Michael W. Toffel

33 Results

 

What Shapes the Gatekeepers? Evidence from Global Supply Chain Auditors

Private gatekeepers, from credit rating agencies to supply-chain auditors, are supposed to provide unbiased, objective assessments of companies' internal operations, and such private assessments play a central role in contemporary regulatory regimes. While the impartiality of gatekeeping organizations has come into question over the past decade, little is known about what drives the decisions of the individual accountants, auditors, analysts, and attorneys who work at these organizations. Using data from a private, third-party social auditing firm that assesses global supply chain factories' adherence to corporate codes of conduct governing workplace conditions, this study reveals that external auditors' findings are shaped by a combination of economic incentives and social factors. The study highlights opportunities to design and staff audits to maximize their impartiality and credibility. Read More

Corporate Leaders Need to Step Up on Climate Change

Despite perceptions that sustainable business efforts are progressing, the environment reminds us we're failing to deal with the problem sufficiently. Here's what business leaders must do next, according to Michael Toffel and Auden Schendler. Closed for comment; 14 Comments posted.

Reinforcing Regulatory Regimes: How States, Civil Society, and Codes of Conduct Promote Adherence to Global Labor Standards

Multinational corporations are under increasing pressure to manage their global supply chains in ways that are environmentally sustainable and socially responsible. Many companies have responded to this pressure by asking their suppliers to adhere to codes of conduct governing labor conditions and environmental management. This paper examines the conditions under which tens of thousands of suppliers across many countries are more likely to adhere to the labor practices these codes of conduct call for. Findings indicate that suppliers are more likely to adhere to codes of conduct in countries that not only have made binding domestic and international legal commitments to protect workers' rights, but that also have high levels of press freedom and nongovernmental organization activity. Greater code of conduct adherence is also found among suppliers that serve buyers located in countries where child labor is a more salient issue. This research reveals the critical importance of maintaining multiple, overlapping, and reinforcing governance systems, and urges caution to those hoping that private regulatory regimes can substitute for effective government regulation. Overall, this paper points the way toward building more effective private regulatory regimes. Read More

LEED-ing by Example

When a local government decides to pursue environmentally aware construction policies for its own buildings, the private sector follows suit, according to new research by Timothy Simcoe and Michael W. Toffel. Closed for comment; 7 Comments posted.

Public Procurement and the Private Supply of Green Buildings

Government purchasing programs often have policy objectives that go beyond getting a good deal for the taxpayer. For example, governments may purchase products with enhanced environmental or safety features not only to reduce environmental impacts and safeguard employees, but also to promote broader adoption of similar products in the private market. Such policies have been deployed by governments across the United States and European Union, but little is known about how well they actually work. This paper examines the impact of environmentally friendly government procurement policies on private-sector adoption of the targeted products. The authors find that municipal government green building procurement policies that apply only to municipal buildings also accelerate the use of green building practices in the private sector, both in the cities with these policies as well as in neighboring cities. They also find that such government policies encourage private-sector investment in complementary services, which likely reduces green building costs to private developers. Read More

When Business Competition Harms Society

In highly competitive markets, many firms are likely to bend the rules if doing so will keep their customers from leaving for a rival, according to new research by professor Michael W. Toffel and colleagues. Case in point: service stations that cheat on auto emissions testing. Open for comment; 10 Comments posted.

OSHA Inspections: Protecting Employees or Killing Jobs?

As the federal agency responsible for enforcing workplace safety, the Occupational Safety and Health Administration is often at the center of controversy. Associate Professor Michael W. Toffel and colleague David I. Levine report surprising findings about randomized government inspections. Closed for comment; 11 Comments posted.

Customer-Driven Misconduct: How Competition Corrupts Business Practices

Competition is typically thought to generate many positive outcomes including lower prices and higher productivity. But competition can also lead firms to increase quality for their customers in ways that are both illegal and socially costly. This paper examines the impact of competition on the vehicle emissions testing market, and finds that firm misconduct increases with competitive pressure and the threat of losing customers to rival firms. These results have serious implications for policy makers and managers. This paper is among the first to empirically demonstrate that increased competition can motivate firms to provide illicit quality to avoid losing business. Read More

Where Green Corporate Ratings Fail

Many companies receiving high marks in environmental sustainability are hurting the planet in other ways, write professor Michael Toffel and executive Auden Schendler. Here's where green rankings fall short. Open for comment; 7 Comments posted.

Engaging Supply Chains in Climate Change

Managing a company's risks and opportunities associated with climate change—including its physical and regulatory implications—requires focusing not only on internal operations, but also on supply chains, especially since greenhouse gas (GHG) emissions in supply chains typically exceed those from a company's own operations. But this requires obtaining climate change information from suppliers, which some are reluctant to share. In this paper, Chonnikarn (Fern) Jira and Michael W. Toffel examine proprietary data from the Carbon Disclosure Project's Supply Chain Project, a collaboration of multinational corporations asking their key suppliers to share information about their GHG emissions and their vulnerabilities and opportunities associated with climate change. Jira and Toffel find evidence that a supplier is more likely to share this information when it faces several buyers requesting the information, when its buyers appear committed to actually using this information, and when the supplier is in a relatively competitive industry and is thus particularly vulnerable to being replaced by its rivals. These findings can help managers better predict which suppliers will be more willing to share climate change information, and which might require more incentives or pressure to share this information. Read More

What Environmental Ratings Miss

Environmental ratings of companies are based on "green" management efforts and the environmental performance of their operations. In this paper, Michael Toffel and Auden Schendler argue that these ratings neglect companies' actions that seek to influence environmental policy, which can have a much broader impact than their internal efforts. As a result, sustainability ratings risk seriously misleading consumers and investors, and can even enable "greenwashing" by allowing corporations to game the system, gaining high rankings for greening their operations despite advocating for less stringent environmental policy. Toffel and Schendler argue that environmental ratings should factor in political contributions, CEO advocacy work, and engagement with non-governmental organizations, among other actions. This would erode the environmental ratings of companies advocating weaker environmental policy, and bolster the ratings of those advocating more stringent environmental policy. Read More

The Globalization of Corporate Environmental Disclosure: Accountability or Greenwashing?

Between 2005 and 2008, the world saw a dramatic increase in corporate environmental reporting. Yet this transition toward greater transparency and accountability has occurred unevenly across countries and industries. Findings by professors Christopher Marquis and Michael W. Toffel provide the first systematic evidence of how the global environmental movement affects corporations' environmental management practices. Firms' use of symbolic compliance strategies, for instance, is affected by specific corporate characteristics and by institutional context. This study contributes to a larger body of research on the effects of global social movements and environmental reporting. Read More

How Firms Respond to Mandatory Information Disclosure

Companies are facing increasing pressure to reveal information about their operations, including their environmental performance. This research examines which types of organizations are especially likely to reduce their pollution levels once they face mandatory disclosure requirements. Research conducted by Anil Doshi and Michael Toffel of Harvard Business School, and Glen Dowell of the Johnson School of Management at Cornell University compares the responses of companies based on their proximity to headquarters and to corporate siblings, organizational size and the density of their surrounding communities, and whether they are part of publicly- or privately-held firms. Read More

Turning Employees Into Problem Solvers

To improve patient safety, hospitals hope their staff will use error-reporting systems. Question is, how can managers encourage employees to take the next step and ensure their constructive use? New research by Julia Adler-Milstein, Sara J. Singer, and HBS professor Michael W. Toffel. Read More

Managerial Practices That Promote Voice and Taking Charge among Frontline Workers

How can front-line workers be encouraged to speak up when they know how to improve an organization's operation processes? This question is particularly urgent in the US health- care industry, where problems occur often and consequences range from minor inconveniences to serious patient harm. In this paper, HBS doctoral student Julia Adler-Milstein, Harvard School of Public Health professor Sara Singer, and HBS professor Michael W. Toffel examine the effectiveness of organizational information campaigns and managerial role modeling in encouraging hospital staff to speak up when they encounter operational problems and, when speaking up, to propose solutions to hospital management. The researchers find that both mechanisms can lead employees to report problems and propose solutions, and that information campaigns are particularly effective in departments whose managers are less engaged in problem solving. Read More

The Role of Organizational Scope and Governance in Strengthening Private Monitoring

Governments have long debated which tasks should be outsourced to the private sector. Although often justified on the basis of the cost-efficiencies of market competition, outsourcing to private firms carries its own risks, which can reduce the quality of services provided. In addition to more conventional services such as garbage and recycling collection, some governments outsource the enforcement of laws and regulations. This paper by Olin Business School's Lamar Pierce and HBS professor Michael W. Toffel examines the automobile emissions testing market in one state where this form of regulatory enforcement has been outsourced to the private sector. Their analysis illustrates the importance of considering organizational scope and private governance mechanisms such as monitoring provided by corporate headquarters and independent third-parties in efforts to assure the reliability of firms that provide outsourced services. Read More

Environmental Federalism in the European Union and the United States

Under what circumstances will individual states take the lead in passing the most stringent environmental regulations, and when will the federal government take the lead? When a state takes a leadership role, will other states follow? HBS professor Michael Toffel and coauthors describe the development of environmental regulations in the U.S. and EU that address automobile emissions, packaging waste, and global climate change. They use these three topics to illustrate different patterns of environmental policymaking, describe the changing dynamics between state and centralized regulation in the United States and the EU. Read More

Operational Failures and Problem Solving: An Empirical Study of Incident Reporting

Operational failures occur within organizations across all industries, with consequences ranging from minor inconveniences to major catastrophes. How can managers encourage frontline workers to solve problems in response to operational failures? In the health-care industry, the setting for this study, operational failures occur often, and some are reported to voluntary incident reporting systems that are meant to help organizations learn from experience. Using data on nearly 7,500 reported incidents from a single hospital, the researchers found that problem-solving in response to operational failures is influenced by both the risk posed by the incident and the extent to which management demonstrates a commitment to problem-solving. Findings can be used by organizations to increase the contribution of incident reporting systems to operational performance improvement. Read More

Quality Management and Job Quality: How the ISO 9001 Standard for Quality Management Systems Affects Employees and Employers

Nearly 900,000 organizations in 170 countries have adopted the ISO 9001 Quality Management System standard. This is a remarkable figure given the lack of rigorous evidence regarding how the standard actually affects organizational practices and performance. Proponents claim that quality programs such as ISO 9001 improve both management practices and production processes, and that these improvements, in turn, will increase both sales and employment. Documenting and training proper work practices can also reduce potentially dangerous "work arounds," and thus could reduce the risk of workplace accidents and injuries. Some critics, on the other hand, point to the potential for quality programs such as ISO 9001 to be detrimental to employees by documenting work practices, resulting in routinization that may reduce skill requirements and increase repetitive motion injuries. This paper reports the first large-scale evaluation of how ISO 9001 affects workers, focusing in particular on employment, total payroll, average annual earnings, and workplace health and safety. Read More

Extending Producer Responsibility: An Evaluation Framework for Product Take-Back Policies

Managing products at the end of life (EOL) is of growing concern for durable goods manufacturers. While some manufacturers engage in voluntary "take back" of EOL products for a variety of competitive reasons, the past 10 years have seen the rapid proliferation of government regulations and policies requiring manufacturers to collect and recycle their products, or pay others to do so on their behalf. Toffel, Stein, and Lee develop a framework for evaluating the extent to which these product take-back regulations offer the potential to reduce the environmental impacts of these products in an effective and cost-efficient manner, while also providing adequate occupational health and safety protection. The evaluation framework is illustrated with examples drawn from take-back regulations in Europe, Japan, and the United States. Read More

Responding to Public and Private Politics: Corporate Disclosure of Climate Change Strategies

Social activists are increasingly attempting to directly influence corporation behavior, using tactics such as shareholder resolutions and product boycotts to encourage companies to improve their environmental performance, increase their transparency about operations and governance, and more stringently monitor their suppliers' labor practices. This paper examines how companies are responding to these pressures, in the context of requests for greater transparency about the risks climate change poses to their business—and the strategies these companies have developed to address these risks. This paper reveals that a company is more likely to comply with social activists' requests for greater transparency about climate change when the company itself, or other companies in its industry, has been targeted by formal shareholder resolutions on environmental topics—and when the company is facing potential regulations restricting greenhouse gas emissions. These findings demonstrate that changes in corporate practices may be sparked by both social activists and by the mere threat of government regulations, and that challenges mounted against a specific firm may inspire broader changes within its industry. Read More

Evaluating the Impact of SA 8000 Certification

The Social Accountability 8000 Standard (SA 8000), along with other types of certification standards and corporate codes of conduct, represents a new form of voluntary "private-governance" of working conditions in the private sector, initiated and implemented by companies, labor unions, and nongovernmental activist groups cooperating together. There is an ongoing debate about whether this type of governance represents real and substantial progress or mere symbolism. This paper reviews prior evaluations of private codes of conduct governing workplace conditions, including Ethical Trading Initiative's Base Code, Nike's Code of Conduct, and Fair Trade certification. The authors then discuss several best practices that should be employed in future evaluations of such codes of conduct. Read More

Coming Clean and Cleaning Up: Is Voluntary Disclosure a Signal of Effective Self-Policing?

This paper demonstrates some of the benefits and limitations of industry self-policing programs. Many self-regulation programs are operated exclusively by the private sector, often in the hope of garnering goodwill with consumers or staving off more stringent government regulation. Less well known are voluntary self-regulation programs operated by government regulators seeking innovative approaches to further regulatory objectives and to stretch shrinking agency budgets. Little is known about the effects of these programs, or how they might contribute to the overall effectiveness of a regulatory regime. Michael Toffel and Jodi Short seek to determine whether the self-policing required under the U.S. Environmental Protection Agency's Audit Policy affects the behavior of regulators and participating facilities and the relationship between them. Specifically, the researchers examine whether self-policing is associated with improved environmental performance at these facilities and whether regulators reduce their scrutiny over self-policing facilities. Read More

Diffusing Management Practices within the Firm: The Role of Information Provision

Managers face a range of options to diffuse innovative practices within their organizations. This paper focuses on one such technique: providing practice-specific information through mechanisms such as internal seminars, demonstrations, knowledge management systems, and promotional brochures. In contrast to corporate mandates, this "information provision" approach empowers facility managers to decide which practices to actually implement. The authors examine how corporate managers diffused advanced environmental management practices within technology manufacturing firms in the United States. The study identifies several factors that encourage corporate managers to employ information provision, including subsidiaries' related expertise, the extent to which the subsidiaries were diversified or concentrated in similar businesses, and the geographic dispersion of their employees. Read More

Mapping Polluters, Encouraging Protectors

Where are the biggest polluters? And what is your company doing to protect the environment? A new Web site—both a public service and a research tool—posts managers' data in real time, allowing a balanced view of industrial environmental performance. HBS professor Michael W. Toffel and senior research fellow Andrew A. King explain. Read More

How Firms Respond to Being Rated

(Previously titled "Shamed and Able: How Firms Respond to Information Disclosure.") As national governments lose the ability to regulate business activities, interest groups and concerned citizens are turning to private governance to monitor global supply chains, ensure product safety, and provide incentives for improved corporate environmental performance. Proponents hope that private governance incentives will encourage firms to act responsibly, but critics worry that these developments will merely forestall necessary government regulation. Social ratings provide one way to benchmark and compare firms' social performance. But are such ratings schemes effective? This paper investigates the effects of third-party environmental ratings, and finds that firms are particularly likely to respond to such ratings by improving their environmental performance when two circumstances arise simultaneously: (1) when the ratings threaten their legitimacy, and (2) when they face relatively low cost improvement opportunities. Read More

The Causes and Consequences of Industry Self-Policing

The corporate confession is a paradox, as described in this paper aimed at managers, policymakers, and citizens. Why would a firm that identifies regulatory compliance violations within its own operations turn itself in to regulators, rather than quietly fix the problem? Economic intuition suggests that firms will self-disclose violations only when the cost of doing so is less than the expected cost of hiding violations. However, while the cost of doing so can be increased regulatory scrutiny, there is often almost no expected cost of hiding violations. To explore the complex behavior of corporate self-disclosure, Short and Toffel conducted a large-scale analysis in the context of the U.S. Environmental Protection Agency's Audit Policy. They investigated what factors lead organizations to self-disclose violations that went undiscovered by regulators, and asked whether these self-disclosing organizations were obtaining any unofficial regulatory benefits above and beyond formal penalty mitigation. They also evaluated whether self-policing promotes the regulatory objective of improving compliance records. Read More

Self-Regulatory Institutions for Solving Environmental Problems: Perspectives and Contributions from the Management Literature

What role can business managers play in protecting the natural environment? Academic research on when it might "pay to be green" has advanced understanding of how and when firms achieve sustained competitive advantage. The focus of such research, however, has begun to change in light of limits to available "win-win" opportunities and to gaps in regulation. This paper, intended as a book chapter, reviews current literature and explores the potential of self-regulatory institutions to solve environmental problems. Read More

Industry Self-Regulation: What’s Working (and What’s Not)?

Self-regulation has been all over the news, but are firms that adopt such programs already better on important measures like labor and quality practices? Does adopting a program help companies improve faster? In this Q&A, HBS professor Michael Toffel gives a reality check and discusses the trends for managers. Read More

Do Corporate Social Responsibility Ratings Predict Corporate Social Performance?

Ratings of corporations' environmental activities and capabilities influence billions of dollars of "socially responsible" investments as well as consumers, activists, and potential employees. But how well do these ratings predict socially responsible outcomes such as superior environmental performance? Companies can enhance their environmental image in one of two ways: by reducing or minimizing their impact on the environment, or by merely appearing to do so via marketing efforts or "greenwashing." This study evaluates the predictive validity of environmental ratings produced by Kinder, Lydenberg, Domini Research & Analytics (KLD), and tests whether companies that score high on KLD ratings generate superior environmental performance or whether highly rated firms are simply superior marketers of the factors that these rating agencies purport to measure. The data analysis examines all 588 large, publicly-owned companies in the United States that were both regulated by the U.S. Environmental Protection Agency and whose social performance was rated by KLD at least once during 1991-2003. This paper may be the first to examine the predictive validity of social or environmental ratings. Read More

Resolving Information Asymmetries in Markets: The Role of Certified Management Programs

Hundreds of thousands of firms rely on voluntary management programs to signal superior management practices to interested buyers, regulators, and local communities. Such programs typically address difficult-to-observe management attributes such as quality practices, environmental management, and human rights issues. The absence of performance standards and, in most cases, verification requirements has led critics to dismiss voluntary management programs as marketing gimmicks or "greenwash." Toffel examines whether a voluntary environmental management program with a robust verification mechanism attracts participants with superior environmental performance, and whether the program elicits improved environmental performance. His study focuses on the ISO 14001 Environmental Management System Standard, but the results have implications for voluntary management programs that govern many other difficult-to-observe management issues. Read More

Organizational Response to Environmental Demands: Opening the Black Box

How and why do organizations respond differently to pressures from different stakeholders? This question is central to organizational theory and feeds into strategic management research as well. Delmas and Toffel develop and test a model that describes why organizations respond differently to similar stakeholder pressures. They suggest that differences in how organizations distribute power across their internal corporate departments lead their facilities to prioritize different institutional pressures and thus adopt different management practices. Read More

Coerced Confessions: Self-Policing in the Shadow of the Regulator

Are regulators necessary? In industry, self-regulation and self-policing have been touted as a new paradigm of regulation that trades outmoded "command-and-control" strategies for industry-directed, market-based solutions. Short and Toffel's work, one of the first empirical studies to address self-policing behavior, examined a rich data set of companies' voluntary disclosures of regulatory violations under the U.S. Environmental Protection Agency's Audit Policy. The goal: to learn how violators behave when offered the option of voluntarily self-disclosing. The results show that even as corporations are given an expanding role in their own governance, the success of "voluntary" self-policing depends on the continued involvement of regulators with coercive powers. Read More