Accepted Manuscript

Ecological impacts of the ISO14001 certification of small and medium sized

enterprises in Europe and the mediating role of networks

Johan J. Graafland

PII: S0959-6526(17)32626-4

DOI: 10.1016/j.jclepro.2017.10.322

Reference: JCLP 11114

To appear in: Journal of Cleaner Production

Received Date: 24 December 2016

Revised Date: 05 September 2017

Accepted Date: 29 October 2017

Please cite this article as: Johan J. Graafland, Ecological impacts of the ISO14001 certification of
small and medium sized enterprises in Europe and the mediating role of networks, Journal of
Cleaner Production (2017), doi: 10.1016/j.jclepro.2017.10.322

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 ACCEPTED MANUSCRIPT

Ecological impacts of the ISO14001 certification of small and medium sized

enterprises in Europe and the mediating role of networks

Highlights

 Participation in environmental networks improves ecological performance of SMEs

 ISO14001 certification increases participation of SMEs in environmental networks
 Networks mediate the influence of ISO14001 on ecological performance of SMEs
 ACCEPTED MANUSCRIPT

Ecological impacts of the ISO14001 certification of small and medium sized

enterprises in Europe and the mediating role of networks

JOHAN J. GRAAFLAND

Tilburg Sustainability Center / CentER

Department of Economics
Tilburg University, room P1205
Warandelaan 2
5000 LE Tilburg
The Netherlands
E mail: J.J.Graafland@uvt.nl
Tel. 0031 13 466 2707

Number of words: 8,981

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Ecological impacts of the ISO14001 certification of small and medium sized

enterprises in Europe and the mediating role of networks

Abstract

In international scientific literature, it is argued that the adoption of ISO14001 certification is

symbolic, aiming to improve the enterprise’s public image. Various empirical researches have

indeed shown that ISO14001 does not have substantial favorable ecological impacts. This

paper contributes to the scientific literature by arguing that previous research has neglected

possible mediators through which ISO14001 may have a positive indirect influence on

ecological outcomes. More specifically, we conjecture that ISO14001 certification stimulates

participation in external environmental networks, and that such networks generate favorable

effects on the ecological performance of their participants. This mediation channel seems

particularly relevant for small and medium sized enterprises. They often lack knowledge of

how to handle the increasingly complex issue of ecological performance and can receive

guidance about managing these processes from other parties in the network. A second

contribution is that the paper uses structural equation modelling to test the indirect effect of

ISO14001 certification on ecological outcomes involving a large sample of 3,633 small and

medium sized enterprises from twelve European countries. The findings confirm that

participation in networks—through cooperation in the supply chain, or partnerships with

training institutes or local organizations—mediate the impact of ISO14001 on the ecological

outcomes of small and medium sized enterprises. Based on these results, it can be concluded

that promotion of ISO14001 certification among small and medium sized enterprises is

particularly useful if is combined with participation in external networks that facilitate its

implementation.

Keywords: Ecological performance, ISO14001 certification, mediation, networks, small and

medium sized enterprises

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1. Introduction

Increasingly, enterprises are using environmental managements systems (Darnall and Sides,

2008). A widely used voluntary program is the ISO14001 certificate (Delmas and Montes-

Sancho, 2011). However, research has cast doubt on the effectiveness of this system in

improving ecological outcomes (Koehler, 2007; Aravind and Christmann, 2011; Boiral, 2012).

The reason that companies with ISO14001 may not produce better ecological results than other

companies might be that these companies employ this voluntary measure primarily to prevent

government interventions (Maxwell et al., 2000) or to safeguard their reputation (Castka and

Prajogo, 2014). As a result, the implementation of ISO14001 could be a superficial gesture

disconnected from the internal practices that could improve ecological outcomes (so-called

decoupling). Decoupling of programs and outcomes could be especially relevant for small and

medium sized enterprises (SMEs). Because of the specific characteristics of these businesses,

standardized management systems may not be a proper tool for SMEs (Welsh and White, 1981;

Tilley, 2000; Spence et al., 2003; Perrini, 2006; Aragón-Correa et al., 2008; Battisti and Perry,

2011) and these tools may even be counterproductive (Fassin, 2008).

However, research has ignored the fact that ISO14001 may also indirectly improve the

ecological outcomes of small and medium sized enterprises. One of the mechanisms that may

mediate the effect of ISO14001 on these outcomes is the stimulation of external networks to

foster information exchange on best environmental management practices. Some studies into

the effectiveness of ISO14001 for small and medium sized enterprises have referred to this

mechanism, but without empirically verifying whether it explains any positive effects of

ISO14001 on ecological outcomes (Ammenberg and Hjelm, 2003; Darnall and Sides, 2008;

Lopez-Gamero et al., 2009). The aim of this paper is therefore to analyze the following research

question: Does participation in external networks mediate a positive impact for ISO14001 on

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the ecological outcomes of small and medium sized enterprises? The research is conducted on

a large sample of 3,633 SMEs in twelve countries in Europe. The data are taken from two

surveys: one conducted in 2011 and one in 2014.

In the next section the authors present the literature review and hypotheses. In section 3 they

discuss the data sources and methodology. Section 4 presents the empirical results, followed

by a discussion and conclusion.

2. Literature review and hypothesis development

This section first reviews recent literature on the impacts of ISO14001 certification on

ecological outcomes. Next, section 2.2 highlights the importance of external networks for

improving the ecological outcomes of SMEs. Section 2.3 subsequently argues that ISO14001

certification and external networks are not independent, because ISO14001 may stimulate the

company to participate in external environmental networks. Based on sections 2.1-2.3, section

2.4 then presents a set of hypotheses, including a mediation hypothesis postulating that external

networks mediate the impact of ISO14001 on ecological outcomes.

2.1 ISO14001 and ecological outcomes

Companies aiming to improve their ecological outcomes can apply various types of

standardized instruments. Standardized instruments refer to systems that provide procedures

and specifications for the integration of ecological measures into an enterprise’s everyday

practices and are designed for all kinds of companies (Barth and Wolff, 2009). Examples are

the ISO14001 standard and the European EMAS (Eco Management and Audit Scheme) that

set requirements for an environmental management system (EMS), the Greenhouse Gas

Protocol Initiative that sets a standard for how to measure, manage, and report greenhouse gas

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emissions, or the Global Reporting Initiative (GRI) that provides standardized approaches and

principles on social reporting.

This paper focuses on ISO14001. This is a global standard, open to all organizations and

having a practical focus. Each year the firm has to define an environmental plan that sets targets

for those areas of the business to be improved, specifying the activities it will undertake to

achieve that improved performance. The environmental plan goes into the specific detail of

how these actions will be implemented, such as the costs per action, which division is

responsible for implementing them and the date that the target will be reached.

But for SMEs that do implement ISO14001 certification, it cannot simply be assumed that

this generates favorable ecological impacts. Institutional theory states that companies are more

likely to decouple implementation from impacts if they experience a tension between gaining

social legitimacy from their stakeholders and pressure to maintain internal efficiency (Davis,

2005). By showing that they qualify for ISO14001, companies may obtain legitimacy from

external stakeholders (Martín-de Castro et al., 2017). But, at the same time, discretion over

how the enterprise improves its ecological outcomes provides room for symbolic policies

generating sufficient internal flexibility to avoid measures that might be too costly (David et

al., 2007). As a result, the ecological outcomes may be disconnected from ISO14001. This kind

of decoupling is invited by the absence of mechanisms to monitor the ecological outcomes of

most companies (and particularly SMEs) (Ogawa and Scribner, 2002). Several empirical

studies on corporate social outcomes indeed showed that managers, when responding to

external pressures, tend to adopt formal measures that have little impact on core processes

(Weaver et al., 1999). Jamali (2010), too, found that most companies respond in a symbolic

way to strong pressure, adapting their formal structures to signal coherence with external

expectations, but then barely changing their internal processes so as to avoid incurring costs.

Decoupling may be particularly relevant for ISO14001, as it merely indicates the enterprise

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has a well-documented and consistent EMS (Oliveira et al. 2010). The system does not require

that the degree of control over ecological impacts is revealed. When scrutinizing the documents

provided by organizations, ISO14001 audits focus on procedures (Heras-Saizarbitoria et al.,

2013), not on the real ecological impact. It is therefore not surprising that many researchers

have found that the use of ISO14001 is merely symbolic (Aravind and Christmann, 2011;

Boiral, 2012) and that mature adoption of ISO14001 is associated with low improvement in

ecological outcomes (Testa et al., 2014). Castka and Prajogo (2014) found that ISO14001

brings reputational benefits because NGOs and industry watchdogs accept it as evidence of a

firm’s ecological efforts, but that this does not contribute to the substantive effect of ISO14001.

Schylander and Martinuzzi (2007) and Poksinska et al. (2003) found that the desire to improve

public image by credibly communicating activities that receive outside recognition is the most

important motivation behind the implementation of ISO14001. Another explanation of the

limited effects of ISO14001 is that many companies have already been applying targets long

before they formalized their EMS (Steger (2000), King et al. (2005)). As a result, the instrument

does not lead to substantial changes in the realization of these goals.

Nevertheless, there are also studies showing that ISO14001 certification does improve

ecological outcomes for SMEs (Ferenhof et al., 2014; Nguyen and Hens, 2015). Several studies

have argued that the use of ISO14001 is an effective way of raising the quality of the

environmental management of SMEs because it disciplines the enterprise to pay continuous

attention to improving ecological outcomes through information gathering and auditing

(Seiffert, 2008; Rao et al., 2009; Parisi and Maraghini, 2010). Although the ISO14001 standard

does not establish specific performance criteria, it prescribes requirements for having an

environmental policy, as well as the planning, implementation, operation, verification,

corrective action, and critical analysis by management (Oliveira et al., 2016). It contributes to

better internal communication and helps managers to track issues systematically, while making

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it easier for outsiders to check the ecological efforts and hold SMEs more accountable for their

behavior. Guerrero-Baena et al. (2015), who evaluated the effects of ISO14001 certification

for Spanish olive oil firms, found that ISO14001 certification stimulates environmental

awareness among employees. Nguyen and Hens (2015), who conducted a study into the

influence of ISO14001 certification in the cement industry in Vietnam, also found a significant

improvement in environmental awareness in certified plants. Moreover, their analysis showed

that certification has a significant positive effect on ecological performance. Singh et al. (2015)

showed that ISO14001 significantly reduced the waste of SMEs in India. Oliveira et al. (2016)

estimated that organizations having an ISO14001 certification with full scope tend to adopt

more so-called cleaner production practices, and these have been shown to be one of the most

successful proactive environmental strategies (Van Hoof and Lyon, 2013). A recent case study

by Wong et al. (2017) of a ISO14001 certified coal power plant in Malaysia concluded that the

company not only achieved relatively better environmental performance, but that the ISO14001

certification induced better compliance with Malaysia’s environmental rules and regulations.

In line with this finding, Ferreira Rino and Salvator (2017) found that among 11 Brazilian

companies, ISO14001 certification over time led to a reduction in the number of environmental

penalties imposed by the state environmental agency, because it fosters a preventive culture

and develops practices that deal with environmental impacts. These findings are confirmed in

a study by Mazzi et al. (2016) asking Italian practitioners of ISO14001 certification what, in

their view, are the greatest advantages of ISO14001 certification. According to these

practitioners, the main benefits of ISO14001 certification are that it stimulates environmental

competences and awareness among employees, increases compliance with legal requirements,

and facilitates operational control of environmental performance. From the information

provided by this literature review, it is likely that the implementation of ISO14001 has a

positive impact on the ecological outcomes of SMEs.

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2.2 Networks and ecological outcomes

Apart from standardized instruments, a number of specific, tailor-made tools exist by which

businesses strive to improve their ecological outcomes. Some of these non-standardized

instruments are internally oriented, such as employee training (Graafland et al., 2003). Other

instruments are externally oriented, such as participation in external networks to share best

practices (Maon et al., 2009; Schouten and Remmé, 2006; Pirsch et al., 2006).

In research among participants in a German energy efficiency network, Wohlfarth et al.

(2017) found that the companies participating in the network were mainly motivated by the

need for practical knowledge and information about specific measures and technologies that

would reduce energy cost. The second most important reason was decision support provided

by exchange of experiences. A further important set of reasons (with an average score of 4 on

a scale from 1 to 5) concerned organization and implementation, such as gaining information

about crucial aspects of planning and about difficulties in implementation. In a second survey,

Wohlfarth et al. (2017) estimated the extent to which these expectations were met by the

network. They did not find any significant difference between the ranking of expectations and

the ranking of the extent to which those expectations had been fulfilled by the energy efficiency

network. They concluded that the network was well able to meet the expectations of the

participants. The majority of participants reported implementation of measures that would not

have been implemented without participation in the network.

Other studies have also shown that collaboration on environmental issues leads to more

positive results (Perz et al., 2010; Valentine, 2016). Cooperation with other parties is

particularly appropriate for SMEs (Albino et al., 2012) since they are often part of a larger

enterprise’s network of suppliers, or of a local network of SMEs (Battaglia et al., 2010). As

small firms are more resource constrained, they must rely on external experts to provide them

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with appropriate solutions to ecological challenges. Cooperation and partnerships in the supply

chain, or guidance from training institutes, will help bring expertise to the enterprise and

provide knowledge both on technology and on how to integrate ecological concerns into the

businesses. From these networks, SMEs can also learn what the most important ecological

issue is to focus on (Tilley, 2000). Collaboration with suppliers or customers in the supply

chain can compensate for a lack of technical capacity, but also for legal and business skills that

a small enterprise may lack. Supply chain management, and practices implemented along the

supply chain, are an important driver of ecological outcomes. Research has shown that

suppliers provide SMEs with various solutions that have significant effects on ecological

outcomes (Arimura et al., 2011; ECEI, 2010; Darnall and Sides, 2008; Bos-Brouwers, 2010).

Participation in projects with training institutes aimed at reducing ecological impact, or at

anticipating the technological evolution of products or services, was also found to contribute

to better ecological results (ECEI, 2010; European Commission, 2002). From all of this, it is

likely that participation in external networks has a positive impact on the ecological outcomes

of SMEs.

2.3 ISO14001 and external networks

ISO14001 and the participation in external networks are probably not independent. On the basis

of a literature study, Ferenhof et al. (2014) concluded that the implementation of EMS-based

methods not only improves ecological outcomes, but also leads to better collaborative

networks. Lopez-Gamero et al. (2009) also argued that the use of an EMS stimulates the

development of informal information exchange channels on best management practices, as well

as the capacity to cooperate with external stakeholders. Similarly, on the basis of an analysis

of nine US studies, Darnall and Sides (2008) argued that EMSs help SMEs to establish peer

networks and encourage greater collaboration among the participating firms. These networks

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stimulate the exchange of information on best management practices, strengthening a firm’s

management of their ecological capabilities. Battaglia et al. (2010) argued that cooperation

with stakeholders or other enterprises in their local networks helps SMEs to overcome barriers

in the implementation of formal CSR policies and practices. The cooperation makes it possible

to improve results and decrease the costs of implementing CSR (European Commission, 2007).

According to Ferenhof et al. (2014), the costs of implementing EMSs systems can be reduced

by up to 50% if an enterprise uses systems of cooperation instead of implementing the scheme

on an individual basis.

Ammenberg and Hjelm (2003) describe an illustrative case study of SMEs in Sweden where

certified EMSs generated more cooperation in peer networks. Small enterprises formed an

ecological group and a network to jointly implement an EMS. Each enterprise fulfilled the

requirements of ISO14001 and had a certificate of its own, but the administration was done by

a central organization. This cooperation in turn improved the ecological impacts. Therefore it

could be that the importance of ISO14001 for SMEs lies in it stimulating the formation of

networks that reduce the costs of implementation and generate positive indirect impacts on

ecological outcomes through exchange of best practices within a firm’s network.

2.4 Set of hypotheses

On the basis of the literature review and the arguments in section 2.1-2.3, the authors

hypothesize that (see also Figure 1):

Hypothesis 1. The implementation of ISO14001 has a positive impact on the ecological

outcomes of small and medium sized enterprises

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Hypothesis 2. Participation in external networks has a positive impact on the ecological

outcomes of small and medium sized enterprises

Hypothesis 3. ISO14001 stimulates participation in external networks

HERE FIGURE 1

The combination of hypothesis 2, that participation in networks leads to better ecological

outcomes, and hypothesis 3, that ISO14001 stimulates participation in external networks,

implies that external networks mediate the impact of ISO14001 on ecological outcomes.

Hence, our final hypothesis is:

Hypothesis 4. External networks mediate the impact of ISO14001 on ecological outcomes

3. Methods

This section describes the sample, how the dependent and independent variables of the model

are measured, the type of control variables included, and some test results on non-response

bias.

3.1 Sample

The data were taken from two large surveys: one conducted in 2011 and one in 2014. The

survey results in 2011 were used for measuring the independent, mediating, and control

variables and the survey results in 2014 for measuring the dependent variables. There are two

reasons to use two surveys with a substantial time lag instead of one survey. First, by using the

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2011 survey for independent and control variables and the 2014 survey for dependent variables,

one diminishes the common source bias. The longer the time lag, the less likely it is that the

correlation between independent and dependent variables is driven by common source bias.

Second, it is likely that it takes some time before organizational measures, such as ISO14001

certification and the participation in networks, lead to better ecological performance.

Developing environmentally friendly production techniques or products often takes a long time

(Dijk et al., 2013). By using a time lag of three years, one can assume that the effects of

ISO14001 certification and/or external networks on ecological performance, if any, have

materialized.

The survey was sent to SMEs in twelve countries in Europe (Denmark, Finland, Sweden,

The Netherlands, Germany, France, Austria, Hungary, Poland, Italy, Spain, and the UK). The

methodology of the data collection process of the survey in 2011 has been described in XXX

(2016). Extensive testing of XXX (2016) showed no common source bias.

In 2014, the survey was repeated and sent to 13,637 companies that had responded to

the 2011 survey. 1,316 invitation e-mails were bounced. From the 12,321 companies that

received the invitation to participate to the survey, 3,816 responded, of which 3,633 were SMEs

(with employment in FTEs ≤ 250). Using Cochran’s sample size formula, this response is

adequate to infer reliable research findings for the total population of companies in the twelve

countries, using an alpha of .05.

3.2 Measurement

Enterprise size was measured by the number of employees (in FTEs).

ISO14001 was measured by a three-point scale, with 0 if the enterprise is not certified for

ISO14001 at all, 0.5 if it is certified for part of the enterprise’s operational sites, and 1 if it is

certified for all operational sites of the enterprise. Earlier researches on large samples used

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comparable measurements. For example, Nguyen and Hens (2015) compared certified plants

with non-certified plants and used a binary variable for certified plants. Since our sample

consists of companies which may have several plants, we added a third option that part of the

company’s plants are ISO14001 certified. This is in line with the methodology of Oliveira et

al. (2016) who distinguished those companies with ISO14001 certification with a partial score,

covering just one sector of the organization, from companies that have ISO14001 certification

with full scope. Singh et al. (2015) also distinguishes certified versus uncertified SMEs, but

the exact measurement is not given in the paper.

The participation in external networks was measured by three indicators. First, companies

can participate in networks in the supply chain (Bos-Brouwers, 2010; Pirsch et al., 2006;

European Commission, 2007). Second, companies can develop partnerships with professional

training institutes (technical schools, laboratories etc.) in order to anticipate the technological

evolution of products or services (ECEI, 2010; European Commission, 2002). Third, SMEs

can participate in the local initiatives of governments and/or social organizations (Barth and

Wolff, 2009). Each instrument is measured by a binary scale.

For ecological outcomes three indicators were used to measure the change in energy

consumption, waste production, and water consumption between 2010 and 2013. Empirical

studies on ecological outcomes often use ratings from professional rating bureaus (Ioannou and

Serafeim, 2012) or public data bases (Aravind et al., 2011; Testa et al., 2014). These data are

typically only available for large companies that exceed specific thresholds in pollutant

emissions (Testa et al., 2014) and not for SMEs. We therefore developed our own

measurements, using the following steps. First, we analyzed how environmental outcomes are

measured by professional rating bureaus. We only considered generic measurements, not

sector-specific variables. Second, we sought guidance from an SME consultant who specialized

in advising SMEs on their ecological outcomes in order to establish the kind of indicators

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known to micro, small, and medium-sized companies, indicators that they could look up

relatively easily when filling out the survey questions. Based on this, we selected energy use,

water use, and waste production. Third, following Nguyen and Hens (2015) and Schylander

and Martinuzzi (2007), who used a five-point Likert scale to measure environmental

performance, we developed a seven-point Likert scale for the change in energy use, water use,

and waste production. Fourth, we pre-tested this scale by interviewing executives from ten

companies in different sectors. Executives were asked to fill in the survey before the interview

was held, and then the researchers visited the company and discussed its responses in depth,

checking whether the questions suited the CSR of the company. These executives provided us

with extensive feedback on the survey questions. Based on the outcomes of this pilot survey,

we fine-tuned the cut-off values of the seven categories of the Likert scale for environmental

performance. Whereas the data for ISO14001 and participation in external networks were taken

from the survey in 2011 and refer to 2010, the data for ecological outcomes were based on the

survey in 2014 and refer to the change in outcome during 2010-2013. In this way, it can be

tested if ISO14001 and participation in external networks improve ecological outcomes in later

years.

The results of the bivariate correlation analysis in Table 1 show that the scores for the three

measures for networks are highly correlated. Also the various ecological outcomes

significantly correlate. The Cronbach's alphas (see α in Table 1) indicate the internal

consistency of these two factors, as both meet the accepted threshold of 0.60 (Kline, 2000).

These test results show that networks and outcomes measure single, unidimensional, latent

constructs.

HERE TABLE 1

3.3 Control variables

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In the statistical analysis the authors controlled for external characteristics (sector, region,

position in the chain, and intensity of price competition) and internal features of the enterprise

(age structure and skill level of employees, organizational culture, and time horizon).

HERE TABLE 2

Companies in those sectors where environmental issues are more prominent (like the energy

sector) are expected to be more prone to vigilance on these issues (Brown, Vetterlein, and

Roemer-Mahler, 2010). Eight sectors were distinguished, based on the Global Industry

Classification Standard (GICS). Furthermore, the region in which the company operates is also

expected to influence the processes hypothesized, as environmental performance is affected

(but not determined) by the culture and wider institutional environment of the company (Matten

and Moon, 2008). Five regional dummy variables were added as control variables, using the

categorization developed by Moon et al. (2012) that is based on different types of capitalism.

Next, ecological outcomes may be dependent on the enterprise’s position in the chain.

Companies that operate in business-to-consumer (B2C) relations rather than business-to-

business (B2B) relations may be more sensitive to public reputation (Hendry, 2006). B2C was

measured by a scale ranging from 1=‘B2B’ to 5=‘B2C’. Furthermore, the intensity of price

competition was controlled for. The more competitive the market environment, the lower

profitability and the fewer resources an enterprise has available to invest in improving

ecological outcomes.

For internal variables, the age and skill structure were included as control variables, since

these have been shown to affect managerial beliefs, values, and actions and therefore might

also affect ecological performance (Marginson and Mcaulay, 2008). Furthermore, the authors

controlled for the two dimensions of organizational culture distinguished by the Competing

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Value Framework (CVF): control versus flexibility orientation, and internal versus external

focus. Linnenluecke and Griffiths (2010) have argued that a flexibility orientation and an

external focus positively affect corporate social outcome. Finally, time horizon was controlled

for. Companies with a long time horizon are more inclined to invest in ecological instruments,

because the revenues of these investments materialize in the long run.

3.4 Tests on non-response and attrition bias

In order to evaluate the non-response and attrition bias, three ex post tests were performed.

First, wave analysis compares the scores on key variables in the survey for early respondents

and late respondents (Rogelberg and Stanton, 2007). If late respondents differ from early

respondents, it suggests some level of non-response bias exists. In order to apply this test, a

variable was constructed with values ranging from 1 to 4 for respondents that responded after

the invitation to participate in the survey and after the first, second, and third reminder,

respectively. Correlation analysis showed that the (Spearman) correlation coefficients are not

significant for ecological outcomes in the 2011 and 2014 survey (see Table 3).

Besides wave analysis, the authors also used the Heckman two-stage estimation

procedure (Puhani, 2000). Heckman showed that non-response bias is a kind of omitted

variable bias. The omitted variable can be measured by the so-called inverse Mills ratio that

captures the influence from unobserved characteristics of the enterprise on the response to the

survey. The inverse Mills ratio has been calculated from the estimation results for a selection

equation in which the response to the survey is explained by type of country, sector, enterprise

size, and the year in which the enterprise started.

For the survey in 2014, the authors additionally tested for attrition bias (selection bias

caused by loss of participants) by performing correlation analysis between ecological outcomes

and a dummy measuring the response to the 2014 survey for all respondents that responded to

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the 2011 survey. As is shown by Table 3, the response indicator variable was insignificant. It

can therefore be concluded that attrition bias in the 2014 survey does not bias our estimation

results.

HERE TABLE 3

4. Results

As the mediating and independent variables are likely to be interdependent, we used structural

equation modeling (SEM) in STATA (Version 14) with maximum likelihood with missing

values as estimation technique, which allows a simultaneous analysis of all variables in the

model. The structural model is simultaneously estimated with the measurement model.

The estimation results are reported in Figure 2 and Table 4.

HERE FIGURE 2 and TABLE 4

The model is confirmed by the global fit indices. The Comparative Fit Index (CFI), the

Tucker-Lewis Index (TLI) and RMSEA measure are all acceptable (Kaplan, 2009). The

estimation results show that ISO14001 has no significant effect on ecological outcomes. Hence,

hypothesis 1 is not supported. In contrast, participation in external networks has a significant

positive effect on ecological outcomes, which provides support for hypothesis 2. Finally,

ISO14001 stimulates participation in networks, confirming hypothesis 3.

For large samples (as in our case), a convenient method to test for mediation is by using

the estimates that SEM provides for the significance of the indirect effects by way of the Wald

statistic (Shrout and Bolger, 2002; Little et al., 2007). For the indirect effect from ISO14001

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on ecological outcomes, this effect equals a * b, where a is the unstandardized coefficient of

ISO14001 in the equation of external networks, and b the coefficient of external networks in

the equation of ecological outcomes (Preacher and Hayes, 2008). The total effect on ecological

outcomes is equal to the direct effect of ISO14001 on ecological outcomes and the indirect

effect as mediated by networks. Table 5 shows that the indirect and the total effect are both

significant. These results show that participation in networks positively mediates the effect of

ISO14001 on ecological outcomes, which provides support for hypothesis 4.

HERE TABLE 5

5. Discussion

5.1 Comparison with previous research

According to Martín-de Castro et al. (2017), the question of whether ISO14001 certification

really contributes to better ecological performance or could be just ‘greenwash’ is still

unanswered. On one hand, in our literature review in section 2 we discussed several studies

that found low improvements in ecological outcomes from ISO14001 certification (Jamali,

2010; Aravind and Christmann, 2011; Boiral, 2012; Testa et al., 2014; Castka and Prajogo,

2014), and that the main motive to employ ISO14001 certification is to improve public image

(Schylander and Martinuzzi, 2007; Poksinska et al., 2003). On the other hand, we also found

several studies that did identify positive effects of ISO14001 certification on ecological

performance, and suggested that it stimulates environmental awareness among employees and

better compliance with environmental regulation (Ferenhof et al., 2014; Nguyen and Hens,

2015; Guerrero-Baena et al., 2015; Nguyen and Hens, 2015; Singh et al., 2015; Oliveira et al.,

2016; Malaysia by Wong et al., 2017; Ferreira Rino and Salvator, 2017).

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In this debate, our analysis takes an intermediate position. Our empirical analysis

corresponds to the first line of research—that ISO14001 does not significantly improve the

future ecological outcomes of SMEs, as we find no direct effect from ISO14001 certification

on the growth in energy consumption, waste production, and water consumption. At the same

time, our findings support the second line of research—that ISO14001 does contribute to better

ecological performance, but we find that this influence is indirect and mediated by participation

in networks.

This mediation channel seems particularly relevant for SMEs, on which we focused our

sample. SMEs often lack the resources to have up to date knowledge of the increasingly

complex issue of ecological outcomes (Baumann-Pauly et al., 2013). They need guidance from

external parties to manage such processes, and ISO14001 certification may be the trigger for

the SME to collaborate with other network partners who can offer this guidance. Getting

involved in external networks helps SMEs share best practices and compensates for a lack of

technology and/or skills.

5.2 Benefits and limitations of the study

A major strength of this study is the use of a unique data set based on a sample of 3,633 SMEs

from 12 countries. This large database complements previous in-depth case studies that were

based on a small number of enterprises (often from one particular country). Such studies allow

more detailed insights into the processes that influence ecological performance but lack the

scale to derive more representative conclusions.

A second advantage of our methodology is that the SMEs were surveyed twice, in 2011 and

2014. The independent variables and mediator were taken from the survey in 2011 and the

dependent variable from the survey in 2014. This is not only a remedy against common source

bias, but also allows testing of whether ISO14001 and participation in external networks do

affect future changes in ecological outcomes.

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Furthermore, the large number of observations made it possible to use structural equation

modelling (SEM). The SEM methodology has several advantages (Tomarken and Waller,

2005). First, it provides a convenient method to estimate latent variables and their manifest

indicators (the measurement model) and the relationships among constructs (the structural

model). The use of latent constructs represented by multiple indicators provides more valid and

reliable measurements of the variables studied and corrects for biases attributable to random

error and construct-irrelevant variance. This improves the ability to draw causal inferences,

because testing models with good data and cross-validation allow a better understanding of the

phenomenon studied. Another commonly acknowledged strength of SEM is the availability of

measures of global fit that provide a summary evaluation of the full model, in contrast to

models that are estimated on an equation-by-equation basis. Fourth, SEM provides an advanced

method of dealing with missing data thereby generating more efficient estimates of confidence

intervals. Finally, SEM provides an easy way to test for mediation by the estimation of direct

and indirect effects (Bullock et al., 1994).

A possible weakness of the SEM methodology is that it cannot fully prove causality.

Notwithstanding the several advantages discussed above, it can only offer tentative causal

inferences (Bullock et al., 1994). Although the use of a lag of three years between the dependent

and independent variables diminishes the likelihood of reverse causality from ecological

performance to the use of ISO14001 certification and external networks, a longitudinal research

design would allow more lags as well as controlling for unobserved heterogeneity between

companies by the use of fixed effects.

Furthermore, the study leaves open several other relevant research questions, all of which

provide avenues for future research. For example, besides stimulating participation in external

networks, ISO14001 may also yield other benefits. Poksinska et al. (2003) and Arimura et al.

(2011) have argued that ISO14001 does not only serve ecological improvements, but also

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contributes to regulatory compliance, ecological transparency, and/or enterprise image. Future

research could investigate other impacts of ISO14001 in the context of small business, to

determine how valuable the standard is for SMEs.

6. Conclusion

6.1 Scientific contribution

This paper investigates the relationship between ISO14001 certification, external networks,

and the ecological outcomes of small and medium sized companies in 12 European countries.

The paper contributes to the scientific literature by analysing the pattern of the impact of

ISO14001 on the ecological outcomes of SMEs by distinguishing direct effects from indirect

effects mediated by participation in networks. Previous research has not conjectured that

participation in external networks mediates the influence from ISO14001 certification on

ecological outcomes, although several authors do hint at the existence of this mechanism

(Ferenhof et al., 2014; Lopez-Gamero et al., 2009; Darnall and Sides, 2008; Battaglia et al.,

2010; Ammenberg and Hjelm, 2003).

A second major contribution to the international scientific literature is that we test the

mediation model on a large sample of 3,633 SMEs from 12 countries by structural equation

modelling. Our test results confirm that participation in external networks mediates the

relationship between ISO14001 certification and ecological performance.

Our study is important, because it bridges two opposing positions on the effectiveness of

ISO14001 certification that are found in the literature. On one hand, our analysis concurs with

literature that stresses decoupling, because we find no direct effects of ISO14001 certification

on ecological outcomes. On the other hand, our study supports the literature that argued that

ISO14001 certification does contribute to better environmental performance. But the

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mechanism that causes this influence seems to be indirect, rather than direct as suggested by

previous literature.

6.2 Policy implication of the findings

Our findings have important implications for policymakers. If the effects of ISO14001 on

ecological outcomes were to be absent or weak for SMEs, promoting the use of this relatively

costly instrument among SMEs would be inadvisable. This reflects the view expressed by

Fassin (2008) that standardized schemes are of no use for SMEs.

This research indicates, however, that this view is too pessimistic, because the findings show

that ISO14001 provides SMEs with an incentive to cooperate with other enterprises in order to

improve their ecological outcomes. The policy implication of these findings is that stimulating

the use of ISO14001 among SMEs is particularly fruitful for realizing energy savings and better

waste and water efficiency when combined with participation in networks with external parties.

Even if individual SMEs were to realize only small savings, the total overall contribution to

reducing environmental impact could be huge because of the very large number of enterprises

involved. Taken together, SMEs in Europe are responsible for approximately 64% of the

region’s industrial contamination (Ferenhof et al., 2014).

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Appendix 1 Survey questions

Variable Survey question Answer options and allocated

scores
ISO14001 Are your activities certified for ISO14001? 1 no: 0.0
2 Partially: 0.5
3 yes: 1.0
External Which measures are realized in your enterprise? 1 no: 0.0
networks - Cooperation with other enterprises in the supply 2 yes: 1.0
chain to meet CSR goals
- Partnerships with professional training institutes
(technical schools, laboratories etc.) to anticipate the
technological evolution of products or services
- Participation in local initiatives (cooperation with
local governments or social organizations) to meet
social or environmental objectives
Ecological Has your performance on the following 1 Decreased by more than 5%: -3.0
outcomes environmental indicators increased, decreased or 2 Decreased by 3-5%: -2.0
remained more or less the same in 2013 compared to 3 Decreased by 1-3%: -1.0
2010? 4 Not changed very much: 0.0
- reduction in energy consumption 5 Increased by 1-3%: 1.0
- reduction in water consumption 6 Increased by 3-5%: 2.0
- reduction in waste 7 Increased by more than 5%: 3.0
Position in the To whom do you sell your products and/or services? 1 Only enterprises: 1
chain (B2C)a 2 Mainly enterprises: 2
3 Both enterprises and consumers: 3
4 Mainly consumers: 4
5 Only consumers: 5
Intensity of In the market for your main product or service, your Seven-point scale ranging from ‘not
price enterprise is prone to price competition: at all’ (1) to ‘very much’ (7)
competition
Age structure What is the share of the age categories of employees .. %
(as % of total FTEs)?
- <25 years
- 25-50 years
- >50 years
Skill level What is the share of the skill level categories of .. %
employees (as % of total FTEs)?
- Low skilled (no qualifications, O-levels, CSEs,
GCSEs)
- Medium skilled (A levels or BTEC equivalent)
- High skilled (degree and post graduate level
qualifications)
External Please characterize your enterprise on the following The responses are measured by a
orientation scale ranging from ‘In our enterprise we focus on seven-point Likert scale ranging
optimizing the internal organizational efficiency’ to from: ‘not at all’ (1) to ‘very
‘In our enterprise we focus on adapting to the much’(7).
demands of the external environment.’
Flexibility Please characterize your enterprise on the following The responses are measured by a
orientation scale ranging from ‘In our enterprise we manage seven-point Likert scale ranging

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employees by supervision and strict compliance from: ‘not at all’ (1) to ‘very
mechanisms’ to ‘In our enterprise we stimulate much’(7).
employees autonomy and participative decision
making.’
Time horizon What is the average time horizon of the financial 1 1 year or less
targets of your enterprise? 2 2 years
3 3 years
4 4-5years
5.more than 5 years.

E-mail addresses, sector, company size and country were taken from the Kompass database.

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TABLE 1 Descriptive statistics and correlation analysis of dependent and independent

variables
Variable Measure Mean SD Year
1 Enterprise size Natural logarithm of enterprise size (in 3.11 1.42 2011
FTEs)
2 ISO14001a 0.10 0.28 2011
3 External Cooperation supply chain 0.26 0.44 2011
4 networksa Partnerships with training institutes 0.24 0.43 2011
5 (α = 0.68) Participation in local initiatives 0.27 0.44 2011
6 Ecological Reduction energy consumption during 0.53 1.18 2014
outcomea 2010-2013
7 (α = 0.73) Reduction in waste during 2010-2013 0.44 1.01 2014
8 Reduction in water consumption during 0.32 0.87 2014
2010-2013
Spearman correlation coefficientsb
1 2 3 4 5 6 7 8
1 1
2 0.26*** 1
3 0.13*** 0.22*** 1
4 0.18*** 0.22*** 0.36*** 1
5 0.19*** 0.20*** 0.40*** 0.44*** 1
9 0.04 0.06** 0.04* 0.03 0.05* 1
10 -0.03 0.05* 0.09*** 0.03 0.05* 0.45*** 1
11 0.00 0.03 0.04* 0.03 0.03 0.51*** 0.49*** 1
a For the survey questions and options per question, see Appendix 1.
b * p<0.05, ** p<0.01, *** p<0.001.

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TABLE 2 Descriptive statistics of control variables

Sector division (% of respondents)

Energy 4 Consumer staples 4
Material 17 Financial 2
Industrial 18 ICT 3
Consumer discretionary 17 Other business 35
Region (% of respondents)
Continental Europe: Austria, France,
UK 3 26
Germany, The Netherlands
Mediterranean Europe: Italy, Spain 46 East Europe: Hungary, Poland 11
Scandinavia: Denmark, Finland,
13
Sweden
Other (means)
Position in the chain (B2C)a 1.96 Share of medium skilled (%)a 43
Intensity of price competitiona 5.09 Share of high skilled (%)a 24
% of young employees (<25) a 9 External orientationa 4.58
% of medium aged employees (25- Flexibility orientationa 5.06
69
50) a
% of old employees (>50) a 22 Time horizon (in years) a 2.59
Share of low skilled (%)v 33
a For the survey questions and options per question, see Appendix 1.

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TABLE 3 Bivariate correlation analysis to test for non-response bias and attrition biasa

Test Energy consumption Waste Water consumption

Wave analysis 2011 survey -0.03 -0.02 0.04

Wave analysis 2014 survey -0.04 -0.02 -0.03

Response 2014b 0.02 0.01 0.01

a Spearman correlation coefficients; * p<0.05, ** p<0.01, *** p<0.001.

b 1 if respondent responded in 2011 and 2014 and 0 if respondent only responded in 2011.

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TABLE 4 Estimation results of structural equation modela

1 2
External networks Ecological outcome
ISO14001 0.27*** 0.04
External networks 0.09**
Energy 0.00 -0.03
Materials 0.02 0.04
Industrials 0.04 0.01
Consumer discretionary 0.04 0.02
Consumer staples 0.06** 0.03
Financials 0.01 -0.02
IT & communication 0.05* 0.02
Scandinavia 0.07 0.06
Continental Europe 0.06 0.11
East Europe 0.07 0.09
Mediterranean Europe 0.07 0.12
B2C 0.01 0.02
Intensity of price competition 0.00 0.08*
Enterprise size (logarithm) 0.19*** -0.04
Medium aged -0.20*** 0.06
High aged -0.20*** 0.07
Medium skilled 0.01 0.00
High skilled 0.07* -0.00
External orientation 0.02 -0.02
Flexibility orientation 0.10*** 0.02
Time horizon 0.09*** 0.02
Inverse Mill’s ratio 0.01 -0.05
Measurement model
External networks
- Cooperation supply chain 0.59***
- Partnerships with training institutes 0.63***
- Participation in local initiatives 0.69***
Ecological outcome
- Energy 0.69***
- Waste 0.67***
- Water 0.75***
a Standardized coefficients; * p<0.05 ** p<0.01 *** p<0.001. For sectors, the dummy for other business is used
as reference; for regions, the dummy for UK; for age structure, the dummy for young employees; for skill
structure, the dummy for low skilled employees.
b Global fit indices: CFI = 0.964; TLI = 0.944; RMSEA = 0.020; R2 = 0.205.

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TABLE 5 Estimation results for direct, indirect and total effects of ISO14001 on

ecological outcomesa

Independent Mediator Dependent Direct Indirect Total

variable variable
effect effect effect

ISO14001 Ecological Ecological 0.131 0.068*** 0.199**

Network Outcome
a Unstandardized coefficients; * p<0.05, ** p<0.01, *** p<0.001.

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FIGURE 1 Conceptual framework of hypothesized relationships

ISO 14001 Ecological

certification H1 outcomes

H3 H2
External
Networks

FIGURE 2 Estimation results of structural relations: core relationships

ISO 14001 Ecological

certification 0.04 outcomes

0.27*** 0.09**
External
Networks

a Standardized coefficients; * p<0.05, ** p<0.01, *** p<0.001. N=3,633.