Join In . . . and Drop Out? Firm Adoption of and Disengagement From Voluntary Environmental Programs

Abstract

Voluntary environmental programs (VEPs) offer opportunities for companies and stakeholders to improve environmental outcomes valued by society in the absence of regulatory mandates. Research has addressed numerous antecedents for firm adoption of VEPs, enhancing knowledge of how stakeholders and firms engage on substantive issues of public importance. However, program adoption is dynamic, and stagnant participation rates may threaten program longevity when firms do not realize expected benefits. Prior literature has not sufficiently addressed the factors that compel firms to drop out. In this study I articulate three consequential drivers of firm commitment to VEPs—transparency, effort, and achievement—and empirically estimate their effects on firm disengagement from one such prominent program: CDP (formerly known as Carbon Disclosure Project). Findings indicate that firm transparency and effort represent powerful commitment mechanisms driving continued program participation. This study contributes to theory over multiple literatures related to VEP participation and offers practical guidance for both VEPs and firms.