New Governance and Industry Culture

Article excerpt

New governance scholarship argues that a blend of public and private regulation is playing an increasing role in influencing firm behavior. Despite its burgeoning growth, new governance scholarship is critiqued as lacking practical examples. This Article begins to fill that void by conducting a new institutional economics analysis of forest sustainability certifications, an example of new governance. This Article analyzes the features of the domestic forest industry to trace why new governance emerged within it and has persisted for over seventy years. The industrial characteristics that contribute to this longstanding new governance regime include strong norms within the industry, a resource-type that favors user-developed rules, and robust competition among private actors to regulate the industry. These findings suggest that new governance may emerge as a regulatory tool to address environmental problems in other industries that possess similar characteristics. The Article also sheds light into the broader discussion of how to measure the "success" of new governance regimes. B identifies stakeholder involvement relative to the democratic process and displacement of other regulatory tools as two key considerations in evaluating new governance approaches.

INTRODUCTION

New governance--legal reform emphasizing the role of non-state actors in influencing behavior against a backdrop of the state (1)--is an important emerging intellectual movement. (2) New governance scholars are "engaged in developing a broad menu of legal reform strategies that involve private industry and nongovernmental actors in a variety of ways while maintaining the necessary role of the state to aid weaker groups in order to promote overall welfare and equity." (3) A central feature of new governance is extralegal regulation that privileges private actors in rule setting and rule enforcement, (4) which marks a shift from the previous state centric or market mechanism regulatory approaches. (5)

Although the term "new governance" appeared in the literature relatively recently, (6) the underlying idea of private regulation against a backdrop of state enforcement is not new. This Article traces that idea through a review of literatures addressing corporate social responsibility; (7) environmental nongovernmental organizations, (8) and the study of norms in law and economics. (9) Each of these literatures foreshadowed the emergence of new governance by observing that industrial action can be regulated by private regulatory schemes operating against the backdrop of state regulation.

Critiques of new governance scholarship center on the lack of detailed empirical studies illustrating the principles in action. Leading articles are critiqued as having a "high level of generality" (10) and focusing on "ambiguous" and "scattered" policy assessments with innovations found "here and there." (11) As a result, examples in the field appear "aberrational, idiosyncratic, or unproven, and the anecdotes and case studies heralding these developments unconvincing...." (12) Adherents to new governance agree that there is a pressing need for detailed studies examining the circumstances of when non-state regulation succeeds. (13)

This Article joins in the task of providing examples of new governance (14) to provide a detailed analysis of new governance operating within a particular industrial setting. It conducts a new institutional economics (15) analysis of the industrial features that led to voluntary, market-based sustainability certifications for forests and forest products. Sustainability certifications are a voluntary, primarily private (16) regulatory regime that incentivizes firms to conduct their operations in accordance with what the certification identifies as socially desirable standards. (17) For reasons previously unexplored, the forest industry contains an unusually longstanding example of sustainability certifications. …