Corporate environmentalism and economic performance: examining the effects of ISO 14001 certification on technical efficiency

The ISO 14001 voluntary standard is a blueprint for improving an organization’s environmental record and one of many tools available to address our planet’s ecological challenges. Since its introduction in 1996, adoption of the standard has surged globally, despite its significant costs. We examine the economic benefits to firms of being ISO 14001-certified by exploring whether certification results in a more efficient production process, using a panel of South Korean manufacturing firms and a stochastic frontier model with endogeneity. We find evidence that ISO 14001 certification significantly improves technical efficiency among high-polluting industries, increasing output by an average of 2.7%. This research enriches the empirical literature on voluntary environmental programs by showing that the standard improves technical efficiency among manufacturing firms. This may account for the popularity of the standard in South Korea, a global leader in manufacturing and exports, where its effects on efficiency have not been empirically examined.