South Korea Adopts the ISO 14001 Environmental Standard: A Question of Resources or Institutional Pressure?

On December 9, as part of a seminar run by the HSE’s Laboratory for Studies in Economic Sociology, there was an opportunity to meet Kyungmin Baek, new Assistant Professor at the Faculty of Social Sciences, School of Sociology, who joined HSE in September 2014. In a report about South Korean firms’ comprehensive adoption of the ISO 14001 environmental standard, Baek explained how businesses’ motivation has changed.

Kyungmin Baek was born in South Korea, where he completed BA and MA courses in sociology. In 2014 he defended his dissertation in the University of Minnesota, United States, where he completed his PhD. In his teaching career, he has worked both with BA and MA students on courses about organization theory and social statistics.

His academic research interests include labor law and government social policy. His first publications in English were related to social responsibility and South Korean business. Today, he focuses on environmental issues. His report was on entitled: ‘The Diffusion of Voluntary Environmental Programs: The Case of ISO 14001 in Korea, 1996–2011’, and analyses the factors that enable South Korean firms to adopt ISO 14001.

The International Standardization Organization’s ISO 14001 was adopted in 1996. It is voluntary, and in just 10 years, from 2000 to 2010, the number of participants in this program exceeded 250,000. There are two main theories regarding this behavior – according to the resource-based approach, adopting this standard offers companies a competitive advantage while also cutting outlay. The second approach focuses on institutional pressure, pushing firms to adopt the program. This chiefly involves social expectations regarding the firms’ behavior, which encourages them to adopt this program. In this case, the social expectations that good companies have to meet push them to follow best practice and incorporate innovations.

Baek’s latest work involves integrating these theories and an attempt to track business people’s changing motivation regarding the expansion of this environmental standard. He uses panel data, which is another feature distinguishing his research from its predecessors.

His main research thesis is that during the initial stage, when the environmental standard is virtually unknown, the resource approach has an impact – enabling firms to strengthen their competitive advantage and reduce operating costs. However, as adoption expands, the benefit, in that sense, contracts, but the number of institutions involved continues to grow. Therefore, in later stages, it is the institutional factor that comes into play.

His research sample included 977 South Korean industrial enterprises over a 15-year period, from 1996-2011, and his approach combined historical case study analysis and regression where the first year of ISO 14001 adoption was the dependent variable.

Independent variables were split into four groups: resources (capital intensity, financial indicators, chemical and oil industry); institutional (small to medium size firms, company age, export volume and financial regulation); and control (the size of firms adopting ISO 9001) and time-related factors. This last was divided into two periods: 1996-2003 and 2004-2011.

As is traditional, presentations are followed by discussion. A great deal of attention was focused on the essence of ISO 14001. Vadim Radaev was interested in its rationale and the extent to which it has proved effective in preventing pollution. In fact, the standard involves a raft of recommendations on improving environmental management. The measure’s effectiveness varies country to country, as a result. In the United States, adopting this standard led to a reduction in emissions, while in South Korea it has not delivered any significant environmental improvements. Baek believes that the reason for this extensive disparity is that ISO 14001 does not include any formal oversight regarding its implementation. Therefore, other environmental laws in place matter.

If it is not effective, then why adopt it? That was the question asked by Olga Kuzina. The report’s author said he believes the main benefit is felt by early adopters. But consumers also benefit, as they are protected from fly-by-night firms.

Another question related to one of the report’s hypotheses. Ivan Aymaliev asked why the company size has an impact on adoption. The answer was that major firms enjoy plentiful resources, enabling them to cover expenses incurred in adopting ISO 14001 without any significant production loss.

In conclusion, Kyungmin Baek expressed his hope that similar research will, in future, be carried out in Russia. In the meantime, he lacks the necessary linguistic skills, and has not found any students to assist – so go for it!

Alexander Buzdin, for HSE news site.