Magazine article Stanford Social Innovation Review

Virtue or Else

Magazine article Stanford Social Innovation Review

Virtue or Else

Article excerpt

ENVIRONMENT

When a company breaks the law, the Environmental Protection Agency (EPA) would really rather it just say so. And many of them actually do. Under the EPA's Audit Policy, violators who voluntarily report themselves can get certain penalties reduced or waived if they commit to ongoing self-regulation. The companies set up internal compliance procedures and promise never to do it again.

"These firms have agreed to do something above and beyond what's required by law," says Jodi Short, an associate law professor at Georgetown University. But is that promise any more than window dressing? Short found that when firms commit to policing themselves, they do in fact have better compliance outcomes-under certain conditions. "There are things regulators can do to promote the meaningful implementation of self-regulatory commitments," she says. In particular, watching them is more effective than warning them.

Looking at hundreds of industrial facilities subject to the Clean Air Act across the United States between 1993 and 2003, Short showed that surveillance of self-auditing firms increases compliance, whereas overt threats decrease it: Those companies that started self-regulating only when the EPA said it would punish them did not improve compliance outcomes. Coercion reframes self-regulation from a question of corporate honesty to a cat-andmouse game, says Short, and "you can't sustain voluntary regulation without a certain amount of non-calculative motivationmotivation to just do the right thing. …

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