region of the country, reporting only on local matters for each large city or region. From the experience gathered during the research for this paper we discovered a large part of environmentally related news is included in the local news section, and not the first section which focus more on national and global news. Unfortunately, the UDN database does not provide an option for searching only a certain section of the newspaper, and so all local news articles are also included in the data. A third reason is more subjective, but is based on three and a half years of living in Taiwan, and lies in the fact Taiwan is a calm country, with very few large events occurring in it. On the other hand, Israel is a country on which major national security and political issues take place on an almost daily basis, leading to less newspaper space dedicated to more
“civilian” matters. Moreover, based on the amount of articles in Taiwanese media and the correlation shown between their number and ISO 14001 certification we have reason to believe that a similar process could occur in Israel, should environmental issues receive a larger and steadier coverage in daily newspaper.
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We believe the results of Taiwanese media coverage show the Media’s power of determining public agenda. More coverage of environmental issues increases individuals’ knowledge and concern about ecological issues and so helps create direct and indirect pressure on firms’ managements to become more environmentally concerned. The higher number or environmental related articles in Taiwan compared with Israel might be another sign of the large importance and significant effect of Media coverage on corporate environmental policies.
The second difference between the two countries lays in the negative correlation between B2C firms and likelihood of ISO 14001 certification in Taiwan. While Israeli firms show a significant correlation between firms’ costumers and ISO 14001 certification, the surveyed Taiwanese firms do not show such a distinct correlation, despite the fact the ratio between B2B and B2C firms in both countries is similar. In our opinion a possible reason for this phenomenon is as a result of the different trade partner markets for both countries. Being relatively small markets themselves, both countries’ economies rely heavily on export. However, the main trade partners for both countries are substantially different. While Taiwan’s export is mainly to East and South East Asian countries (about two thirds of total trade (MOF, 2010)), Israel’s main export markets are the United States and European Union (around 75% of all exports(CBS, 2011)), areas in which environmental awareness and regulations are historically more regulated and enforced than in most Asian countries. Therefore we assume the demands regarding environmental standards and qualifications of firms importing most Israeli products are higher than most firms importing Taiwanese products, hence the difference in the effect they have on B2C firms’ tendency for EMS certification.
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The support of firms’ size and resources hypothesis provides us a different point of view regarding firms’ adoption of EMS methods. If we follow this hypothesis, a possible conclusion would be that some firms do want to obtain ISO 14001 or similar certificates but cannot do so due to financial restraints. Such a phenomenon could generate a lose–lose situation for both the firm as well as for the environment and society: While the environmental implications are quite obvious, ranging from continued pollution of air, soil and water to public health hazards and long term environmental effects (e.g. global warming), firms also face financial implications.
Firms’ managers who want but cannot afford ISO 14001 certification lose both potential profits resulting from improved production and reduced costs (Andrews et al., 2001; Berry & Rondinelli, 1998; Perez et al., 2009) and the opportunity to gain first mover advantage or simply have the ability to react to their direct competitors actions (Welford & Gouldson, 1993), abilities which could ironically provide them with more profits and resources than the ones they require for ISO 14001 certification.
Comparing both countries’ firms, we notice a significant difference between the two countries’ examined firms in terms of mean firm size, Taiwanese firms being on average more than 50% larger than Israeli ones (Firm size data, in terms of total assets, was calculated in US Dollars for an easier comparison). From these stats we could conclude the firm size effect on ISO 14001 is either relative, rather than nominal, with larger firms within an industries more likely to implement ISO 14001 regulations.
Another possible explanation is that a nominal threshold in firms size and value, above which firms are more likely to apply for ISO 14001 certification, indeed exists.
In this case Taiwanese firms of smaller size than the ones found in our research, all the way down to the mean firm size in Israel, could be more easily encouraged to
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apply for ISO 14001.
Both in Taiwanese as well as in Israeli firms’ analysis, a significant correlation was found between firm size and within industry competitors’ ISO 14001 adoption rate. This correlation could be the consequence of larger firms’ stronger effect on their competitors, being in many cases a model to look up to for less mature and less developed firms. This data is consistent with the assumption large companies’ and organizations’ do have a stronger impact over other firms, and could serve as a confirmation for green organizations and governments of the utility and advantages of focusing efforts of “greening” practices on such firms. In other words, this data might be of use showing that focusing on a small number of large but influential firms might be more efficient than focusing on a larger number of firms, which not necessarily have a strong influence within their industries.
A possible solution for this situation, in which small firms are less likely to adopt ISO 14001 due to lack of funds, comes from government as well as nongovernmental organizations active support of firms and institutions seeking to improve their ecological impact. Direct funding through loans or grants, or indirect funding through tax deductions and other fiscal rebates could provide the necessary means for smaller companies (in terms of size or resources) in order to facilitate obtaining EMS certificates and operation methods.
Another issue which should be noted with regard to these conclusions is the concept of sustainable business development becoming more widespread over the last years. This concept includes calculating not only present day financial gains and losses, but also long term impact on future generations. Most companies today do not include calculations of “ecological price” in their balances and reports (Wasley, 2009).
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The long term effects of manufacturing, hauling and disposing of a product, as well as the ways in which to handle products after they finish their life cycle are often not part of the product research and design process, and so products which should actually cost more, were overheads of processing and dealing with their real environmental effect included, are sold at a price lower than their “actual” price (Fletcher, 2007;
Stranks, 2008). Wider prevalence of this concept of management methods could change current view on resource allocation (Bremmers et al., 2007) and put environmental management in a higher priority, even for firms with limited resources which have to convince stockholders to invest in “greening”.
The within industry hypothesis is supported by the Taiwanese dataset while being rejected according to the Israeli dataset. According to these results, we learn that firms obtaining ISO 14001 in Israel do not show direct influence on firms within their industry. The fact a significant correlation in Taiwan is rejected in Israel might be attributed to the sector division in both stock exchange.
When analyzing the firms included in the dataset, we found out, as earlier mentioned in this paper, that while firms in the TSE are divided to sectors according to the SIC model, the TASE uses a different and far more general division system.
While the Taiwanese firms (numbering 111 in our dataset) are divided into 21 different sectors; Israeli firms, on the other hand, numbering 181 in this dataset, were divided to 8 industries in total, meaning firms that are not necessarily competing in the same industry are nevertheless included in the same category. We assume future research should be made according to similar guidelines be made, where results might not differ so greatly between the two countries.
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A different direction in which these results can be interpreted relates to network affect. ISO 14001, as mentioned before, does not check environmental performance further upstream of downstream of the supply chain. Network effect, in its basic form, means that managers within an industry where new technology or management systems are introduced would feel the need to implement those innovations in their
A different direction in which these results can be interpreted relates to network affect. ISO 14001, as mentioned before, does not check environmental performance further upstream of downstream of the supply chain. Network effect, in its basic form, means that managers within an industry where new technology or management systems are introduced would feel the need to implement those innovations in their