Is a Voluntary Approach an Effective Environmental Policy Instrument? A Case for Environmental Management Systems

Using Japanese facility-level data from an Organisation for Economic Co-operation and Development survey, we estimate the effects of implementation of ISO14001 and publication of environmental reports on the facilities’ environmental performance. While most previous studies focused on an index of emissions toxicity, this study examines three areas of impacts, none of which have been explored in the literature: natural resource use, solid waste generation, and wastewater effluent. The study is also unique in that the effectiveness of ISO14001 is considered in relation to environmental regulations. Our findings are summarized as follows. First, both ISO14001 and report publication help reduce all three impacts; the former appears more effective in all areas except wastewater. Second, environmental regulations do not weaken the effect of ISO14001. Third, assistance programs offered by local governments—a voluntary approach—promote facilities’ adoption of ISO14001. These findings suggest that governments can use command-and-control and voluntary approaches concurrently.