Introduction
Self-regulation has been characterised
as an ‘attempt to deceive the public[1]’,
as ‘placebo policy[2]’,
and as mere ‘cosmetic effects[3]’.
It has been viewed as ‘a useful way of organizing issues out of politics[4]’
and perhaps most colourfully as ‘a wicked weapon of agenda management[5]’.
The reality, however, can be quite
different. As Julia Black notes, ‘self-regulation’ does not refer to
individualized regulation but ‘describes the situation of a group of persons or
bodies, acting together, performing a regulatory function in respect of
themselves and others who accept their authority. [6]’
In contrast to the bogeyman conjured up
by the above comments, self-regulation does not offer free reign to regulated
industries. In fact it allows regulation to access the most powerful of social
forces which were previously off limits to it.
In the absence of substantial state
involvement self-regulation can remain legitimate and effective. This is
because self-regulation is itself ‘conditioned[7]’
by an array of regulatory and institutional forces outside the realm of
traditionally conceived regulation. The title question will be addressed under
the following four headings: The power of social norms, general effectiveness
of self-regulation, legitimacy and institutional embeddedness.
Seeing everything through the regulatory lens
Regulatory governance,
in academic terms, induces the ultimate Damascene conversion. Everything is
viewed through a new lens. First of all, everything is regulation. ‘[I]t can be
holding a child’s hand at a pedestrian crossing, encouraging a work mate to
take recreation leave or reminding a family member to put their dirty clothes
in the laundry basket.
[8]’
Secondly, soft-regulation is hard-regulation
like, for example, social norms. Last of all, self-regulation is not
self-regulation. What initially sound like newspeak slogans out of 1984 make sense through this new lens.
The context for
this argument in favour of the efficacy and legitimacy of self-regulation then
is also one of the most powerful prongs of the argument. Self-regulation is not
actually self-regulation. Self-regulation, following Braithwaite’s idea, is
itself enforced[9]. This will be dealt with in more detail later.
The power of social norms – Soft regulation is hard
regulation
Teubner’s
autopoietic view of regulated industries shows us that systems are
self-generating and self-referring[10]. He views actors as bounded by the rationality of
their own environments[11]. These systems are described as ‘normatively closed,
but cognitively open[12]’. In short, there are regulatory areas that can be
reached only indirectly by a form of ‘conditioned’ self-regulation.
Traditional
legal norms are simply viewed as ‘external ‘noise’’ and are filtered and
reconstructed in keeping with a system’s own rationality[13]. This is evidenced in the economic system where its
rationality of efficiency leads to the concept of ‘efficient breach of
contract’[14].
When self-regulation
speaks the language of the system a force without parallel in state regulation
can be brought to bear upon a company. Can you imagine, for example state
regulation imposing a fine that would do away with 57% of Nike’s share value
and 16% of its revenue in one year?
[15] There are places that state regulation simply cannot
reach.
Self-regulation then
can effectively operate without substantial state involvement because it
already does wherever traditional regulation cannot reach. Lisa Bernstein’s
examination of the use of extralegal contractual relations in the diamond
industry is informative in this regard[16].
There the
institutional premium on secrecy means that ‘parties are rarely willing to pay
the reputational price of violating [...a norm...] simply to gain access to the
courts.
[17]’ She also portrays the New York Diamond arbitration
board as a jury black box[18]. It does not give written opinions and is designed
with deterrence of challenges in mind[19]. This is similar to Shasta County rancher’s ignorance
of the formal law relating to cattle trespass incidents in favour of
reputational norms[20].
Empirical
research by Macaulay also illustrates that contract law is often times ignored
in preference of non-legal norms in business transactions[21]. Additionally, Beale and Dugdale note that, in many
cases, where businessmen while expressly agreeing upon primary obligations still
govern issues related to their business relationship with tacit non-legal norms[22]. Social norms then are more powerful than legal norms
alone.
Put simply self-regulation
is more effective in the absence of substantial state involvement because there
is a certain point past which it cannot make its direct influence felt. Where
command-and-control style regulation can influence industry its approach is
often ham-handed and lacking the regulatory fit offered by self-regulation.
Self-regulation’s
benefits over traditional regulation in terms of intelligence and dynamism have
already been thoroughly canvassed by others. Briefly though, self-regulation
can provide regulation that is tailored to a specific scenario, bring to bear
industry expertise and keep abreast of fluid and ever changing situations.
That
self-regulation can, in this way, be very effective is very much the easy sell.
This is especially the case when one compares it to traditional regulation. This
regulation can penalize a company for permitting work on a bridge without life
jackets over a dry river bed[23]. It can attempt to reduce the number of cars in
Athens and end up increasing car ownership overall[24]. It is the regulation of unintended effects and unwanted
paradoxes[25].
More generally,
voluntary participation provisions offer industry more input into the design
process and can act as a powerful means of overcome regulatory resistance[26]. Participating firms have a sense of ownership[27]. Social norms really are the elixir of regulatory
governance. This can be seen from research suggesting that the act of
negotiating on regulation alone provides industry with a greater insight into
improved environmental management practices[28].
Self-regulation is not self-regulation
In the
legal context, ‘the ‘self’ in ‘self-regulation’ is not used in the literal
sense[29]. ‘Rather it connotes some degree of
collective constraint, other than that directly emanating from government, to
engender outcomes which would not be reached by individual market behaviour
alone.
[30]’
The notion
that self-regulation is not self-regulation will be fleshed out mainly through
an examination of transnational private regulation (TPR) and institutional
embeddedness in environmental self-regulation more generally. Transnational
private regulation will be discussed in terms of it being a form of conditioned
or enforced self-regulation. The terms of private transnational regulation are ‘hopelessly vague[31]’, ‘bristle against[32]’ those ‘who see legitimate political order stemming
only from Sovereignty and constitutions[33]’ and are ‘much more often regional and sectoral than
global.
[34]’
Take the
Forest Stewardship Council (FSC) for instance. It is not the only forest
certification scheme to exist. There is the US Sustainable Forest Initiative (SFI), the Lembaga
Ekolabel Indonesia (LEI), the programme for the endorsement of forest
certification schemes (PEFC), the Malaysian Timber certification council
(MTCC), etc[35]. The
main difference between FSC certification and others is that the FSC
essentially employs a form of self-regulation compared to the others[36]. The FSC is completely performance based rather than
system based[37]. TPR will be discussed as presenting the model form
of self-regulation.
General effectiveness of self-regulation
Reservoir of pre-existing norms
Self-regulation is effective because it takes advantage of pre-existing
norms. The FSC serves to demonstrate this point. In 1992 there was a failed
push to bring about a binding forest convention in a Nations conference on
environment and development (UNCED) in Rio[38]. The FSC on the other hand tapped into ISO and INFOAM
things that were going on at the same time[39]. It was developed ‘out of an amalgam of discourse,
participatory, multi-stakeholder, policy-making processes, technical
standard-setting Convention’s and emerging trade rules. [40]’
The inability of
predominantly state led regulation to harness pre-existing norms where self-regulation
can weighs in favour of self-regulation’s efficacy. Self-Regulation can draw
from a pool of pre-existing norms which means that the cost for different
self-regulatory regimes is reduced and they all receive the aggregate benefits
of other regimes’ expertise.
In Uganda forest certification is pursued
within the framework of forest carbon sequestration projects. Certification can
be done as a kind of add-on standard as a proof of sustainability[41]. In Swaziland the plantation industry is a stronger
driver of the certification schemes[42].
In Uganda for
the most part, (94%) of the certified area, it is occupied by recent
plantations of the FACE foundation, a not-for-profit organization created by a
consortium of five Dutch power companies[43]. There the FSC certificate is used as an add-on standard
for sustainable forestry in addition to the certification that proves that
carbon is sequestered[44]. The FACE Foundation has also been the first to
establish the FSC in places like Ecuador and Malaysia[45]. Often FACE is the first to establish the FSC in
developing countries[46].
There are clear
trends towards the growth of SFM certification as an add-on standard[47]. A sizeable amount of projects certified against the
climate, community and biodiversity alliance (CCBA) standard are certified
against the FSC standard too[48].
Smartwood South
America, for instance, only audits for CCBA in conjunction with the FSC[49]. Additionally, the FSC runs a forest working group to
give the review of its principles and criteria to control carbon claims in terms
of their FSC certified operations[50]
Power of contracts
Another feature
of self-regulatory regimes that makes them so effective is that all of the
powers to make and enforce rules are concentrated within one regime[51]. As John Willis has suggested these self-regulatory
regimes can be like ‘Governments in miniature’[52].
The powerful
contractual power of self-regulatory regimes is interesting. Another interesting
thing is the degree to which self-regulatory regimes influence the regimes and
contracts of others.
The enforced
self-regulatory regime of the FSC has been targeting governments to adopt their
standards in government procurement policies[53]. This shift towards targeting procurement policies is
important given large states ability to affect markets through their buying
power[54].
Multilateral development banks in cooperation
with UN organizations, the OECD, the Canadian government, and non-governmental
organizations have established an ‘Environmentally and socially responsible
procurement working group.
[55]’ The really exciting thing about the power of
contracts, in examples like the one above, is the degree to which the strong
private powers of one self-regulatory regime can be tapped into by others.
This point adds
a reservoir of contractual powers point to the previous reservoir of
pre-existing norms point. Self-regulatory regimes also foster the emergence of
forms of institutional regulation at each contractual stage in the chain of
custody. This can be seen in the FSC chain-of-custody certification (CoC) [56]. This certificate indicates that a product is made
out material originating from an FM-certified forest[57].
Free rider problem
The
self-regulation problem presented by free-riders and weaker actors stuck at the
bottom can often be addressed. In the context of forest certification, for
example, since the United Nations Framework Convention on Climate Change the
concept of paying developing countries to protect their forests has been gaining
support[58]. This concept is embodied in the mechanism known as
reduced emissions from deforestation and forest degradation (Redd+)[59].
Also the
scheme’s measurement, reporting and verification (MRV) requirement is already
partly done by third-party certification[60]. In this way the networking or pooling of norms and
expertise can help overcome the free rider problem.
Legitimacy
The first part
of this essay dealt more generally with the positive case for the effectiveness
of self-regulation. The second half will argue the more negative case against
the notion that self-regulation is doomed to operate solely in the narrow self-interest
of the self-regulated industry. This argument takes place under the headings of
legitimacy and institutional embeddedness.
Legitimacy refers
to the social credibility and acceptability of regulation[61]. It relates to ‘a generalized perception or
assumption that the actions of an entity are desirable, proper, or appropriate
within some socially constructed systems of norms, values, beliefs and
definitions.
[62]’
Commonly held
perceptions of self-regulation view it as compromised by self-interest. While
this can be the case the opposite can also be true especially where
self-regulation is in anyway transparent. The state’s regulation on the other
hand benefits from its perception, often undeserved, of having derived from the
democratic will of the people and as being de facto legitimate.
Often the legitimacy
of state regulation is taken for granted as being credible or acceptable. The
difference between the Marine Stewardship Council’s fishery certification and
Japan’s State certification programmes illustrate that self-regulation can be
much more deserving of legitimacy[63].
MEL Japan,
Japan’s state fishery certification scheme, does not appear to be run wholly,
or even primarily, by elected officials which raises accountability challenges
which should in theory affect the legitimacy of the certification scheme[64]. Furthermore serious accountability issues are raised
by the strong link between MEL Japan, the Japanese government and the fishing
industry[65].
Transparency
Transparency can
exert tremendous influence over self-regulatory regimes and ensure that they
remain legitimate. Khanna’s research into the US’s Toxic Release Inventory
programme (TRI) indicates that the companies that suffer the most at the hands
of investors are not the largest emitters but those emitters who were not
‘known’ to be polluters on the basis of prior environmental information
available to investors[66]. Thus even a little bit of transparency goes a very
long way.
One of the most
effective and simple ways of improving the transparency and accountability of
self-regulation is to require that regulators give reasons for their decisions[67]. This requirement activates at minimum four
additional mechanisms for controlling regulatory discretion and enhancing
regulatory legitimacy[68]. These include public participation and debate, complaint
procedures, peer review, and judicial review[69]. In an environment that is fully transparent actors
become subject to what Habermas calls the ‘forceless force of the better
argument.
[70]’
Extended accountability
This
transparency in turn enhances the accountability of self-regulation. Colin
Scott’s idea of extended accountability again suggests that self-regulation’s
legitimacy can exist in the absence of substantial state involvement[71]. Dialogic and transparent processes of
self-regulation offer a means of extended accountability. Scott argues that
overlapping mechanisms of accountability take away from the need for any
individual accountability mechanism to play a central role. He likens this
process to ‘collibration’ described by Andrew Dunsire[72]. Scott refers here to the way in which the balance of
accountability mechanisms shifts in order to maintain legitimacy[73].
Under this model
legitimacy can be constructed and legitimacy communities can be developed to
ensure the legitimacy of self-regulatory regimes in the absence of substantial
state involvement. Multiple sources of accountability can be harnessed to add legitimacy
to a self-regulatory regime. The regime might not be able to respond to all
potential accountability claims at once. It has, however, the ability to
respond to them individually. It dynamically balances itself so that it can rely
on the collective legitimacy endowed by all of the accountability mechanisms[74].
Fighting for legitimacy
This dynamic
response to legitimacy claims brings us on to the next point. Self-regulation’s
need to respond to legitimacy claims in and of itself actually adds legitimacy
to a self-regulatory regime. Given the earlier point about a reservoir of norms
the best administered regimes are likely to naturally emerge above the melee.
It is
interesting that legitimacy within self-regulatory regimes is based to a much
larger extent on effectiveness. The Marine Stewardship council, discussed
earlier, was established by the World wildlife fund and Unilever in 1996 and was
initially criticised due to perceived industry capture and lack of transparency
and participation within its standard-setting procedures[75]. In view of these criticisms, the MSC became a fully
independent non-profit organization in 1998, and undertook a comprehensive
governance reform to enhance participation, representation and transparency[76].
The MSC’s standards
garner further legitimacy from their use of objective third-party assessments
based on scientific evidence, transparent processes with built-in stakeholder
consultation and objection procedures, and guidelines that ensure the
sustainability of target species, ecosystems, and management practices[77].
Not only does
fighting for legitimacy actually improve the self-regulatory regime but winning
a legitimacy contest also adds to the perception of legitimacy. The perception
of legitimacy is itself a part of legitimacy. A fight for legitimacy also seems
to trigger a move towards democratization and transparency within a regime.
The alliance of
voluntary accreditation bodies ISEAL’s flagship document is the code of good
practices for setting social and environmental standards[78]. Under section 7.2 multi the code explicitly requires
multi-stakeholder consultations, and section 7.2 requires that all interested
bodies ‘be provided with opportunities’ to contribute to the elaboration of a
standard[79]. There is also a feedback loop in that the legitimacy
of these bodies is enhanced because they are democratized and made more responsive
to legitimacy claims in response to legitimacy claims.
This inclusive
approach to decision making reinforces the legitimacy of such self-regulatory
regimes. Specific examples of this trend include codification in principles
such as the Rio Declaration principle 10 (which states that environmental
issues are best handled with participation form all ‘concerned citizens on the
relevant level’) and the Aarhus Convention on the access of information, public
participation in Decision-making and access to justice in environmental
matters, which came into force in 2001[80].
Self-regulatory
regimes, at least as enforced by transnational private regulation schemes, are
moving in the direction of a normative consensus on the need to ‘democratize’
global governance[81]. Fighting for legitimacy is a catalyst that enhances
a regime’s legitimacy provided it survives.
Dealing with instrumental theories of self-regulation
In order for a
self-regulatory regime to acquire legitimacy then it must be transparent and
its norms must be institutionally embedded in the other organizations to allow
for extended accountability. In regimes enforced by TPR and in otherwise
effective regimes there is an institutional body speaking the same language as
the company and allowing them to regulate themselves. That may be NGO’s in the case
of TPR or it could be, more broadly, banks insurance companies and various
market actors at different stages in a supply chain.
Parker thus puts
forward an ideal type of ‘permeable’ self-regulation in which corporate
management is open to a broad range of stakeholder deliberations about values
and legal regulation facilitates and enforces this permeation[82]. Institutions can operate as instruments which can
transmit information that educates actors not only about the substantive
content of rules, but also the objectives that underlie norms and methods by
which norms can be complied with. In this way norms are crystallized[83].
One of the problems
critics allege with self-regulation is that it operates only in its narrow
self-interest. Cashore, Auld and Newson have argued that the key factors which
lead business to support the FSC were pragmatic evaluations related to the
possibility of either increased market access or the protection of market
share, and not through normative evaluations relating to participation,
transparency, and so on[84]. A number of points can be made about this. First of
all, there is an element of transformation of the market so that market forces
are aligned with regulatory objectives. Secondly, businesses do not support the
FSC for solely pragmatic reasons legitimacy is very much a social construction.
If legitimacy
were a purely instrumental concern then the FSC, for example, would not place
such an impetus on institutionalizing ‘an elaborate governance structure which
is based upon ‘participation’, ‘democracy’ and ‘equality’[85]. The reality is that the FSC has many stakeholders
concerns to take into consideration including other NGO’s[86]. The general assembly of the FSC has a tripartite
governance structure of social, economic and environmental[87]. Each of these chambers has equal voting rights. The
chambers themselves in turn have a North and a South[88]. The chamber operates to maintain a balance of voting
power between the different interests without having to limit the power[89].
In an effort to
maintain its legitimacy the FSC constrains all of the various actors which
subscribe to its accreditation scheme. In this way, in an institutional sense,
the implicit social licence of companies is recognised in the makeup of the
FSC. It is not just about narrow self-interest.
The effort to
maintain legitimacy requires inclusion which of necessity takes us away from
self-regulation’s potential narrow self interest. Specific standards, for the
purpose of certification, are developed by national standard working groups and
they are reviewed internationally via a two-tier consultation process[90]. To maintain legitimacy the FSC has to become
inclusive and in becoming inclusive it maintains its legitimacy.
In terms of
legitimacy, neo-institutional theory stresses that not all choices made by
business are the result of manager’s rational economic decisions[91]. Di Maggio & Powell suggest that managerial discretion
is constrained by the need to possess social legitimacy long term[92]. Furthermore, Suchman defines the construct of
legitimacy as ‘a generalized perception or assumption that the actions of an
entity are desirable, proper, or appropriate within some socially constructed
system of norms, values, beliefs and definitions. [93]’ In short, legitimacy reflects the degree to which a
social entity’s actions are socially acceptable[94].
Sometimes
compliance with the ‘social licence’ will offer a company respite in terms of
the ‘regulatory licence’[95]. Research on mills illustrates that community
relations are used to achieve additional regulatory leverage[96]. In one case good community relations meant that the
community sided with their mill on the issue of the location of a superfund
site[97]. Regulatory action is in part determined by the
community[98].
Legitimacy in
the arena of self-regulation is not just about instrumentality. The way we
conceptualize legitimacy is not insulated from normative concerns like those derived
from constitutional, democratic, performance or value-based evaluative
criteria. A survey carried out in 2007 by ISEAL, an alliance of social and
environmental TPRs, highlighted the importance of normative evaluations in the
legitimation of standard-setting organization’s including TPRs[99]. The results of the survey showed that inclusiveness,
participation, fair representation, and independence of auditing all played a
crucial role in the assessment of the credibility of standards which in turn,
feeds into the legitimacy of TPRs[100].
In the case of
TPR these normative evaluations are actually also the specific concerns of
certain actors. TPR shows the future of self-regulation. It allows for the
enforcing of self-regulation where institutions that can generate norms and
educate companies are included in a process of self-regulation.
The role of
institutional educators is paramount in self-regulation. In the case of the FSC
for example the Rainforest Action Network played a very important role in the
socialization of companies[101]. It spent 2 years and held roughly 600 actions to
persuade home depot to start using stocking FSC accredited products[102]. By the time they approached Lowes anecdote has it
that it only took two phone calls and one meeting for Lowes to follow suit[103]. In this way companies learn from experience with
these institutions to pre-empt the forest campaigners and just regulate
themselves.
Critics of
self-regulation again argue that companies will only voluntarily subscribe to
schemes that are instrumentally useful to them in the strictest sense. Those
critics should take a closer look at the nature of legitimacy. The Sullivan
principles which were used for measuring the responsibility of US corporations
in apartheid South Africa bear out this idea[104]. In 1986, Sullivan disassociated himself from the
principle and the programme became discredited[105]. Before that point, 25% of local and state laws
concerning US corporations in South Africa used the Sullivan principles[106]. After he disassociated himself 9% of local and state
laws used them. This demonstrates that the instrumental usefulness is but a
small part of the taxonomy of legitimacy[107]. Any self-regulatory scheme that wants to be
successful in the long run ought to be more than just useful to its regulatees.
This is
evidenced by many examples of organizations responding to crises of legitimacy
by becoming more democratic, more inclusive and more transparent. The
legitimacy of ISO standards were initially assessed by reference to the degree
of expertise and the extent to which ISO standards rationalised technical
standards[108]. However, when the ISO branched out to include a new
social responsibility standard, ISO 26000, expertise and rationalisation were
insufficient in and of themselves to legitimate the new standard[109].
Again and again,
when confronted with the legitimacy dilemma instrumentality does not provide
the answer. ISO recognized this and
given the potential users of its standard it adapted its standard-setting
procedure to open it up to wider stakeholders such as NGOs and consumer groups[110]. In order to do this, the ISO set up six specific
stakeholder categories and created new procedural rules so that all stakeholder
views were represented[111].
When the regime
for the enforcement of a self-regulatory regulatory regime also represents the
institutions that actually align the market with regulatory goals the problem
of self-interest is drastically reduced. Self-interest becomes much closer to
regulatory goals.
Institutional
embeddedness
In addition to
being instrumentally useful inclusiveness is required to maintain legitimacy.
When this inclusiveness includes institutional players like NGOs or ethically
conscious banks these regimes become extremely effective.
Earlier in this
essay reference was made to the importance of institutions and institutional
embeddedness. In the context of legitimacy that included writing transparency
into the DNA of TPR regimes in response to challenges to their legitimacy. It
also included a look at the role of outside institutions as educators of
companies. Now this essay will take a more detailed look at institutional embeddedness.
One can liken
banks and insurance companies to NGOs and voluntary accreditation
organisations. Teubner argues that the role of law should be to stimulate
indirectly the controlling of the internal organizational structures of
companies[112]. He sees the desired outcome as the ‘mobilization of
internal self-control resources.
[113]’
As former UN
Secretary General Kofi Annan said: ‘We are not asking corporations to do
something different from their normal business: we are asking them to this
business differently.
[114]’ Regulatory demands would achieve the most results if
they were sensitive to the corporation’s capabilities[115].
Asking firms to
do what they do best, rather than something they do not do at all, is the
easiest way to create positive results[116]. Selznick has talked in terms of institutionalizing
responsibility, or building moral competence into an enterprise’s structure[117]. The US Green Lights programme is an example of where
self-regulatory instruments have been specifically designed to exploit win-win
outcomes[118].
Institutionalizing
norms in conditioned self-regulation can steer massive amounts of private
wealth, unavailable to state regulators, towards regulatory ends. Since January
2001, Swedish State-run pension funds have been required to incorporate ethical
investment strategies and report to the government annually with respect to how
they are fulfilling this policy[119]. These obligations apply to the five largest
state-controlled pension funds in Sweden[120]. A 2008 survey for the Responsible Investment
Association of Australia valued portfolios at A $ 15.7 Billion which
represented 1.9 % of all managed investment portfolios in Australia[121]. In 2001 France created a pension reserve fund obliging
annual reporting to trustees on social, environmental and ethical
considerations. This fund is to have 150 billion euros by 2020[122].
In the
Netherlands, environmental agreements are negotiated on a self-regulatory basis
between government and entire industry sectors[123]. These ‘environmental covenants’ allow the states
scarce resources to be used to best effect[124]. In Australia, the Victorian environmental protection
authority rewards ‘good performers’ by getting rid of much their regulatory
burden This includes things like works’ approvals and multiple licences across different
sites[125].
Large
institutional investors are another massive source of private wealth that could
be used to induce companies to self-regulate[126]. In selecting, and then in monitoring, their
investments, large activist institutional investors in the US have placed
corporate social responsibility on their agendas[127]. TII-CREF, Calpers, NYCERS, as well as labour union
pension funds, such as textile workers (amalgamated clothing & textile
workers, or ACTV) or the carpenter’s union of pension funds, have become
up-front socially responsible investors[128].
Environment
Australia is similarly ahead of the curve on the institutional embeddedness
front. It took part in drafting the financial services reform Act of
2001(FRSA), which introduced new ethical investment disclosure requirements for
financial organizations. The act is ambitious in that it covers an extensive
range of investment products[129]. It obliges issuers of financial products to include
disclosure statements (PDS) information about the extent to which labour
standards and environmental, social or ethical considerations are taken into
account in the selection, retention, or realization of the investment[130].
In the
Netherlands a Dutch green investment directive issued by the Government in 1995
offers tax deductions for interest payments and dividend yields from approved
environmental investment funds[131]. In order to qualify, the fund has to have at least 70%
of its assets invested in environmentally friendly projects recognised as acceptable
by the Dutch environmental agency[132]. The interest rates are attractive and investors now
see benefit in funding progressive new projects that were originally perceived
as risky with limited return[133].
In Canada, the
securities commission actually encourages corporations to use their internal
organization apparatus to look at the environmental problems. It does so by
requiring corporations to report the current and anticipated financial or operational effects of environmental
protection requirements in an annual information forum[134].
Finally, Institutionalization
means embedding norms in supply-chains[135]. This means that socialization and reinforcement of
regulatory norms take place mainly through market forces. Accountability,
transparency, legitimacy and effectiveness are all woven into the fabric of
inter-institutional and intra-institutional dealings as regulation is carried
out again and again at every stage of the market.
Conclusion
Self-regulation
does not mean entirely abdicating existing regulatory responsibilities[136]. It gives regulatory opportunities to the state to
draw on the capacities of other actors to create a chain of primary and
secondary regulatory controls[137].
TPR offers the
perfect model for ‘conditioned’ self-regulation. Under this model institutions
ensure that self-regulation can remain effective and legitimate. That self-regulatory
regimes can have legitimacy beyond strictly instrumental corporate reasons
means that self-regulation can be effective and remain legitimate.
Perhaps the
current institutional trend can be built upon and there can be more focus on
rewarding good behaviour rather than just punishing bad behaviour. Parker hopes,
for example, that more deliberation earlier will allow open companies to ‘reap
the reputational rewards of leadership and innovation. [138]’ If regulation becomes a self-regulating market based
process regulation will no longer just be a box ticking exercise. In a
regulatory regime of reputational norms performance can far exceed modest
traditional regulatory goals.
Perhaps the
title question of should instead read:-
Can substantial
state involvement be legitimate and effective without self-regulation?
[1] Cunningham,
‘Environment, Self-regulation and chemical industry: Assessing Responsible
Care’, (1995) Law & Policy 17(1) 57,
at 58
[7] Alders
and Wilthagen, ‘Moving beyond command-and-control: Reflexivity in the
regulation of occupational safety and health and the environment’(1997) Law
& Policy 19 415, at 429
[8] Valerie
Braithwaite, ‘Ten things you need to know about regulation but never wanted to
ask’, (2006) Australian Law Librarian 14(3) 19, at 19
[9] Cunningham,
‘Environment, Self-regulation and chemical industry: Assessing Responsible
Care’, (1995) Law & Policy 17(1) 57,
at 89
[15] Conroy ‘Branded! : How the certification revolution is
transforming global corporations’ (2007) New Society Pub, at p12
[16] Lisa
Bernstein, ‘Opting out of legal system:
Extralegal contractual relations in the diamond industry’, (1992) Journal of
Legal Studies 21(1) 115
[20] Robert
Ellickson, ‘ Of Coase and cattle: Dispute resolution among neighbours in Shasta
County’(1985-1986) Stanford Law Review 38(3) 623
[21] Scott
and Casey, ‘The Crystallization of
regulatory norms’, (2011) Journal of Law and Society 38(1) 76, at footnote 30
on p86
[23] Grabosky,
‘Counterproductive regulation’, (1995) International journal of sociology of
law 23 347, at 353
[25] See Grabosky,
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Meidinger, ‘The administrative law of global private-public regulation: the
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Scott, ‘Regulatory governance and the
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not necessarily substitutable one for the other such that if one fails another
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[75] Scott
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Marx & Dieter Cuypers, ‘Forest certification as a global environmental
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