Firms are under continued pressure to certify themselves as
virtuous, good, effective, high quality, and any number of other positive
things. Often they display the certification prominently. For example, if you
type “General Motors ISO” or “General Electric ISO” into Google, it will fill
in “9001,” because both companies display prominently on the web that they are
ISO 9001 certified.
There is an interesting exception to this. Many firms are
certified as environmentally responsible through the Dow Jones Sustainability
Index, but four out of ten DJSI firms do not display this certification. Why would
a firm with such a positive achievement not promote it? Chad Carlos and Ben Lewis have a new article in Administrative Science Quarterly that looks at the
reasons for this silence, and they find that it is a strategic silence. They
are silent because it is a way of avoiding attention, and attention to sustainability
could be risky for the firm.
Firms don’t announce why they stay silent about an
environmental certification, of course, but we can see how they behave. Carlos
and Lewis found that they are more likely to invoke strategic silence if they
run the risk of looking like hypocrites. The main problem for firms is to lose
their reputation through being called out as less sustainable than they claim
to be or should be. So, we should expect firms that have good environmental reputations
to be more concerned about looking bad if their commitment to the environment
is called into question. That is exactly what Carlos and Lewis found.
Shareholders can file resolutions against firm actions that
go against sustainability. If they do, and if the firm has a good environmental
reputation to begin with, the firm is especially likely to be strategically
silent about the DJSI certification. Other stakeholders can target the firms
through boycotts, demonstrations, and other protest actions. If they do, and if
the firm has a good environmental reputation to begin with, the firm is likely
to be strategically silent about the certification. It’s clear that those firms
already seen as good on environmental issues are very careful not to have this
reputation damaged by any charges of being hypocritical. That means sometimes
keeping the sustainability certification out of sight, to avoid attracting
attention.
The evidence is interesting because certification is usually
an initiative to do three things: make firms follow a standard, make firms
influence others to follow the standard, and make firms compete to beat the
standard. The firms that were secret environmentalists broke this chain by only
doing the first of these three steps. Through their strategic silence they did
not influence other firms, and they did not compete to be the most
environmental either. Many try to influence firms, for many purposes, but it is
important to keep in mind that firms also want control over what they do, and
they have a wide range of actions to escape the control of others.
