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Current Issue: Volume 12, Issue 3 (2010) Private Regulation in the Global Economy Introduction Tim Büthe, Guest Editor The eleven articles in this special issue examine private regulation in the global economy from a variety of perspectives. The papers were first presented at an interdisciplinary workshop, held at Duke University in October 2009 to critically examine our current knowledge about private regulation of global markets and advance the research frontier through conceptual, theoretical, and empirical contributions. Many of the articles focus on previously little-known cases of private regulation with distributional implications and consequences for millions of participants in the global economy, including measurement standards for greenhouse gas emissions (Green), standards for electro-technology (Büthe), food safety standards set by retailers (Fuchs and Kalfagianni), private rules for cross-border financial transfers and the recognition of professional qualifications (Cafaggi and Janczuk), standards for the certification of food as "kosher" (Starobin and Weinthal), and rule-making for transnational commercial arbitration (Whytock). Others examine new aspects of familiar cases, such as the role of technological change in the private regulation of forestry practices (Auld, Cashore, et al), problems that arise in the implementation of such practices in developing countries (Bartley), or chances for public regulation to compensate for limits of private regulation in light of changing patterns of global production (Mayer and Gereffi). Jointly, the articles illustrate and analyze the politics behind the important phenomenon of transnational private regulation.

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SPECIAL ISSUES: Private Regulation in the Global Economy Global Economic Governance: Beyond Management by the United States and the European Union? Business Power and Global Governance

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Private Regulation in the Global Economy: Guest Editor's Note Tim Büthe

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Private Regulation in the Global Economy: A (P)Review Tim Büthe

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Private Standards in the Climate Regime: The Greenhouse Gas Protocol Jessica F. Green

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Engineering Uncontestedness? The Origins and Institutional Development of the International Electrotechnical Commission (IEC) Tim Büthe

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The Causes and Consequences of Private Food Governance Doris Fuchs and Agni Kalfagianni

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Private Regulation and Legal Integration: The European Example Fabrizio Cafaggi and Agnieszka Janczuk

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Transnational Private Regulation in Practice: The Limits of Forest and Labor Standards Certification in Indonesia Tim Bartley

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The Search for Credible Information in Social and Environmental Global Governance: The Kosher Label Shana Starobin and Erika Weinthal

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Can Technological Innovations Improve Private Regulation in the Global Economy? Graeme Auld, Benjamin Cashore, Cristina Balboa, Laura Bozzi, and Stefan Renckens

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Private-Public Interaction in Global Governance: The Case of Transnational Commercial Arbitration Christopher A. Whytock

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Regulation and Economic Globalization: Prospects and Limits of Private Governance

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Frederick Mayer and Gary Gereffi PDF

Global Private Politics: A Research Agenda Tim Büthe

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ISSN: 1469-3569

Business and Politics Volume 12, Issue 3

2010

Article 1

PRIVATE REGULATION IN THE GLOBAL ECONOMY

Private Regulation in the Global Economy: Guest Editor's Note Tim Büthe, Duke University

Recommended Citation: Büthe, Tim (2010) "Private Regulation in the Global Economy: Guest Editor's Note," Business and Politics: Vol. 12 : Iss. 3, Article 1. Available at: http://www.bepress.com/bap/vol12/iss3/art1 DOI: 10.2202/1469-3569.1349 ©2010 Berkeley Electronic Press. All rights reserved.

Büthe: Guest Editor's Note

The eleven articles in this special issue examine private regulation in the global economy from a variety of perspectives. The papers were first presented at an interdisciplinary workshop, held at Duke University in October 2009 to critically examine our current knowledge about private regulation of global markets and advance the research frontier through conceptual, theoretical, and empirical contributions. Many of the articles focus on previously little-known cases of private regulation with distributional implications and consequences for millions of participants in the global economy, including private standards for food safety (Fuchs and Kalfagianni), greenhouse gas emissions accounting (Green), cross-border financial transfers and the recognition of professional qualifications (Cafaggi and Janczuk), certification of food as "kosher" (Starobin and Weinthal), transnational commercial arbitration (Whytock), and electrotechnology (Büthe). Others examine new aspects of familiar cases, such as the role of technological change in the private regulation of forestry practices (Auld, Cashore, et al), problems that arise in the implementation of such practices in developing countries (Bartley), or chances for public regulation to compensate for limits of private regulation in light of changing patterns of global production (Mayer and Gereffi). Jointly, the articles illustrate and analyze the politics behind transnational private regulation. The Duke University workshop, which brought together scholars of political science, sociology, public policy, law, business administration, and environmental studies from the United States, Canada, and Europe, was generously supported by the Center for International Studies (DUCIS). Supplemental support was provided by Duke's Program on Democracy, Institutions, and Political Economy (DIPE). For their contributions to lively discussions, I thank all the participants of the workshop, which included, in addition to the authors of the papers published in this issue, Andrew Bell, Sarah Bermeo, David Brady, Keegan Callanan, Seth Cantey, Nathaniel Harris, Larry Helfer, Joonkoo Lee, Layna Mosley, Jan Pierskalla, Jim Salzman, Nicholas Troester, Dan Vermeer, Jared Woollacott, and Sean Zeigler, many of whom also served as discussants for individual papers. I also thank DUCIS executive director, Robert Sikorski, and DUCIS assistant director for programs, Daniel V. Smith, for their support of the project from start to finish, as well as Vinod Aggarwal, who as editor-in-chief of Business and Politics recruited tough but exceptionally knowledgeable and constructive anonymous reviewers for the individual papers and the issue as a whole. Before final acceptance, David Vogel read the entire special issue and made several additional helpful suggestions. Tim Büthe Durham, NC, October 2010 Published by Berkeley Electronic Press, 2010

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Article 2


Private Regulation in the Global Economy: A (P)Review Tim Büthe, Duke University

Recommended Citation: Büthe, Tim (2010) "Private Regulation in the Global Economy: A (P)Review," Business and Politics: Vol. 12 : Iss. 3, Article 2. Available at: http://www.bepress.com/bap/vol12/iss3/art2 DOI: 10.2202/1469-3569.1328 ©2010 Berkeley Electronic Press. All rights reserved.

Private Regulation in the Global Economy: A (P)Review Tim Büthe

Abstract This introduction to the special issue combines a review of the existing literature about the causes and consequences of private regulation in the global economy with a preview of the articles in this issue. To organize this (p)review, I introduce a conceptual model “beyond supply and demand,” which distinguishes three major subsets of stakeholders of global private regulation, which may (but need not) overlap: the political actors who call for private regulation, the rulemakers who provide such governance for the global economy, and what I call the “targets” of the private regulations, who are supposed to behave according to these private rules. I then highlight the three core questions addressed by the contributions to the special issue: (1) How do private bodies attain regulatory authority; why do private regulators provide governance; and why do the targets of the rules comply? (2) Who governs the global economy through private regulations? And (3) what are the effects of private regulation, and how does the rise of private regulation affect public regulatory authority and capacity? KEYWORDS: regulation, private governance, non-state actors Author Notes: Tim Büthe is Assistant Professor of Political Science at Duke University. He is online at http://www.buthe.info and can be reached via email at [email protected]. He thanks the participants of the Workshop on Private Regulation in Global Economy at Duke University in October 2009, especially Christopher Whytock, as well as Eyal Benvenisti, Richard Stewart, and the anonymous reviewers for Business and Politics for helpful comments on previous drafts.

Büthe: Private Regulation in the Global Economy

1. Private Regulation Many economic activities that used to be regulated at the domestic level, if at all, are today governed by transnational private rules. These rules are set by a range of non-governmental bodies: industry associations, NGOs, networks of firms, technical experts, or groups of activists. Many of their rules are widely observed by producers of goods and services, and other economic actors, including many who did not participate in writing the rules. Private rules thus govern—that is, they enable and constrain—a broad range of activities in the world economy. Some of the private regulators, such as technical standards-developing organizations, operate largely out of the public view. Others, such as credit rating agencies, have recently become the object of intense scrutiny. These private rules cause firms, for example, to include particular safety features in their products, maintain or demand certain financial reserves, gather and keep records about their inputs or labor conditions at every step along the entire value chain. In short, they get various economic actors to do things they would otherwise not do. Transnational private regulators thus exercise power in the Dahlian sense; they are quintessentially political actors.1 In recent years, a small but fast-growing social science literature has started to examine these private regulators as political actors.2 Yet, there have been few studies of private regulation that analyze more than a single issue area and, as David Vogel recently observed, few specific cases of private regulation “have been studied in depth.”3 The articles in this special issue contribute to this literature by providing original insights into the causes and consequences of private regulation based on in-depth studies of particular cases of private regulation, many of them little

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Dahl 1957. Private regulation may be defined narrowly as rule-making by non-governmental actors. Private regulation in a broad sense entails private actors playing a major role—at one or more stages beyond implementation or compliance—in what might be called the “regulatory process” (Abbott and Snidal 2009) or the “governance sequence” (Büthe 2010c): agenda-setting, rule-making, implementation, monitoring, adjudication, and enforcement. Most private actors analyzed in the articles in this special issue play a role at two of more of these stages, but they are all rule-makers and in that sense meet even the narrow definition of private regulators. 2 Keohane and Nye (1972) first called attention to the political importance of transnational relations; Rosenau and Czempiel (1992) to “governance without governments.” A few transnational organizations that govern significant parts of many lives, such as the Catholic church, have a long history (Ryall 2001) and have been recognized as political actors for some time (Vallier 1972). Only recent work, however, has focused on transnational private bodies as rule-makers with regulatory functions for the global economy. Among the first were Cutler, Haufler, and Porter 1999c and Hall and Biersteker 2002. See also Büthe 2004; Rudder 2008. 3 D. Vogel 2008, 275. Published by Berkeley Electronic Press, 2010

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Business and Politics, Vol. 12 [2010], Iss. 3, Art. 2

studied previously.4 Jessica Green examines the multi-stakeholder process for developing the Greenhouse Gas Protocol, the global measurement standard for corporate greenhouse gas emissions.5 Tim Büthe examines the origins and institutional development of the WTO-recognized yet non-governmental International Electrotechnical Commission, which sets standards for thousands of electrical and electronic products and components.6 Fabrizio Cafaggi and Agnieszka Janczuk examine the contribution of private regulatory regimes to economic and legal integration in the EU, including private rules for electronic payments, product safety, and professional accreditation.7 And Doris Fuchs and Agni Kalfagianni examine private standards for the quality, appearance, and safety of food, mostly set by American and European food retailers but regulating the behavior of farmer-suppliers in many developing countries.8 Tim Bartley then focuses on different patterns of adoption or implementation of transnational private standards for sustainable forestry and labor conditions in a major developing country: Indonesia.9 Shana Starobin and Erika Weinthal examine the certification of compliance with the oldest yet littlestudied private regulations: standards for kosher food.10 Graeme Auld and Benjamin Cashore with their co-authors examine private regulations for environmentally sound disposal of e-waste, and carbon offsets, as well as sustainable forestry and fisheries, organic coffee and tea.11 And Christopher Whytock examines the rules of transnational commercial arbitration as a means of dispute resolution between private parties from different countries.12 4

Altogether, this special issue focuses on private regulators that are themselves transnational, though all contributors are cognizant that, sometimes, rules developed by private actors from a single country become de facto global rules. Even the most powerful countries’ domestic rulemakers, however, are finding it increasingly difficult to command extraterritorial authority. Take the American Society for Testing and Materials (ASTM), one of the oldest U.S. sources of product standards for many manufacturing industries. In the early decades after World War II, products manufactured to its proudly “American” technical standards were assumed and accepted around the world for meeting the highest standards of quality, functionality, and consumer safety; its standards have also long been widely used in many foreign markets. Yet, after it increasingly lost standards users, including foreign government regulators, to more transnational organizations (especially ISO and IEC), ASTM felt forced in the early 2000s not only to boost the number of its non-U.S. members (firms and individuals, mostly from Canada and Mexico), but also to change its name to “ASTM International.” On ASTM’s website today, one searches in vain for any hint about what the “A” stands for in the acronym; see ASTM International 2010. 5 Green 2010. 6 Büthe 2010a. 7 Cafaggi and Janczuk 2010. 8 Fuchs and Kalfagianni 2010. 9 Bartley 2010. 10 Starobin and Weinthal 2010. 11 Auld, Cashore, et al 2010. 12 Whytock 2010. http://www.bepress.com/bap/vol12/iss3/art2 DOI: 10.2202/1469-3569.1328

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Beyond in-depth studies of particular cases, this issue as a whole seeks to advance our understanding of private regulation in the global economy as a general phenomenon. In particular, the papers address three core questions: (1) How do private bodies attain regulatory authority? Why do private regulators provide governance and why do the targets of these rules comply? (2) Who governs in private regulation? (3) What are the effects of private regulation? In particular, what is the effect of the rise of private regulation on public regulatory authority and capacity? All of the analyses in this special issue take agency seriously and hence address the second question—“Who governs?”—from a variety of social science perspectives. Most of the articles also speak to the first and third set of questions, but they differ in emphasis. The first four articles, by Green, Büthe, Cafaggi and Janczuk, and Fuchs and Kalfagianni, focus especially on the supply of regulatory governance—the rule-making—by private bodies. Why the targets of private rules comply with those rules is at the center of the analyses by Bartley, Starobin and Weinthal, and Auld, Cashore, et al (a question also discussed briefly in other articles). Finally, Whytock‘s work on commercial arbitration and Frederick Mayer and Gary Gereffi’s discussion of the prospects and limits of private regulation in the context of economic globalization13 focus primarily on the relationship between public and private governance. In the remainder of this introduction, I first discuss the main explanations that scholars from various disciplines have offered for the rise of private market regulation in an increasingly global economy. I then introduce a conceptual model of private regulation. My three-fold distinction among stakeholders of private regulation builds upon, but goes beyond, traditional models of supply and demand for private regulation. I submit that this conceptual model leads to a better understanding of private regulation as a political phenomenon and is useful for identifying the key stakeholders and the incentives and constraints that they face to become meaningful actors in private regulation. I use the conceptual model to organize my review of the literature on private regulation in the global economy. Specifically, I discuss in this introduction the answers that the existing literature offers to the three sets of questions noted above and how the articles in this special issue contribute to that literature. In the conclusion, I then summarize the findings and raise questions for further research.

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Mayer and Gereffi 2010.

Published by Berkeley Electronic Press, 2010

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2. Background: Regulatory Retreat of the State? “International commerce,” Cutler, Haufler, and Porter note in the introduction to their pioneering study of private authority, “operates most effectively … under the umbrella of a system of rules that govern the behavior of participants.”14 In fact, as Steven Vogel has pointed out, the liberalization of markets often increases the need for rules.15 Commercial actors, to be sure, have a long tradition of regulating some aspects of their commercial practices themselves, even transnationally.16 In the 20th century, however, the rules for commerce have increasingly been established by states through laws and regulations, as states gained greater control over their borders than arguably ever before.17 The literature on global governance and private regulation suggests several key reasons why governments are providing fewer and fewer of the rules for the global economy. First, many studies emphasize increasing complexity and rapid change. In consumer finance, for instance, the 1990s were characterized by rapid product innovation that made it increasingly difficult even for advanced industrialized countries’ regulators or legislators to keep up.18 Similarly, ever more complex financial products have become prevalent in international financial markets, where transgovernmental networks of regulators are arguably even further removed from the product innovation “on the ground.”19 Second, as economic activity itself becomes ever more transnational,20 effective regulation is arguably beyond the control of any one country’s national government. “Fundamentally,” Deborah Spar opens her analysis of private regulation of internet commerce, “governments cannot set the rules of cyberspace … because cyberspace, unlike governments, slips seamlessly and nearly unavoidably across national boundaries.”21 Trade similarly has affected the ability

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Cutler, Haufler, and Porter 1999a, 3. The authors thus extend to the international realm the more general insights from institutional economics that economic transactions are embedded in institutions (Coase 1937; Williamson 1985). 15 S. Vogel 1996. See also Jordana and Levi-Faur 2004. 16 E.g., Milgrom, North, and Weingast 1990. On the history of the lex mercatoria, see also Cutler 2003; for broader historical perspectives, see Greif 2006, Jansen and Michaels 2007, and Shaffer 2009 as well as Cutler’s (1995) critique of the notion of a private, economic sphere that is distinct from the public, political sphere. 17 Thomson and Krasner 1989. 18 Warren 2010. 19 Büthe and Mattli 2011; Mosley 2009; D. Singer 2007. 20 See Gereffi 1996. 21 Spar 1999, 32. Governments have, of course, regulated some aspects of internet commerce, most notably privacy protection, see Bignami 2005; H. Farrell 2003; Newman 2008; Shaffer 2000. Moreover, authoritarian governments have found numerous ways to keep their citizen from accessing the world wide net, even while not outright denying them access to some form of http://www.bepress.com/bap/vol12/iss3/art2 DOI: 10.2202/1469-3569.1328

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of regulators to ensure that products are safe for consumers, which has been particularly prominently discussed in the realm of food safety: Even the United States, one of the least trade-dependent countries, now imports 15% of its food supply, including 60% of the fruits and vegetables consumed in the United States and 75% of the seafood. And, increasingly, food products are imported ready-toeat, i.e., many imports no longer go through the relatively tightly regulated domestic food processing facilities before they reach the consumer. Food safety therefore cannot be effectively addressed as a purely domestic policy issue anymore.22 As Abbott and Snidal write, “the scale and structure of contemporary global production challenge the capacity of even highly developed states to regulate activities that extend beyond their borders.”23 One regulatory response to these changes in the global economy is to increase international cooperation among government regulators. Such regulatory cooperation can take place through treaties that establish international law and formal institutions such as the WTO, whose rules regulate many aspects of international trade, or the OECD, which has established rules (inter alia) against money laundering that are now widely (if begrudgingly) implemented.24 It can also take place through direct and often informal trans-governmental cooperation among specialized regulators from several countries, such as financial market regulators25 or competition watchdogs.26 International cooperation among government regulators, however, has proven cumbersome, slow, and often ineffective, especially when distributional conflicts are involved. Agreeing, for instance, on “safe” levels of pesticide residues or other health-related food standards in the (at least nominally governmental) Codex Alimentarius Commission has often taken the better part of a decade—far too long for effective regulatory responses to health scares.27 Even within the EU, a highly institutionalized forum for cooperation among a group of states whose preferences are usually far more closely aligned than at the global level, the harmonization of regulatory standards for manufactured goods took so long that the reduction of these non-tariff barriers as part of the Common Market project required delegating the task to private regulators.28 Similarly, more than a decade of negotiations among governments in the EU over the harmonization of internet; see, e.g., Milner 2006. Government control, however, tends to be very imperfect and is in a constant race with savvy programmers’ latest ideas how to work around the constraints. 22 See Büthe 2009; Coglianese, Finkel, and Zaring 2009. 23 Abbott and Snidal 2009, 44. 24 E.g., Helleiner 2002; Simmons 2000; Verdugo 2008. 25 D. Singer 2007. On transgovernmental networks more generally, see especially Raustiala 2002; Slaughter 2004, 36ff; and Verdier 2009. 26 Svetiev 2010; Wilks 2010. 27 Echols 2001. 28 Egan 2001; Joerges, Schepel, and Vos 1999. Published by Berkeley Electronic Press, 2010

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financial reporting yielded a grand total of two directives with many options and exceptions, prompting the EU Commission to suggest delegating the task to the non-governmental International Accounting Standards Board.29 These changes in the regulatory practices of governments—coincident with and reinforced by a broader shift toward a neoliberal ideology that delegitimized many forms of government intervention in the economy30— constitute the backdrop for private regulation in the global economy and arguably explain in part the increasing demand for private regulation. Scholars differ, however, about whether the trends described above are indeed indicative of a “retreat of the state”31 or a reconfiguration of the public and private sphere,32 which might be quite deliberate and intentional on the part of states seeking to retain primary control over key areas in a more interdependent world.33 3. Beyond Demand and Supply: A Threefold Distinction Among Stakeholders of Global Private Regulation In a review of two key early volumes on private governance, I argued for analyses of both supply of, and demand for, global private governance.34 My call for such political-economic models of private governance built on Walter Mattli’s compelling use of a model of demand and supply to explain success and failure of attempts to establish public institutions for the governance of markets at the regional (supra-national) level, as well as Hendrik Spruyt’s more informal yet powerful model of the demand and supply of governance to explain why rulers or governments have in many historical cases provided measurement standards for private markets—weights, measures, and coinage—but until the 20th century have left the supply of all other product standards mostly to market participants, i.e. private governance.35 Indeed, supply-and-demand models have been successfully used in numerous political-economic analyses of private regulation. Donald Lecraw, for instance, uses a model of supply and demand for product standards (and statistical analyses of empirical data for 252 types of manufactured goods) to identify industries and product categories in which the available stock of such standards is systematically below or above socially optimal levels.36 Shyam Sunder uses a (very informal) model of supply and demand for financial reporting 29

Büthe and Mattli 2011, chapter 4. Blyth 2002; Coen and Thatcher 2005; McNamara 1999. 31 Strange 1996. 32 Ruggie 2004. 33 Krasner 1995; see also Keohane 2009. 34 Büthe 2004, 283. 35 Mattli 1999, Spruyt 2001. 36 Lecraw 1984. 30

http://www.bepress.com/bap/vol12/iss3/art2 DOI: 10.2202/1469-3569.1328

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standards to examine how changes in financial market regulations affect the cost of capital for publicly held corporations.37 And Mattli and Ngaire Woods use a schematic model of supply and demand of regulation (public or private) to assess the normative desirability of regulation based on the probability that it will serve the public interest.38 Notwithstanding the significant analytically usefulness of these models of private regulation in the international political economy, models of supply and demand also have at least two severe limitations as models of politics and especially as models of regulation. I briefly note the first limitation, then focus on the second. First, in economics, these models derive their analytical power from the fundamental idea of a long-term equilibrium between supply and demand, which may never be perfectly attained but towards which market pressures push both suppliers and demanders. This tendency toward equilibrium is made possible by the existence of a single unit of account and exchange in markets (money), which allows economists to assume that a wealth of motivations—including material desires, personal emotive attachment, and other tastes and norms—can be projected onto a single dimension, on which they can be compared and traded via the monetary price of goods. Politics lacks such a singular unit and hence the functional equivalent of price, which need not categorically inhibit but greatly complicates comparisons and trade-offs between interests and actors in politics and policy-making. Even “power,” arguably the base unit of politics, is analytically no match for money and price because, as David Baldwin has shown, power resources—such as political will, organizational capacity, market size, and material or military assets—lack stable conversion rates and are far less fungible than money across scope and domain.39 This first problem does not invalidate thinking of demand and supply for private regulation (as long as the domain is clearly specified), but it means that we may not be able to assume equilibrium. Consequently, deriving the preferences of possible suppliers and demanders (and deriving from their indifference curves the shape of supply and demand curves) may be a useful part of, but is not sufficient for, the analysis of politics or policy, including private regulation. And when we observe, for instance, a certain level of demand for private regulation, we should 37

Sunder 2002. The changes that are the focus of his analysis involve allowing competition among multiple financial reporting standard-setters. 38 Mattli and Woods 2009. 39 Baldwin 1989, esp. 5f, 10ff. In information-rich environments, it is possible to posit a “latent” single dimension, which can be estimated using Bayesian statistics, even if that dimension is not directly observable (see Jackman 2004). Embedding such latent variable calculations in an equilibrium model of supply and demand would, however, yield a very complex model (implicitly involving mulitple joint hypothesis tests), which to my knowledge has never yet been tried. Published by Berkeley Electronic Press, 2010

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not assume that it is (or will be) met by supply. Nor, when we observe a certain level of supply of private regulation, does it imply that there is an approximately corresponding level of demand. At a minimum, both supply and demand and then the politics of their interaction must be examined. The second problem further complicates the analysis, but recognizing it is crucial for understanding interests and agency in global regulation. In economic models of supply and demand, those who ultimately “buy” a product or service are not only identical with those who subsequently “use” it, they presumably purchase it in order to use it. This identity of user and buyer does not necessarily hold in politics. Specifically, in political models of regulation, the notion of “demand” for rules conflates two sets of stakeholders which, in practice, often diverge: those who would like to see, or are actively calling for, a set of rules, and those who are supposed to behave according to those rules, precisely because politics is often about exerting influence over others. I therefore argue that it is analytically more useful to distinguish three major subsets of stakeholders for private regulation: the actors who call for private regulation, the private actors who supply such rules for the global economy, and those whom I call the “targets” of the rules. The first group consists of political-economic actors who either overtly call for private regulation or value it to the point where they are willing to give credit or pay some cost for the provision of such rules. The intensity of their preferences explains the level of what we might call the “political demand” for private regulation (for any particular issue). The second group consists of the private actors who write, maintain, and disseminate regulatory rules for the global economy. Why they supply private regulation needs to be explained because these activities are costly. The third group consists of the political-economic actors whose behavior private regulations seek to affect. For them, the analytical question is about implementation and behavioral adjustment: Why do they comply with private rules? Any two or all three of these subsets of stakeholders may more or less overlap (see Figure 1),40 with analytical as well as normative implications. Idealtypical “self-regulation,” for instance, entails complete overlap of all three groups; conversely, the greater the share of stakeholders whose interests are affected but who have no voice in the rule-making process, the greater the democratic deficit in private regulation.

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The figure recognizes that these three groups do not exhaust the range of possible stakeholders of private regulation, but each group constitutes a major subset of the stakeholders.


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Figure 1

3.1. Demand If a system of rules is indeed a requirement for the efficient operation of markets, then market participants should generally demand some level of regulation, and a decline in the public supply of such rules should naturally lead them to look to private actors to provide those rules. There are many empirical examples where this functionalist account, emphasizing market efficiency, provides at least a partial explanation of the demand for regulation. Financial market regulation in the United States, for instance, has its origin at least in part in investor expressions of concern about information asymmetries or political leaders’ expectation that


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regulation of disclosure, trading practices, etc. would lead to more efficient allocation of capital.41 Analogous expectations motivated many to push for the international harmonization of financial reporting by a private transnational body.42 The demand for model or “standard” contracts similarly arises from the efficiency gains such contracts afford.43 And within firms, the demand for rules that govern the internal exchange of information and goods—the ultimate example of private regulation—is commonly motivated by wanting to lower transaction costs, increase reliability, and generally achieve efficiency gains, which firm-internal studies often document.44 Practical necessity also has driven much of the demand for common standards among firms making products that communicate with each other, from basic telecommunications equipment to computer hardware and peripherals.45 In such cases, private-sector firms often push for private rule-making because they expect it to lead to more cost-effective rules more efficiently than government regulations.46 Demand for private regulation that is fully explained by private parties’ (correctly anticipated) efficiency gains raises few political or strategic issues and therefore plays no prominent role in the analyses in this special issue. It does, however, play a supporting role in Green’s analysis of the Greenhouse Gas Protocol and some of the illustrative examples in Cafaggi and Janczuk’s work on private regulation in Europe. Participants of a commercial transaction are of course not the only ones who can demand rules to govern that transaction (and other transactions like it). In fact, one of the most interesting developments in global governance has been the increase in the explicit delegation of regulatory authority by states to private actors.47 In Europe, this delegation has often taken the form of governments laying down general principles but leaving it to private bodies at the regional level to specify the best way to meet those public policy objectives without introducing non-tariff barriers to trade or otherwise fragmenting the Common Market through cross-national divergence in regulatory measures. For general product and electrotechnical standards, for example, the EU has delegated the rule-making 41

Banner 1998. Büthe and Mattli 2011, chapter 4; Camfferman and Zeff 2007; Martinez-Diaz 2005. 43 Perillo 2008; as well as Schwartz and Wilde 1979; Trebilcock and Dewees 1981 vs. Gazal-Ayal 2007. See also Hadfield 2001; 2009. 44 E.g., DIN (Deutsches Institut für Normung) et al 2000, 14f and Joynt 1972. See also Coase 1937 and Williamson 1985. Bureaucratic politics and inefficient rules of course can also be found within private enterprises but are beyond this review of the literature on private regulation. 45 David and Greenstein 1990; Farrell and Saloner 1987; Katz and Shapiro 1985; Migliaro 2006; Pelkmans 2001. 46 E.g., Abbott and Snidal 2009; Haufler 2001; D. Vogel 2008. 47 E.g., Avant, Finnemore, and Sell 2010. See also Avant 2005; Muthien and Taylor 2002; and P. Singer 2005, who show a similar trend beyond the economic realm. 42


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functions to the European Committee for Standardization, CEN, and its counterpart, CENELEC. Such delegation is at the heart of the EU’s “new approach to technical harmonization and standards,” adopted in 1985 to achieve the common market by 1992.48 Explicit public recognition and sometimes supplemental public financing for the private regulators underscore this governmental demand for private regulation. Similar delegation has occurred at the international level, for instance through the stipulation in the WTO’s TBT-Agreement that government regulations be based on international standards, defined (non-exclusively) as the standards set by the most important private product standard-setters, the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC).49 As Büthe discusses in his article, writing the IEC into the WTO treaty cemented the private standard-setters preeminence as the transnational forum for setting product standards in its area of expertise. In calling on private actors to regulate various aspects of the global economy, governments often seek not only cost savings, but flexibility and political efficiency, since the specific technical solution prescribed by private bodies can be adjusted as technology changes without the need for new intergovernmental negotiations.50 To the extent that the existing literature on private regulation examines such governmental demand for private regulation at all, it tends to emphasize these mostly economic benefits. The broader literature on the delegation of public authority, however, also identifies more overtly political motivations for delegation, such as blame avoidance and locking in policy preferences.51 Under what conditions may such political and strategic calculations generate demands by public authorities for private regulation? Cafaggi and Janczuk address this issue by examining several instances where the EU Commission and/or member states have fostered or elevated private regulation with the conscious objective to change the legal framework within which regional (and to some extent global) transactions take place. Drawing an important distinction, discussed further below, the authors analyze the strategic logic of public actors recognizing private rules ex post or explicitly delegating rule-making to private actors ex ante. Last but certainly not least, societal actors who are not a party to a commercial transaction may demand private regulation of such a transaction. 48

Egan 2001. Under the new approach, as Gregory Shaffer points out based on original 1985 documents from the Commission, “national authorities are obliged to recognize that products manufactured in conformity with harmonized standards … are presumed to conform to the ‘essential requirements’ established by the directive;” see Shaffer 2009, 174. See also Cafaggi and Janczuk 2010. 49 Marceau and Trachtman 2002; see also Trachtman 2003. 50 See Braithwaite 1982; Büthe, 2010b. 51 See especially Moe 1990; 2005. On international delegation more generally, see Hawkins et al 2006 and Bradley and Kelley 2008. See also Büthe 2010b. Published by Berkeley Electronic Press, 2010

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These third parties may demand regulation because their material interests are affected by externalities of the transaction in question—the classic market failure rationale for regulation. In the global economy, it appears to be rare, however, for third parties who are affected by classic economic externalities to call for private regulation, maybe due to the overtly (re)distributional character of such demands. The existence of such externalities makes it unlikely, as Mayer and Gereffi point out, for commercial interests to be aligned with broader societal interests. Far more common are demands for private regulation by third parties who feel that their non-material interests are affected by the existing or missing regulations. These private actors are often social activists, motivated by normative commitments that are altruistic (or at least perceived as such by these actors). Such agenda-setting demanders abound in the literature on the regulation of forestry practices,52 environmental management,53 and corporate social responsibility.54 Non-commercial third parties, however, often issue only general demands for regulation of the economic activity that they find objectionable rather than propose specific rules—creating incentives for the participants of that transaction to provide private regulation in order to forestall government regulation. Such demands play an important in Fuchs and Kalfagianni’s account of why the major multinational food retailers have in recent years sought to regulate their suppliers’ farming methods and other aspects of local production. This shifts our focus to the supply of private regulation. 3.2. Supply Writing, maintaining/updating, and institutionalizing rules is costly.55 Technical rules of high quality are therefore easily undersupplied.56 What, then, explains the existing supply of private regulation? Private supply of regulation often occurs in the shadow of public regulation. If the threat of less favorable public regulation is credible, then preempting public regulation is a powerful incentive for the supply of private regulation.57 Helleiner argues, for instance, that the consortium of major international banks known as the Institute of International Finance stepped in to 52

E.g., Bartley 2003; Cashore 2002; Cashore, Auld, and Newsom 2004; Meidinger, Elliott, and Oesten 2003. 53 Delmas 2002; Prakash and Potoski 2006. 54 Auld, Bernstein, and Cashore 2008; Baron 2001; Brown, Vetterlein, and Roemer-Mahler 2010; McBarnet, Voiculescu, and Campbell 2007; Ruggie 2004; Tamm Hallström 2006; D. Vogel 2005 and Weaver, Trevino, and Cochran 1999. See also Auld, Camargo, and Toseland 2007, as well as Blowfield 2005 vs. Henderson 2001. 55 Keohane 1984. 56 Kindleberger 1983; Lecraw 1984. 57 E.g., Balleisen 2010, 450f; Peters, Koechlin, and Zinkernagel 2009, 2f. http://www.bepress.com/bap/vol12/iss3/art2 DOI: 10.2202/1469-3569.1328

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regulate sovereign debt restructuring above all to break the momentum of an intergovernmental initiative for an IMF-sponsored international bankruptcy mechanism preferred by, and likely more favorable to, debtor countries.58 The shadow of public regulation also has implications for compliance with private regulation, as discussed below. Functional explanations of the political demand for private regulation, which emphasize anticipated efficiency gains, may be read to imply that such efficiency gains will also induce potential private-sector rule-makers to supply those rules. Such an ideal overlap of demanders and suppliers of private regulation, however, does not occur naturally but must be politically established, since collective action problems and especially incentives to free-ride can be expected to undermine the functionalist supply of private regulation. To be sure, private actors may be able to solve such collective actions problems on their own,59 but such solutions require conditions that seldom obtain.60 Far more common is the supply of private regulation in the expectation of private gains for the suppliers. Specifically, cooperation in rule-making allows participants to set regulatory requirements such that they create or retain barriers to entry, or create or reinforce an oligopolistic market structure, thus guaranteeing for themselves profits well in excess of the cost of supplying private regulation by minimizing competition and/or shifting competition away from price.61 The structure of the market for bond ratings, for instance, fits this description of private regulation.62 Suppliers may of course also be transnational civil society organizations (NGOs) with altruistic motives. They, too, however, gain a private benefit from the supply of private rules if it allows them to bring about rules and outcomes closer to their normative preference than they would obtain by seeking to influence public laws and regulations. Supplying private rules can also bring benefits by lowering the cost of compliance for those who provide private regulation (as a function of the particular rules) or by institutionalizing and thus safeguarding the exclusive rulemaking privilege of a particular set of experts (guaranteeing greater subsequent influence for a particular set of interests). The result can be less stringent regulations with more loopholes than would have come about through a more inclusive process,63 but the opposite is also possible: Firms that already use clean technology or produce products with multiple safety features, for instance, may seek to establish more stringent environmental or consumer protection through 58

Helleiner 2009. See Coase 1990. 60 Abbott and Snidal 2001. 61 Cutler, Haufler, and Porter 1999a, 7; Lecraw 1984, 509f. 62 E.g., Sinclair 1999, 156. 63 E.g., D. Murphy 2004. 59


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private regulation in order to gain an advantage vis-à-vis their competitors.64 Prakash and Potoski have documented such a competitive “race-to-the-top” dynamic for voluntary certifications of compliance with ISO 14,000-series standards for environmental impact assessment. And Henk de Vries has provided specific illustrative examples of firms participating in international standardization strategically, such as when a Dutch medical products manufacturer pushed successfully to raise European and international standards for the disinfection of medical devices so that they could no longer be met by low-cost competitors.65 These distributional implications of the supply of private regulation by some particular subset of stakeholders in turn create incentives for those who do not like the rules written by one private regulator to seek to write a more favorable set of rules in a different forum or set up a new, competing private regulator in the same issue area. Market competition between several private rules or regulators is in fact quite common. It is a core feature of the domestic system of product standardization in the United States.66 At the international level, it characterizes the regulation of corporate social responsibility,67 “fair trade” labeling,68 and electronic waste.69 In each of those issue areas (and numerous others), rules and norms developed by transnational civil society NGOs compete with rules and norms developed by firms. Such competition is also common among firms in the information and communication technology industry, where Sony, Philips, and Panasonic, for example, cooperated via a consortium to develop the Blu-ray optical disc format in the early-mid 2000s while a rival consortium, led by Toshiba, developed the alternative HD-DVD format. Such competition among multiple rule-makers, however, can be inefficient and lead to protracted battles for predominance, which are not necessarily won through deliberate consumer choice or by the superior technology but, if they are won at all, through political maneuvers, side payments, and collusion.70 Economic analyses therefore often consider such competition wasteful. After the “standards war” between HD-DVD and Blu-ray, for instance, which raged from 2006 to 2008, the Blu-ray format effectively became the global standard after the Blu-ray consortium offered side payments to enough computer manufacturers, movie 64

See D. Vogel 1995. See also Balleisen 2009. Prakash and Potoski 2006; de Vries 2006, 134. Note that such raising of standards can actually be detrimental to the availability of suitable (and affordable) products for developing countries; see Malkin 2007. 66 Büthe and Witte 2004, chapter 3; Büthe and Mattli 2011, chapter 6. 67 E.g., Kirton and Trebilcock 2004:189ff; D. Vogel 2005. 68 E.g., Jaffee 2007; Levi and Linton 2003; Raynolds, Murray, and Wilkinson 2007; Renard 2003; Taylor 2005. 69 Renckens 2010. 70 E.g., David 1985; Surowiecki 2002. 65


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studies, and retailers for throwing their support behind Blu-ray to “tip” the market in favor of that format.71 Competition among multiple private regulators plays an important role in several of the papers in this special issue. The relative ease of establishing competing regulators is a reason for several of the concerns raised by Mayer and Gereffi about the “limits” of private regulation. Bartley examines differences in the competition among different standards as a reason for differences in the implementation of labor and forestry standards in Indonesia. And Auld, Cashore, et al examine the incentives and disincentives which competition creates for the adoption of new technologies for monitoring and certification of compliance. Competition among multiple rule-makers, however, is not a universal feature of private regulation, even when distributional issues are involved. An important question for research on private regulation therefore concerns the variation in competition among private regulators. What constrains such competition and what allows a particular private body to establish itself as the institutional focal point for private regulation of a particular aspect of the global economy? Green’s analysis of the collaboration between the World Resources Institute, an activist NGO, and a group of corporations known as the World Business Council on Sustainable Development addresses this question directly, as does Büthe’s analysis of the origins and institutional development of the International Electrotechnical Commission, focused on how this organization of technical experts became the preeminent private regulator of electro-technology for global markets. Various institutional constraints on the competition between private standard-setters also play a role in the analyses by Cafaggi and Janczuk, Fuchs and Kalfagianni, Starobin and Weinthal, and Whytock.

We do not yet know under which conditions actors ‘obey’ norms that are not defined by states – Graz & Nölke (2008), 2

3.3. Compliance Even when the rules are written by a private body with no power to mandate implementation, compliance may be required by national laws or regulations and enforced through legal or regulatory procedures. Domestic measures that render private rules mandatory have accompanied the explicit delegation of regulatory authority to private-sector bodies in the United States for many years.72 Under 47 CFR 15.109, for instance, the U.S. Federal Communications Commission requires 71

E.g., Sanchanta 2008. See also Büthe and Mattli 2011, chapter 2. Cheit 1990; Hamilton 1978; Macaulay 1986; Salter 1988. In addition, what Coglianese and Lazer (2003) call “management-based regulation,” effectively delegates significant rule-making all the way to individual firms. 72


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radio equipment either to comply with specifications written into the statute or “with the standards contained in [Publication 22] of the International Special Committee on Radio Interference” (a technical committee of the IEC). In more recent years, this practice has also become common in other countries and transnationally.73 The Canadian Medical Devices Regulation SOR/98-282, for instance, requires compliance with ISO standard 13485.74 Notwithstanding the importance of public measures that make private rules mandatory, the targets of private regulations often comply with those rules even when compliance is not required. To understand why, it is useful to distinguish between economic and political incentives for compliance. Permissive Economic Conditions: Previous studies have identified two permissive economic conditions for compliance with private regulations: constrained competition among those targeted by private rules and the existence of brand names with reputational value. Constrained competition, e.g. due to an oligopolistic structure of a given market, is conducive to compliance because it makes it easier for the targeted firms to absorb the cost of compliance.75 Some scholars, however, argue to the contrary that it is precisely intense competition that prompts attempts to escape competing on price by distinguishing one’s firm or industry through visible commitments to transnational standards.76 Two articles in this special issue examine market structure directly. Bartley studies two industries (forestry and especially apparel) in which international price-based competition has intensified and examines whether attempts to shift from pricebased competition to competition on not-directly-observable environmental or social characteristics, such as labor conditions, in fact occurs. Fuchs and Kalfagianni focus instead on the structure of the food retail sector, that is, among the immediate customers of the developing country farmers that are the ultimate producers. They examine whether an oligopolistic market structure allows the major food retailers not only to set standards, but also to elicit high levels of compliance through their control of market access, as farmers in any given location usually have no alternative buyer. Firms with valuable brands generally appear to have a stronger commitment to compliance. Major Western sporting goods manufacturers, for instance, have long demanded that their developing-country-based suppliers conform with labor standards that limit or prohibit child labor and “sweatshop” conditions.77 As producers of brand-name retail goods, such firms are generally 73

E.g., Braithwaite and Drahos 2000; Gunningham and Rees 1997; Singh 1993. ISO/IEC 2007, 19, 23. See also BSI 2006. 75 Haufler 2001. See also the discussion above re. oligopolistic competition as a permissive condition for the supply of private regulation. 76 Polaski 2006. 77 Bartley 2005; Locke, Qin, and Brause 2007. 74


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better able than low-cost local producers to absorb the cost of compliance.78 Moreover, these businesses have an incentive not to risk the value of the brand, and brand-names make it easier for consumers to punish non-compliance79—at least if the consumers learn about it. Prakash and Potoski’s finding that foreign direct investment by multinationals from home countries with high private voluntary environmental standards leads to aggregate (national-level) increases in the implementation of, and compliance with, those same environmental standards in the host country suggests, however, that brand names are not a necessary condition for compliance with transnational private regulations.80 Economic Incentives: The apparent conduciveness of brand names for compliance is supposedly due to brands empowering consumers to provide economic incentives for others along the global value chain to act in accordance with the consumers’ preferences for sustainable resource use, higher wages/prices paid to farmer and farm workers, etc. If this is correct, then we might ask whether such incentives can be provided in other ways. The more general problem here is overcoming the information asymmetry between producers and consumers or generically between buyers and sellers. As Akerlof pointed out in “The Market for Lemons,” such information asymmetries depress the quality and size of markets.81 Both sides therefore have some economic incentive to overcome it. Starobin and Weinthal examine one of the most prominent ways in which private regulators have sought to do so: monitoring and certification by a third party whose neutrality affords credibility.82 They raise questions about the sources of credibility in third-party certification and caution that third-party monitoring is truly effective only under rather restrictive conditions, and even under those conditions is still far too costly for most of the poor and marginalized producers and workers in developing countries, who are ostensibly the intended beneficiaries of many such regulations. Auld, Cashore, et al share Starobin and Weinthal’s concern about the often high costs of documenting compliance and the consequently low rates of adoption of many private regulations. They therefore analyze whether technological innovations such as tracking chips or satellite-

78

Arnold 2003, 93. Graz and Nölke 2008a, 4; Radin 2003. 80 Prakash and Potoski 2007. Note, though, that in the realm of labor standards, actual compliance, when independently measured, does not appear to experience a similar boost from international economic integration; see Greenhill, Mosley, and Prakash 2009. 81 Akerlof 1970. See also Héritier, Mueller-Debus, and Thauer 2009 for a formal model of firms as monitoring compliance of their suppliers, motivated by the logic of information asymmetries and risk, which underpins Akerlof’s argument. 82 See also Bartley 2003; Cashore 2002; Guler, Guillén, and MacPherson 2002; Kirton and Trebilcock 2004; Meidinger 2006; Ponte 2008; Terlaak and King 2006. 79


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based video monitoring can lower the cost of monitoring and hence the cost of certified compliance. Economic incentives for implementation and compliance can also be the result of network externalities.83 Network externalities arise whenever the benefit one derives from a particular choice increases with the number of others who have made the same choice, or when the value of a product increases with the extent to which complementary products are available. Having a cell phone, fax machine, or network-able computer is only useful to the extent that it can send and receive a signal that allows me to connect with those with whom I want to communicate.84 Some argue that such network externalities are quite rare,85 but many find them to be pervasive.86 The benefits of the size of the “network” are positive externalities to the extent that they are not reflected in the cost of producing, nor the price of acquiring the good, and therefore create an incentive to comply with the most commonly used standard. Network externalities play some role in many of the empirical cases examined in this special issue. The usefulness of GHG Protocol-based emissions reporting for trading GHG emission rights due to the adoption of the Protocol by many other firms and by the Chicago Climate Exchange, for instance, reinforces the centrality of the singular standard-setter analyzed by Green. Similarly, the value of using IEC measurement standards—internally and for communicating characteristics of a manufactured good—is higher for any particular company because those standards are already widely used by others, which facilitates information exchange and lowers transaction costs, as noted by Büthe. The usability and cost-effectiveness of many of the technological innovations discussed by Auld et al also depend upon how widely they are taken up. Network externalities, however, are not at the center of the analyses in this issue. Socio-Political Incentives: I distinguish between four socio-political incentives for compliance with private regulations even when compliance is not mandated by any government. First, private rules—such as the International Chamber of Commerce’s guidelines for commercial letters of credit for international trade87— define what is often interpreted as “best practice.” A firm that does not implement widely accepted standards for workplace safety, for instance, may face a higher insurance premium.88 Should an accident occur and lead to a lawsuit, having complied with the private regulations does not necessarily safeguard the firm 83

Abbott and Snidal 2001; David 1985, 1993; Heyder 1997; Katz and Shapiro 1985. Farrell and Saloner 1987. 85 Liebowitz and Margolis 1994. 86 E.g., Grewal 2008; Shy 2001; Tirole 1988. 87 Levit 2008. 88 Ericson, Doyle, and Barry 2003. 84


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against losing in court. But, as Cafaggi and Janczuk discuss in the EU context, not having complied (and thus not having implemented the industry’s “best practice”) will in many jurisdictions substantially increase the risk of being found negligent.89 The legal implications of non-compliance thus create a strong incentive for compliance.90 Second, NGO monitoring often plays an essential role in ensuring compliance, since it allows various stakeholders to hold the targets of the regulations accountable, i.e. to reward compliance and punish non-compliance. The monitoring NGOs may then themselves bring pressure to bear on the targets of the regulations (usually for-profit companies) or information provided by a transnational NGO may prompt local activist NGOs to organize a campaign directly targeting non-compliant companies. Such campaigns can involve appeals to senior management, public naming and shaming, calls for incorporation of the private rules into domestic laws or regulations, or other forms of political lobbying. Alternatively, or in addition, consumers, stimulated by activist civil society groups, may demand compliance through their purchasing behavior, subtly or vocally through an explicit boycott. Such shifts in consumer demand have led many businesses to commit at least rhetorically to various “fair trade” standards.91 However, such third-party involvement differs considerably across issue areas, and we have little systematic knowledge about its effectiveness. In this special issue, the paper by Starobin and Weinthal, in particular, explores how differences in monitoring (and in the motivation of the monitors) affect compliance with various private regulations. Relatedly, the sustainability over time of monitoring by civil society groups is one of the key concerns discussed by Mayer and Gereffi. Third, the political motivations for supplying governance may also provide incentives to comply. As discussed above, one key motivation for businesses to contribute to the supply of private regulation is to forestall (or minimize the scope of) government regulations. One reason for such a preference is that companies may be assured a more prominent voice when standards are set (and updated) by non-governmental bodies than when they are fixed through

89

See also Basedow 2008; Cafaggi 2009; Michaels and Jansen 2006. To the extent that such compliance is costly, this also creates an incentive for the targets of the private rules to seek a seat at the table during the rule-making stage. It creates an incentive to increase the overlap between the two subsets of stakeholders. Participation of the targets of private regulation in the rule-making is, however, in practice often forestalled by the geography of transnational private regulation, where information about regulatory measures often reaches the targets in the South only long after they have been adopted as the new or updated regulatory rules, as illustrated by Bartley’s analysis of forestry and labor standards in Indonesia. 91 See, e.g., Cashore, Auld, and Newsom 2004; Jaffee 2007; Kirton and Trebilcock 2004; Levi and Linton 2003; Raynolds, Murray, and Wilkinson 2007. 90


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government regulation.92 Compliance is a way to safeguard that privileged voice. This compliance incentive, however, is counteracted by a free-riding incentive. In what is considered an exemplary case of pro-active industry self-regulation after the Three-Mile Island nuclear power plant accident, the private U.S. Institute of Nuclear Power Operations created a “new responsibility-centered industrial culture” among its corporate members.93 Yet, this “success” of voluntary compliance to avoid government regulation and enforcement, Bridget Hutter points out, was only achieved through sustained peer pressure and institutional mutual assurances (of compliance) among the firms in that industry.94 More generally, the incentive to comply in order to safeguard the benefits of private supply may be a function of how directly targeted firms experience those benefits: Compliance may be harder to maintain the more the set of firms targeted by the private regulations diverges from the set of firms involved in rule-making. Finally, although legitimacy in the eyes of the regulated is not a prerequisite for being effective as a regulator,95 private regulators may be more efficient if their rules (or at least their rule-making) are perceived as legitimate.96 Many scholars therefore equate private regulation with private “authority,” defined in a Weberian sense by Cutler, Haufler, and Porter as issue-specific “decision-making power […] that is generally regarded as legitimate.”97 But perceptions of legitimacy can be strategically manipulated—an issue examined by Fuchs and Kalfagianni—and they do not exist independent of a social relationship. We must therefore ask: Regarded legitimate by whom? The papers in this special issue provide examples of a range of economic and social relationships between the suppliers of private regulation and the targets, which will allow me to return to this issue in the conclusion. 4. Who Governs? Much of the theoretical discussion of regulation is devoid of actors or agency, as Avant, Finnemore and Sell observe more generally for the literature on global governance.98 But the actors are central to any analysis that really advances our understanding of private governance as a political process. The articles in this special issue therefore seek to bring out their agency.

92

Coglianese and Lazer 2003; Haufler 2001. Rees 1994. 94 Hutter 2006, 66. See also King and Lenox 2000. 95 See, e.g., Neubert 2009 and Galeotti 2001. 96 E.g., Bernstein and Cashore 2007; Cashore 2002; Graz and Nölke 2008b. 97 Cutler, Haufler, and Porter 1999b, 362. 98 See Avant, Finnemore, and Sell 2010. 93


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Differentiating analytically between demanders, suppliers, and targets of private regulation puts the focus explicit on actors and their motivations for the observed behavior and thus helps answer Robert Dahl’s classic, deceptively simple question in this realm: Who governs the global economy through private regulations? Especially in the supply of private regulation, commercial actors (and technical experts funded by commercial interests) are clearly the most prominent and influential actors. They exercise agency by setting the rules for trade in “conflict-free” diamonds,99 determining the codes of corporate conduct that define “corporate social responsibility,”100 and setting most international product standards in ISO101 and IEC.102 Yet, other actors also play an important role in private regulation. Transnational NGOs and domestic civil society organizations, in particular, play a crucial role not only because, as demanders of private regulation, they have agenda-setting power, but also because their monitoring creates incentives for compliance by the targets of private regulation. As Mayer and Gereffi note, however, the existing literature is short on systematic analyses of the conditions under which we can rely upon fully private civilsociety monitoring and enforcement to ensure lasting compliance, since such volunteer-driven and -funded NGOs face strong organizational incentives to move on to new topics even if the need for monitoring of compliance with private regulation continues unabated. Starobin and Weinthal directly address this question through the comparative element of their study: private monitoring provides a lasting incentive to comply with the requirements for the kosher food certificate but not for “fair trade” certificates. Finally, states and government agencies do play an important role, albeit by definition not directly as rule-makers in private regulation. At a minimum, they usually take a permissive attitude—though the institutionalization of private regulation may frequently occur below the radar of government regulators.103 And quite sometimes, they exhibit notably more agency be creating incentives for the supply of private regulation, including through credible threats of government regulation. 5. Private Regulation & Public Authority Some have portrayed the rise of private authority as inherently diminishing public authority. There are at least three reasons not to accept this as a general 99

Haufler 2009. D. Vogel 2008. 101 Mattli and Büthe 2003; C. Murphy and Yates 2008. 102 Büthe 2010a; 2010c. 103 Djelic and Sahlin-Andersson 2006, esp. 390ff. 100


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conclusion. First, many private regulators have written rules, monitored compliance, or even enforced rules that govern aspects of global markets not previously regulated by public regulators. Second and relatedly, power is not zero-sum. Baldwin’s analysis of the relationship between Robinson Crusoe and Friday starkly illustrates this point: Trying to keep Friday from running away, Robinson Crusoe (RC) ties the boy to himself with a rope. The rope allows RC to restrict Friday’s movements: RC thus has clearly gained power over Friday. But this power cannot have come at Friday’s expense, since neither had any power over the other before Friday arrived on Crusoe’s island. What’s more, tied to Crusoe by the rope, Friday has also gained some amount of power over RC.104 Regulatory power similarly is not zero-sum. To the extent that private regulation enables governments to solve or ameliorate inherently transnational problems that no government can effectively solve unilaterally, such as truly global environmental problems (ozone layer depletion, global warming), regional environmental problems (fishery stocks), or systemic financial risk (money laundering, murky accounting), the rise of private regulators need not diminish state power at all. In previous work, Bartley has given the example of the Austrian government, which sought to encourage sustainable forestry abroad through trade restrictions but quickly found this to be a violation of the country’s obligations under its international trade agreements. The government’s international law experts determined, however, that it would be permissible to have a privately issued certificate provide the information that would allow Austrian retailers and consumers to discriminate, which prompted Austria to provide a substantial part of the start-up funding for what became the Forest Stewardship Council.105 As Krasner argued about transnational actors generally, transnational private regulators can enhance state power or allow governments to escape constraints.106 A third reason to reject the claim that the rise of private regulators inherently diminishes public regulatory authority is that private regulators often depend upon public authority as enabler or enforcer, as discussed by Mayer and Gereffi and analyzed in a particularly interesting context by Whytock.107 Whytock traces the evolution of transnational commercial arbitration in the context of the economic globalization of the last 20-30 years. This method of dispute resolution is often seen as the quintessential example of private regulation since private parties commit via contract to a set of legal principles, rules for the selection of the arbitrators, and usually a waiver of their right to use traditional litigation instead. Whytock questions, however, whether this form of governance can 104

Baldwin 1993, 18f. Bartley 2003. 106 Krasner 1995. 107 See also Balleisen 2010, esp. 468ff. 105


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operate effectively on a global scale independent of states with stable and wellfunctioning judicial systems, given the limits of reputational enforcement mechanisms. Under which conditions then would private regulators diminish state power? Here we need to ask: What are the alternatives to private regulation in a global economy? What kind of governance would be most likely in the absence of private regulation? The articles in this special issue address these questions in specific contexts, as warranted, but jointly suggest a broader point: It may be more fruitful to think of various configurations of contestation and complementarity between public and private authority. I will return to that issue in the conclusion. References Abbott, Kenneth W., and Duncan Snidal. 2001. “International ‘Standards’ and International Governance.” Journal of European Public Policy 8 (3): 345370. ——— and ———. 2009. “The Governance Triangle: Regulatory Standards Institutions and the Shadow of the State.” In The Politics of Global Regulation, edited by Walter Mattli and Ngaire Woods. Princeton: Princeton University Press, 44-88. Akerlof, George A. 1970. “The Market for Lemons: Quality Uncertainty and the Market Mechanism.” Quarterly Journal of Economics 84 (3): 488-500. Arnold, Dennis G. 2003. “Philosophical Foundations: Moral Reasoning, Human Rights, and Global Labor Practices.” In Rising Above Sweatshops: Innnovative Approaches to Global Labor Challenges, edited by Laura Pincus Hartman. Santa Barbara, CA: Greenwod Publishing, 77-99. Auld, Graeme, Steven Bernstein, and Benjamin Cashore. 2008. “The New Corporate Social Responsibility.” Annual Review of Environment and Resources 33: 413-435. Auld, Graeme, Marisa Camargo, and Rebecca Toseland. 2007. “Corporate Social Responsibility: A Research Bibliography.” Unpublished manuscript, Yale University, January. Auld, Graeme, Benjamin Cashore, et al. 2010. “Can Technological Innovations Improve Private Regulation in the Global Economy?” Business and Politics 12 (3). ASTM International. 2010. “ASTM International: Standards Worldwide.” Website www.astm.org (last accessed 2 October 2010). Published by Berkeley Electronic Press, 2010

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Terlaak, Ann, and Andrew A. King. 2006. “The Effect of Certification with the ISO 9000 Quality Management Standard: A Signaling Approach.” Journal of Economic Behavior & Organization 60 (4): 579-602. Thomson, Janice E., and Stephen D. Krasner. 1989. “Global Transactions and the Consolidation of Sovereignty.” In Global Changes and Theoretical Challenges, edited by Ernst-Otto Czempiel and James N. Rosenau. Lexington, MA: Lexington Books, 195-219. Tirole, Jean. 1988. The Theory of Industrial Organization. Cambridge, MA: MIT Press. Trachtman, Joel. 2003. “Addressing Regulatory Divergence Through International Standards: Financial Services.” In Domestic Regulation and Service Trade Liberalization, edited by Aaditya Mattoo and Pierre Sauvé. Washington, DC: World Bank Publications, 27-41. Trebilcock, Michael J., and Donald N. Dewees. 1981. “Judicial Control of Standard Form Contracts.” In The Economic Approach to Law, edited by Paul Burrows and Cento G. Veljanovski. London: Butterworth, 93-119. Vallier, Ivan. 1972. “The Roman Catholic Church: A Transnational Actor.” In Transnational Relations and World Politics, edited by Robert O. Keohane and Joseph S. Nye. Cambridge, MA: Harvard University Press, 129-153. Verdier, Pierre-Hugues. 2009. “Transnational Regulatory Networks and Their Limits.” Yale Journal of International Law 34 (1): 113-172. Verdugo, Concepcion. 2008. “International Standards in Anti-Money Laundering and Combating the Terrorist Financing Regulation: Compliance and Strategy Changes.” Global Business and Economics Review 10 (3): 353378. Vogel, David. 1995. Trading Up: Consumer and Environmental Regulation in a Global Economy. Cambridge, MA: Harvard University Press. ———. 2005. The Market for Virtue: The Potential and Limits of Corporate Social Responsibility. Washington, D.C.: Brookings Institution Press. ———. 2008. “Private Global Business Regulation.” Annual Review of Political Science 11: 261-282. Vogel, Steven K. 1996. Freer Markets, More Rules: Regulatory Reform in Advanced Industrial Countries. Ithaca, NY: Cornell University Press. Warren, Elizabeth. 2010. “Redesigning Regulation: A Case Study from the Consumer Credit Market.” In Government and Markets: Toward a New Theory of Regulation, edited by Edward J. Balleisen and David A. Moss. New York: Cambridge University Press, 391-418. Published by Berkeley Electronic Press, 2010

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2010

Article 3


Private Standards in the Climate Regime: The Greenhouse Gas Protocol Jessica F. Green, Case Western Reserve University

Recommended Citation: Green, Jessica F. (2010) "Private Standards in the Climate Regime: The Greenhouse Gas Protocol," Business and Politics: Vol. 12 : Iss. 3, Article 3. Available at: http://www.bepress.com/bap/vol12/iss3/art3 DOI: 10.2202/1469-3569.1318 ©2010 Berkeley Electronic Press. All rights reserved.

Private Standards in the Climate Regime: The Greenhouse Gas Protocol Jessica F. Green

Abstract This paper seeks to explain the success of two NGOs in creating standards for calculating and reporting greenhouse gas (GHG) emissions at the level of an entire company. These emissions accounting standards, called the Greenhouse Gas Protocol, have been widely adopted by multinational firms, emissions reporting registries, and even an emissions trading scheme. The paper traces the widespread adoption of the standards, and then offers an explanation for this successful instance of private regulation. It presents a supply and demand model of private entrepreneurial authority—where private actors project authority without delegation by states. The two NGOs were successful rule-makers because they were able meet a demand for three benefits to potential users of the standard: reduced transaction costs, first-mover advantage, and an opportunity to burnish their reputation as environmental leaders. The paper also explains the supply of private authority—that is, why we see entrepreneurial authority rather than delegation by states. The disagreement among developed countries on the appropriate role for emissions trading in the climate regime delayed action on developing firm-level accounting methodologies. Moreover, the relative weakness of the focal institution in the climate regime—the climate change Secretariat—meant that there was no obvious international organization to take up the task of creating new measurement tools. KEYWORDS: private governance, regulation Author Notes: Jessica Green is Assistant Professor in the Department of Political Science at Case Western Reserve University. She can be reached via email at [email protected]. The author would like to thank Graeme Auld, Tim Büthe, Seth Cantey, Benjamin Cashore, Jeff Colgan, Christina Davis and Erika Weinthal for comments on earlier drafts, as well as participants in the APSA 2009 Panel, “Private Rules, Public Goals.” She also acknowledges the helpful interviews with Janet Ranganathan and Pankaj Bhatia, who patiently answered many questions about the process of creating the Greenhouse Gas Protocol.

Green: Private Standards in the Climate Regime

1. Introduction Just as financial accounting measures the inflow and outflow of money, greenhouse gas accounting provides an inventory of gases that are put into and removed from the atmosphere. This paper traces the creation of the predominant greenhouse gas (GHG) accounting scheme, called the Greenhouse Gas Protocol. The Protocol was created by two non-governmental organizations (NGOs), namely the World Resources Institute (WRI) and the World Business Council on Sustainable Development (WBCSD), in extensive consultation with numerous firms, NGOs and government agencies. The net result of this process is the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard, which has been widely adopted by emissions reporting schemes around the world. Virtually all GHG registries—which do not trade emissions, but simply require participants to report them—use some version of the Protocol. This paper seeks to explain the success of WRI and WBCSD in creating the standard for GHG emissions accounting at the company level. Earlier work on financial accounting has shown that despite its technical nature, standardsetting is an inherently political process.1 The creation of the Greenhouse Gas Protocol (or more simply, “the Protocol”) is similarly political, involving negotiation and conflict among myriad actors—including states. Although the Protocol is a case of private regulation, the paper shows that states played an important role in its creation: Their inability to come to an agreement about the related issue of emissions trading created a regulatory vacuum, which non-state actors filled through the creation of the GHG Protocol. The paper contributes to the literature on private regulation in several ways. First, answering David Vogel’s call for more studies how and why “civil regulation” is established, this article contributes original research on a case of private rule-making not previously studied in depth.2 My analysis of the greenhouse gas accounting regime, moreover, not only adds to our understanding of private regulation but also contributes to the literature on environmental politics. As the climate regime expands and the value of carbon markets grows, issues of GHG measurement and standards will only become more important. The findings of my analysis suggest that private actors will continue to play a key role in the global governance of environmental issues. Second, I offer a conceptual and theoretical contribution to the literature on private regulation by introducing the notion of private entrepreneurial authority and analyzing the Protocol as an instance of such entrepreneurial authority. Building on previous work on private authority,3 I define private 1

Mattli and Büthe 2003; 2005. Vogel 2008. 3 Cutler et al. 1999; Haufler 2001; Hall and Biersteker 2002. 2


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entrepreneurial authority as: a set of practices that governs the behavior of actors in world politics without explicit delegation of authority by states. I use the case study of the Protocol to demonstrate a more general theory of private authority, which explains why these two NGOs were successful in attaining regulatory authority, and why firms and other actors decided to adopt their rules. I argue that the Protocol emerged as the standard for corporate-level greenhouse gas emissions accounting, because its creators were able to deliver three benefits to what Büthe calls the “targets of private regulation”4—reduced transaction costs, first-mover advantage, and enhanced reputation—not offered by other actors. Standardized “off the shelf” reporting procedures created by the Protocol made it relatively easy for individual firms interested in adopting voluntary reporting measures to do so. In addition, the Protocol provided technical support and ensured a consistent standard across actors. Adopting the Protocol also helped users prepare for international regulation of GHG emissions, potentially giving them a competitive advantage with respect to other firms. Although the Kyoto Protocol had yet to enter into force when the GHG Protocol was published in 2001, many firms believed that some form of climate regulation was likely; implementing GHG accounting was viewed as a way to begin to prepare for such an event. Finally, although primarily motivated by the threat of regulation, firms adopting the Protocol could also burnish their reputations as corporate citizens. Firms that adopted the GHG Protocol could position themselves as climate leaders (indeed, one program that adopted the GHG Protocol was called “Climate Savers”). The paper also explains the supply or form of private authority—that is, why we see entrepreneurship by NGOs, rather than delegation by states. Here, I argue that the inability of public authorities (governments or international organizations) to address an issue, combined with regulatory uncertainty (disliked by most targets) forecloses the delegation of regulatory authority and also creates an opening for entrepreneurial private authority. In the case of the climate regime, the most powerful states—EU and the so-called “JUSSCANNZ” negotiating bloc—had vastly different views on the appropriate role for emissions trading.5 Dissent among these states about the role of emissions trading, and thus, the possible uses of GHG emissions accounting standards took the issue of accounting methodologies off the agenda for inter-governmental cooperation and deprived the Secretariat of the UN Framework Convention on Climate Change (UNFCCC), the international public actor most likely to take on such as role, of any political mandate to do so. The UNFCCC Secretariat also did not have the 4

Büthe 2010. The JUSSCANNZ negotiating bloc is comprised of Japan, the United States, Switzerland, Canada, Australia, Norway and New Zealand. 5


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human resources to work on this issue. At the same time, many firms, including in JUSSCANNZ countries, expected that climate change regulation would surely be enacted sooner or later. For these companies, the uncertainty, created by governmental deadlock, about the form of such “inevitable” future regulation was undesirable. For them, the complete lack of public regulation meant continued uncertainty about the level of exposure, the risk of higher costs if large changes would have to be made quickly, and uncertainty about baselines, with the risk that undertaking voluntary efforts to lower their GHG emissions would put them at a competitive disadvantage rather than provide them with an opportunity to get financial as well as reputational credit for such efforts. Regulatory uncertainty thus provided a window of opportunity for the two NGOs, who were willing to supply (or more precisely, provide an institutional structure to foster) private regulation out of a genuine desire to reduce GHG emissions, even if in part only for reputational benefit. As a result, the WRI and the WBCSD were able to provide a set of benefits that were valued by various stakeholders, and thus induce deference from the variety of actors who adopted the Protocol. The paper proceeds in four parts. First, I present a primer on greenhouse gas (GHG) accounting. Since I cannot expect readers to be familiar with the GHG Protocol, I next provide an empirical account of the emergence of the Protocol. The third section maps my primary dependent variable—deference to private actors by states and non-state actors—by examining the uptake of the Protocol. In the fourth section, I return to the theoretical discussion above. I show that the emergence of the Protocol is consistent with a “supply and demand” model of private authority. Because of the divergent preferences of states, and the relative weakness of the likely focal institution, entrepreneurial NGOs were able to meet a demand for benefits that other actors were not. As a result, public and private actors around the world chose to defer to these rules, and adopted the Protocol to measure greenhouse gas emissions. 2. Primer on GHG Accounting and the GHG Protocol 2.1 GHG Accounting Greenhouse gas accounting provides a detailed and replicable report of the GHG emissions generated by a specific site or actor. The technical and scientific aspects of GHG accounting are complex, but two concepts must be introduced before discussing the specifics of the Protocol. First, like financial accounting, GHG accounting can be conducted either for voluntary or regulatory purposes. Firms may be required to file financial accounting reports with the government, but they also create them for purposes of planning and management. Similarly, GHG accounting can be voluntary or linked to a regulatory regime. Some firms Published by Berkeley Electronic Press, 2010

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choose to track their emissions in order to be transparent to their shareholders, or to reduce energy consumption. Others, like large power producers in the EU, are required by law to report their emissions levels, so governments can evaluate whether or not they are in compliance with regulations. The general term “GHG program” refers to both voluntary initiatives and regulatory programs that measure and report GHG emissions.6 Although many GHG programs are voluntary, they are widely viewed as the logical precursor to emissions trading. One cannot buy or sell emissions without first quantifying them; in this sense, many firms view GHG accounting as the first step in preparing for mandatory emissions trading.7 Second, just as financial accounts can be kept at the level of a project, firm or country, so can GHG accounting occur on multiple levels. GHGs are generally measured and reported at one of four different levels: national, corporate (or firm), facility or project. The Greenhouse Gas Protocol Initiative has developed two accounting standards, one at the corporate level and one at the project level. Corporate level accounting measures the emissions generated by the activities of a given firm, whereas project level accounting is used for calculating the emissions reductions generated by carbon offset projects, such as reforestation, wind farms or methane capture. This article focuses exclusively on the corporate standard, which was released in 2001, and has become the “gold standard” for corporate level reporting.8 The project standard, by contrast, was not released until 2005 and is generally believed to be less widely used. Any private firm, government agency or NGO that wishes to track its emissions uses a corporate accounting scheme. Corporate-level accounting requires deciding how to draw organizational boundaries. For firms with joint operations or subsidiaries, corporate accounting requires deciding how these sources will be measured.9 Moreover, corporate accounting also calls for the calculation of “indirect emissions” from purchased electricity use, as well as emissions generated from purchased materials, waste disposal, travel, etc.10 The key point here is that calculating and reporting at the corporate level is more complex than simply summing the emissions of projects or individual facilities. 6

WRI and WBCSD 2004, 98. This view is expressed not only in the document that constitutes the GHG Protocol, but also by a number of its users. 8 Author's interview with Rebecca Eaton, former Manager of World Wildlife Fund’s Climate Savers Program, Washington DC, 21 May 2009. 9 Choosing organizational boundaries involves deciding whether these boundaries will be drawn on the basis of equity share or control (either financial or operational) in a given operation. 10 At this point, methodologies for measuring indirect emissions beyond electricity use are still nascent. These so-called “scope 3” emissions could potentially include any activity that generates GHGs beyond those included in the direct and electricity categories. 7


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(Facility-level accounting measures emissions from a specific entity—such as a power plant, a paper mill or cement factory.) The Protocol does draw on earlier accounting methodologies at other levels—notably the Intergovernmental Panel on Climate Change Guidelines for National GHG Inventories (1996)—but it has also made a number of original contributions to the field of GHG accounting. 2.2 What is the WRI/WBCSD Protocol? The Protocol is a multi-faceted institution. It is at once a consultative standardsetting process, a conceptual framework, and a set of standards. I explain each of these aspects of the institution for two purposes. First, for conceptual clarity, I wish to acquaint the reader with the different functions of the Protocol. Second, for the analysis of the adoption of the Protocol in section 3, I need to be able to distinguish between its different components. The GHG Protocol Initiative is, first and foremost, a standard-setting process. It describes itself as “a multi-stakeholder partnership of businesses, nongovernmental organizations, governments, and others convened by the World Resources Institute and the World Business Council for Sustainable Development.”11 These two organizations convened hundreds of experts from business, government, and NGOs to create a methodologically rigorous standard. The process has dedicated staff at WRI and WBCSD, as well as partner institutions and public and private funders. The Protocol is also a framework for thinking about how to measure emissions. As one of the co-creators of the Protocol explains, “[t]he GHG Protocol corporate accounting and reporting standard is intended to be a ‘GHG GAAP’—the GHG equivalent of generally accepted accounting practices for financial reporting.”12 To this end, it has created a number of conceptual tools. For instance, the Protocol provides concepts for dividing up emissions into different “scopes.” Scope 1 emissions are those that come from sources owned or controlled by the company. Scope 2 includes those emissions that come from purchased electricity. Scope 3 subsumes all other indirect emissions (such as transportation or extraction of purchased materials). The concept of scopes has become pervasive in the language and practice of GHG programs. Another of the key conceptual contributions of the GHG Protocol has been to provide conceptual frameworks for thinking about how to decide which emissions to include or exclude in the accounting (known as equity vs. control boundaries), an allimportant issue for accounting at the corporate level. 11 12

WRI and WBCSD 2004, 2 Sundin and Ranganathan 2002, 141f.


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Third, the Protocol is a set of rules, comprised of three components: standards, guidelines and calculation tools. In order for a firm to state that it has conducted its accounting in accordance with the Protocol, there are a minimum number of requirements that it must meet.13 The authors of the Protocol signal that they use “shall” to specify required activities. In this sense, it is similar to treaty language that distinguishes between should and shall—activities that are recommended versus those that are required. However, the Protocol also suggests certain practices without requiring them. These guidelines range from recommendations about general principles to a specific how-to on gathering data and calculating emissions. One main author of the Protocol identified the “howto” guidance as a key contribution, walking new users through the process of creating a GHG inventory.14 Finally, the Protocol offers specific tools and formulae for calculating actual emissions. These include how to calculate emissions from activities such as combustion or energy use (applicable to all entities that use the Protocol) to “sector-specific” tools for aluminum, iron and steel, oil and gas, and other sectors. These calculation tools are peer-reviewed in the sense that they were developed collaboratively with expertise from the requisite sector. 3. The Emergence of the GHG Protocol WRI, WBCSD and the other organizations involved in the creation and vetting of the Protocol were not the first to develop procedures for measuring greenhouse gases. Indeed, as the discussion below illustrates, states and international organizations were early actors in the creation of national and project-level measurement tools. However, efforts to develop a corporate-level tool did not advance until private actors became involved. In this section, I briefly review earlier efforts to measure and report GHG emissions and offsets, showing that the GHG Protocol was one of the earliest efforts to develop a firm-level accounting tool, and was certainly the most transparent.15 The expertise concentrated within the Protocol process is a key factor in understanding its uptake. The Protocol process was, quite simply, the first effort to bring together actors with experience 13

Note that the Protocol is voluntary, so there is no monitoring of compliance, nor sanction for non-compliance. Some organizations choose to have their GHG reporting independently audited, but this is not required by the Protocol. 14 Author's interview with Michael Gillenwater, former EPA official, Washington DC, 21 May 2009. 15 I use “firm-level” and “corporate-level” interchangeably for standards that seek to provide measures of GHG emissions at the level of aggregation of a firm, whether or not it is legally a corporation. Offsets are activities that remove GHGs from the atmosphere. As mentioned above, these are specific projects such as reforestation activities or installation of solar panels which require a separate set of measurement tools than those aimed at firm-level accounting. http://www.bepress.com/bap/vol12/iss3/art3 DOI: 10.2202/1469-3569.1318

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and knowledge about corporate-level GHG accounting. As the discussion below illustrates, the little pre-existing knowledge about corporate level accounting was scattered across numerous firms, governments and other organizations. WRI and WBCSD were the first to pool the resources of these actors through a multistakeholder consultative process. Early GHG measurement efforts began in 1995, when the Intergovernmental Panel on Climate Change released GHG inventory guidelines. The Framework Convention on Climate Change (FCCC) requires Annex I countries—those with binding targets under the Kyoto Protocol—to report annually on their emissions in six sectors: energy, industrial processes, solvents, agriculture, land use and land use change, and waste.16 The IPCC guidelines are to be used by Annex I countries when calculating their national level emissions. These guidelines are widely used for calculating emissions within a national territory.17 The same year, the Parties to the FCCC agreed to undertake a pilot program called “Activities Implemented Jointly” (AIJ), whereby states could experiment with carbon offset projects.18 Although it was agreed that states could not earn credits for these pilot projects, the prospect of project-based credits raised awareness about the need for measuring the amount of carbon removed in different types of offset activities. As experiments with offset projects began, so did work on measuring them. In 1997, a working paper drafted by the Lawrence Berkeley Laboratory in the US cited seven existing protocols and guidelines, created by governments, IOs, NGOs, and private firms.19 These protocols and guidelines represented various attempts to measure and report on different types of offset projects. Most of them were rudimentary at best. The Uniform Reporting Format created by the UNFCCC was little more than a two page questionnaire to describe the activities of the offset project. The key event of that year was the signing of the Kyoto Protocol, which institutionalized the practice of carbon offset projects, making the need for well-developed measurement tools quite urgent. Thus, by 1997, there was considerable activity surrounding GHG measurement. However, almost all of it was related to intergovernmental agreements, with states as the primary actors. Moreover, these efforts were focused almost exclusively on the national and project-levels, and developed only very basic tools. The only evidence of comparable efforts to develop comparable methodologies GHG measurement comes from BP. 16

UNFCCC 2006. IPCC 1996. 18 UNFCCC 1995. 19 Vine and Sathaye 1997, 8-16. 17


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The first efforts to undertake GHG accounting at the corporate level began in 1997, when BP announced an ambitious plan to create an internal emissions trading program The goal was to reduce BP’s emissions by 10% below 1990 levels by 2010. However, before trading could begin, BP had to develop a system for measuring and reporting. Victor and House describe these initial steps: Until the decision to pursue the ETS, the company had no uniform standard for reporting greenhouse gas emissions. BP developed a CO2 reporting protocol within months of Browne’s speech [announcing BP’s new initiative], and by the end of 1997 had inventoried GHG emissions for 1990, 1994, 1995, and 1996…The lack of reliable inventories was normal in the industry at the time.20 Thus, the BP experiment was not only the first in corporate-level emissions trading; it was necessarily one of the first in corporate-level emissions measurement. As BP was implementing its pilot trading scheme, other organizations began to recognize the need for a corporate level emissions reporting scheme. Shortly after BP announced its plans, four would-be members of the future WRI/WBCSD Protocol called businesses to action for the same purpose.21 BP, along with Monsanto, General Motors and the World Resources Institute (WRI) published “Safe Climate, Sound Business: An Action Agenda” in October 1998. The document challenges businesses to address their contributions to climate change and “[to] measure, track, and openly report greenhouse gas emissions from their operations.”22 Moreover, the signatories to the document pledge to cooperate to “develop a joint protocol for measuring and reporting greenhouse gas emissions and the eco-efficiency of our global operations.”23 The steps for action set forth in “Safe Climate, Sound Business” laid the foundations for the Greenhouse Gas Protocol. NGOs and firms alike had identified the need for such a tool, and the existing expertise was minimal. Only a few forward-looking firms and NGOs had any experience with measuring GHGs at the firm level, and even these efforts were fairly new. Since existing experience on corporate-level accounting was minimal, early movers had an opportunity to shape measurement rules and practices. Although there was no guarantee that such rules would become binding, many firms felt that a proactive stance was a way to avoid undesirable regulatory outcomes. One former representative of the WBCSD who was involved in the early stages of the 20

Victor and House 2006, 2102, emphasis added. Monsanto was not involved in the consultations and drafting of the GHG Protocol. 22 The Climate Protection Initiative 1998, 6. 23 The Climate Protection Initiative 1998, 16. 21


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Protocol noted that their input at the early stages of developing a measurement tool was a much easier way to shape future rules. He noted, “If you [i.e. the business community] don’t do anything and just leave it to the regulators, you’re stuck with whatever comes out.”24 By contrast, he noted, it is “much easier to influence regulation at the early stages [than to] undo something that’s already been presented.”25 To follow up on the pledge laid out in “Safe Climate, Sound Business,” WRI began talking to leaders in business, as well as NGOs and government actors. It did not want to present a measurement protocol as a fait accompli, but rather wanted to create a consultative multi-stakeholder process both to produce a rigorous product, and to cultivate future users of the Protocol. It soon discovered that the WBCSD had a similar initiative in mind. After some discussion, each organization realized that “two different efforts [were] tantamount to a distandard.”26 Each side realized that the other had something to bring to the table. WRI provided a considerable amount of technical expertise; WBCSD had extensive reach into the business world via its membership. These members were potential users of the Protocol. Moreover, each side realized that the legitimacy and credibility of any measurement scheme would be greatly enhanced by having both NGOs and industry groups involved. One representative of the WBCSD noted that there was suspicion on both sides at the outset, but there was also agreement on the need for a “quality product”27 as well as something that was “implementable.”28 Both of these goals could be achieved through a rigorous, transparent and participatory rule-making process. The cooperation between WRI and WBCSD did not occur seamlessly. Despite initial wariness, there were three factors that facilitated their collaboration. First, all major participants in the process stressed the importance of the deliberative process. This commitment to deliberation and revision addressed the concern that some views might not be adequately considered, and that the end product would favor one group of interests over another.29 Because participants felt that all points of view were seriously discussed, there was less reason for one group to “take their ball and go home” by starting a competing 24

Author's interview with Dave Moorcroft, former Director, Climate and Energy Programme, WBCSD, 17 November 2009. 25 Author's interview with Moorcroft. 26 Janet Ranganathan, World Resources Institute. Interview by author, Washington DC, 19 May 2009. 27 Author's interview with Moorcroft. 28 Author's interview with Antonia Gawel, WBCSD, 8 November 2008. 29 Author's interview with Ranaganathan; Pankaj Bhatia, Director, GHG Protocol (Washington DC, 11 November 2008) and with Rob Frederick, former Manager of Corporate Social Responsibility, Ford Motor Companies, 8 May 2009.


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standard. Second, particularly at the early stages of the process, the participants—including those from the private sector—were largely leaders (or aspiring leaders) on climate change. This self-selecting group was committed to creating a meaningful outcome—a workable standard—rather than creating a lowest common denominator standard. To promote good-faith negotiation, members of the Protocol participated in their individual capacity. As a result, people did not simply negotiate on behalf of their organization, but rather focused on contributing their expert knowledge to the process30 This is not to say that the discussions were not without contention, but that that they were governed by good-faith negotiation to create a rigorous methodology rather than one that would favor certain groups. Third and finally, the vision for the final corporate standard was to create a framework for GHG accounting, in which individual users could use only the parts they wanted, or that suited their objectives. In other words, the Protocol was not designed to be an “all or nothing” standard. While basic elements are required to maintain the intent of the standard, there was some degree of flexibility in its application. Understandably, this lowered the stakes for many groups; if certain non-essential parts of the standard were objectionable, they could simply choose not to implement them. With this common ground in mind, WRI and WBCSD agreed to join forces rather than create competing standards. Since WBCSD had a large member base of multinational firms, one of its key contributions was to ensure participation and support from the private sector. These efforts were important in two ways. First, many WBCSD members expressed interest in the process, and a number were willing to contribute funds and/or staff time to developing the project. Second, by bringing these corporate actors into the fold, and encouraging their input and buy-in, WBCSD helped prevent the creation of a competing standard promulgated solely by business interests. Another important development in consolidating the authority of the WRIWBCSD collaboration occurred in 2001, when the EPA became a major funder and participant.31 Given the uncertainty surrounding US regulatory responses to climate change, the EPA’s involvement served to reassure firms that the Protocol’s rules would be taken seriously by the US government. This further reinforced the perceived legitimacy and potential high level of future usefulness of the Protocol to business groups, lowering the payoff of creating a competing standard. Importantly, the EPA also pledged to use the Protocol in its own voluntary reporting program—again demonstrating recognition of the Protocol by the government. Moreover, a number of other core advisors to the Protocol were heavily involved with separate efforts to create trading schemes and/or measurement protocols. The process convened by WRI and the WBCSD 30 31

Author's interview with Ranganathan. Author's interview with Cynthia Cummis, former EPA official, Washington DC, 19 May 2009.


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provided a natural focal point for these various efforts. Other funders of the Protocol include: the Alcoa Foundation, British Petroleum, the US Agency for International Development and a number of charitable foundations.32 WRI and WBCSD also fostered commitment to the new standards by setting up the creation of the Protocol as an extensive multi-stakeholder process. One member of the project management team described it as “a big tent initiative,” where anyone who was interested could participate. When the first edition of the Protocol was published in September 2001, it listed over 300 contributors from some 200 organizations.33 Through the drafting process, many participants became invested in the implementation of the Protocol. As one member of the WRI project team put it, “it [the GHG Protocol] became theirs too.”34 In short, the multi-stakeholder process was a key strategy for building constituencies for the Protocol.35 WRI and WBCSD also employed other strategies to build these constituencies and commit future users to the Protocol. After the first draft was completed, a number of firms agreed to “road-test” the Protocol, to see what worked and what did not.36 Their experiences not only resulted in improving the final product, but also in creating more users. Preliminary drafts were also peer reviewed by accounting firms and KPMG, to ensure consistency and replicability.37 Similarly, WRI and WBCSD worked with a number of industry associations, to help tailor the Protocol to specific sectors such as aluminum, cement, wood products, etc. There are now a dozen such tools, many of which have become standard for the industry. These iterative reviews had three beneficial effects: they improved the quality of the standard, increased the legitimacy of the process, and created buy-in among participants. All of these efforts helped prevent the creation of a competing standard. However, success is not merely measured by the absence of competition; we must also look at the breadth of the Protocol's adoption. It is to this task that we now turn. 4. Mapping the Dependent Variable: Deference to the Process and the Standard The definition of private authority provided earlier is purposefully broad about which actors in world politics must defer to private actors in order to create 32

GHG Protocol Initiative 2010. World Resources Institute and World Business Council on Sustainable Development 2001. 34 Author's interview with Ranganathan. 35 This is consistent with Bernstein and Cashore (2007), who describe a support-building phase for non-state market driven governance systems. 36 For a similar phenomenon in financial accounting standards, see Mattli and Büthe 2005. 37 GHG Protocol Initiative 2001. 33


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private authority. Any actor who defers to privately-created rules or standards without coercion creates an instance of private authority. Whereas delegated private authority requires that states transfer authority to private actors, the same does not hold for entrepreneurial authority. When one set of actors defers to private actors who seek recognition as rule-makers, entrepreneurial private authority is created. Entrepreneurs may only persuade a few like-minded actors to defer, or the uptake of their rules and practices may be very widespread. In this section, I show that deference to the Protocol’s standards has been widespread: Numerous GHG registries have adopted the Protocol, as have pilot programs, industry organizations and even one emissions trading scheme. One might argue that the widespread deference to the Protocol does not demonstrate private regulatory authority, but is simply “business as usual” for those who adopt it. I submit that adoption of the Protocol is evidence of power as defined by Dahl: WRI and WBCSD convinced other actors to do something that they would not have otherwise done.38 I maintain that adopting the Protocol involves real, measurable costs. Implementation requires purposeful and sustained action: choosing organizational boundaries, setting a baseline to compare emissions over time, identifying and calculating emissions, gathering company-wide data, and assessing the accuracy of the data collected. In other words, we can be confident that adopting the Protocol requires meaningful and costly changes in the behavior and practices of those who defer. The Protocol has induced deference in various sets of actors in different ways. I operationalize deference in three ways. First, I trace the adoption of the GHG Protocol by examining which reporting registries and emissions trading schemes have adopted some or all of the Protocol in their measurement and reporting methodologies.39 I chose to examine all extant trading schemes and four of the largest reporting schemes and evaluate the extent to which they adopt various components of the Protocol.40 Second, to provide a fuller picture of the deference to the WRI/WBCSD-led process, I supply additional evidence 38

Dahl 1957, 202f. Figuring out who has adopted the Protocol is a difficult matter. The GHG Protocol website lists those users who either use the Protocol or whose own measurement scheme is compatible with the Protocol. However, it does not distinguish between these two. I have tried to triangulate, by consulting not only with the GHG Protocol staff, but also with staff at relevant reporting schemes to ask them about the extent to which they rely on the WRI/WBCSD Protocol for their own reporting requirements. Because of the timing of the creation of the registries—they were all created after the publication of the Protocol—I can be fairly confident that this is not simply retroactively identifying registries as Protocol-compatible. 40 The trading schemes were selected on the basis of trade volume as listed in Capoor and Ambrosi 2008. The voluntary reporting schemes were selected on the basis of the number of participating firms and the geographical breadth of participants, as well as information gleaned from interviews about which reporting programs are most widely used. 39


12


illustrating its influence over other actors. I examine the involvement of the GHG Protocol as an institution in discussions surrounding the creation and design of other accounting and trading programs. Third and finally, I provide anecdotal evidence showing that participants in the Protocol process were able to influence the position of previously resistant actors, to adopt the Protocol as well as a proactive strategy toward GHG measurement. Before turning to the specific programs that have adopted the Protocol, some discussion of the universe of cases is in order. Unfortunately, it is infeasible to generate a complete list of all firms that measure and report their emissions, and then calculate the percentage that have adopted the Protocol. However, a review of the corporate users (as listed on the GHG Protocol’s website) shows that 18% of US Fortune 100 companies have adopted the Protocol, as have and 12% of the Global Fortune 100. Moreover, the Carbon Disclosure Project (see below) reports that in 2007, 77% of FT500 companies report their carbon emissions.41 Over half of the firms reporting through the Carbon Disclosure Project use the Protocol.42 This is a rough measure, but it provides a sense that the adoption of these rules is not limited to a few firms on the margins of the private sector. Estimating the proportion of GHG registries that use the Protocol (or are based on the Protocol) is more challenging since there is no established list of all extant registries. To define the universe of cases, I began with the list of Protocol users listed on the GHG Protocol website.43 I supplemented this list with web searches and references to other registries in the literature and in websites about carbon accounting. In sum, I tried to establish as complete a list as possible using multiple sources. Virtually every registry in the set of cases I compiled has either adopted the Protocol; created its own methodology based in whole or in part on the Protocol; recommends using the Protocol (or another methodology based on it); or states that its method for measuring GHG emissions is “consistent” with the Protocol. There were a number of programs that are merely “compatible with” the Protocol; these were excluded from the list of adopters (see Table 1 below). I also excluded programs that focus primarily on one type of energy provision or 41

Riddell and Chamberlin 2007. The 50% figure was provided by Joanna Lee, Carbon Disclosure Project, via email communication. 43 This list is available at http://www.ghgprotocol.org/standards/corporate-standard/users-of-thecorporate-standard. Accessed 24 November 2009. I recognize that beginning with the list generated by the GHG Protocol introduces the possibility of overestimating the number of registries using the Protocol. However, this is the most comprehensive list in existence, thus I would be remiss to exclude it. I have tried to correct for any potential bias by triangulating with other sources, and by setting a stringent standard for what constitutes adoption, as described on the following page. 42


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carbon offset projects. In other words, to calculate the share of registries that have adopted the Protocol, I have focused only on registries (as opposed to other types of carbon management or abatement methodologies), and I set a stringent standard for those that I designate as Protocol-adopters. Despite using these strict criteria, I found a high level of uptake of the Protocol. From these findings, one can infer that the Greenhouse Gas Protocol is the standard for corporate-level measurement. Currently, there are no truly competing standards. The one other corporate-level GHG accounting standard that exists was created by the UN Environment Program in 2000.44 The UNEP GHG Indicator and the Protocol had considerable overlap in their timing. The UNEP GHG Indicator was first conceptualized in 1997, and released in 2000; the Protocol began in 1998 and was released in 2001. The UNEP GHG Indicator was not intended to serve as a substitute nor a complement to the Protocol, but rather was to be a “stand-alone” tool for users that might not have the capacity to implement the more complex Protocol.45 The intended users were small and medium-sized enterprises with a preference for an internal management tool, rather than an external reporting standard. However, according to one of its creators, it was never widely publicized, and UNEP only takes minimal steps to update it. Evaluating the universe of cases of emissions trading schemes is much more straightforward; of the seven functional schemes, one uses the Protocol (see Table 2). As I discuss below, only one emissions trading scheme decided to measure emissions at the corporate level. Given that the decision about the level of aggregation (corporate, facility or national) is prior to the selection of the measurement standard, the conclusions to be drawn from this fact are mixed. In sum, the distribution of uptake of the standard is varied, with the highest concentration by far taking place in voluntary registries. I turn now to the specifics of adoption rates in GHG registries and emissions trading schemes.

44

See http://www.uneptie.org/energy/information/tools/ghg/. Author's interview with Mark Radka, UNEP Division of Technology, Industry and Economics, 14 April 2009. Although one of its creators states that the intended targets of the UNEP GHG Indicator were different than those of the Protocol, one cannot help but notice that the former has had little traction with users. If the creators truly aimed to provide a simpler tool to a different audience, it is unclear why the Protocol would have prevented them from doing so. The fact that the GHG Protocol was successful while the Indicator was not suggests that the Indicator was, in reality, an unsuccessful attempt at creating a new standard.

45


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4.1 Adoption of the Protocol in GHG Registries GHG registries are related to, but distinct from, emissions trading schemes in that they are not a requirement by domestic or international regulation, and generally are not linked to the purchase or sale of emissions allowances. Most are used for the purposes of voluntary reporting. Although some have government participants, almost all are run by private actors. More importantly, unlike emissions trading schemes, which tend to focus at the facility level, the majority of registries use corporate-level reporting. Space constraints preclude a detailed discussion of all of the GHG reporting programs that have adopted the Protocol as (or as part of) their emissions accounting methodologies, but Table 1 provides an overview of the main programs by sector. Importantly, some 25 major reporting programs worldwide use the Protocol, including four key programs: the standard promulgated by the International Organization for Standardization (ISO), the Carbon Disclosure Project, the North American-focused Climate Registry, and the US-based Climate Leaders program. In the remainder of this section, I briefly describe these, two of which are global and two of which operate in the US. By far the biggest success of the Protocol has been its wholesale adoption by ISO. ISO is a network of national standards institutes which creates standards for a vast range of products and processes. After the release of the GHG Protocol in 2001, ISO proposed developing its own methodology. Despite the fact that a number of firms, NGOs and reporting programs were beginning to use the Protocol, ISO was still determined to create its own measurement standard. Those involved in the negotiations with ISO have differing explanations of its desire to create its own scheme. Two participants in the process attributed ISO’s insistence on a separate standard to the active participation of the oil and gas industry, which was generally opposed to action on climate change, let alone the adoption of a measurement scheme created without their input.46 Another key participant attributed ISO’s reluctance to adopt the Protocol to their “mind set [and] mental model” as well as the “defensive behavior of the ISO organization.”47 In an effort to prevent the creation of a competing scheme, participants of the GHG Protocol sought out the ISO and tried to persuade them to adopt the extant standard as their own. A protracted set of discussions between ISO and the main authors of the Protocol followed. Unfortunately, because the documents from ISO meetings are not available, a detailed account of the negotiations is not feasible. However, it is clear that members of the Protocol steering group were very active in the ISO negotiations throughout the process of creating the ISO 46 47

Author's interviews with Ranganthan and Bhatia. Author's interview with Moorcroft.


15


standard. There was considerable resistance by ISO members to the Protocol.48 This suggests that members of the Protocol worked to maintain the integrity of the standard that they had created, and did not simply turn over their work to the ISO to use as it pleased. In a newsletter to Protocol participants, WRI announced that the Protocol would be used as the core document from which the ISO standard was created.49 The bargaining between WRI, WBCSD and the ISO about how much of the Protocol would be used in the ISO standard suggests that the departure point for the negotiations differed considerably from what would have occurred had the ISO created its own standard from scratch. The Protocol used its support from WBCSD and the business community to persuade ISO that establishing a competing standard would be a disservice to all.50 Many of those involved in the process of drafting the Protocol became vocal supporters, and thus, persuasive ambassadors to skeptics within the ISO. After approximately five years of negotiation, ISO finally adopted a standard for GHG measurement and reporting that is almost identical to the Protocol, called ISO14064, Part 1.51 At the same time, it signed a Memorandum of Understanding with WRI and WBCSD, with each organization pledging to promote the standards created by the other.52 Thus, the ISO has deferred to the methods set forth in the Protocol, and has re-packaged them as their own. Given the ISO’s broad reach and high level of legitimacy among business and industry, its decision to adopt the Protocol has translated to a much wider reach to these communities. A second global user of the Protocol is the Carbon Disclosure Project (CDP). An independent non-profit organization, the CDP collects data on GHG emissions on behalf of institutional investors. CDP is organized on the principle that investors are in a better position to evaluate the risks and potential areas for improvement of the companies they invest in if they know their emissions and exposure to future regulation. In 2008, 1550 companies provided GHG emissions data to the CDP, representing US$57 trillion in investor assets.53 The Carbon Disclosure Project relies on participating companies to report their emissions in a manner that is transparent, rigorous, and compatible with its program. Although it does not require a particular GHG accounting methodology, it strongly recommends that participants use the Protocol created by WRI and WBCSD. One interviewee at CDP reported that over 50% use the Protocol in responding to the survey. She added that the Protocol was chosen because “it has international 48

Author's interviews with Bhatia, Moorcroft, and Ranganathan. GHG Protocol Initiative 2003. 50 Both WRI and WBCSD were, and continue to be, recognized as “organizations in liaison” with Technical Committee 207, the ISO committee responsible for drafting ISO-14064 Part 1. See http://www.iso.org/iso/iso_technical_committee?commid=54808. Accessed 7 July 2010. 51 The primary difference is that ISO requires third party verification, which the Protocol does not. 52 See http://www.iso.org/iso/pressrelease.htm?refid=Ref1093. 53 Carbon Disclosure Project 2008. 49


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recognition as being thorough and robust, and we believe it to be the most appropriate.”54 There are two key adopters of the Protocol in the US that also demonstrate the breadth of deference. The first is the US EPA’s voluntary reporting program, called Climate Leaders. Climate Leaders was created in 2001 to help participating companies to measure and reduce their GHG emissions. Like ISO14064, Climate Leaders adopted the Protocol in its entirety. It became involved in the early consultations about creating the Protocol, and decided to fund the initiative as well as to use the newly-created standard in its own program.55 The EPA had three motivations for using the Protocol. First, existing voluntary reporting protocols developed by the US Department of Energy (DoE) did not provide a useful model, since they were focused on project-level, rather than corporate-level reporting.56 Thus, at the time, there were no other models to draw upon—save for the process emerging from WRI and WBCSD. Second, the international reach of the standards was appealing. Because multinational corporations were the primary target market for Climate Leaders, using an international standard such as GHG Protocol assured compatibility with other users, and facilitated consistent accounting practices across world-wide operations of a given company. Third and finally, the transparency and inclusiveness of the GHG Protocol process bolstered the legitimacy of the standards and helped to ensure buy-in from a broad range of stakeholders. Climate Leaders has waned in importance since its creation in 2001, and as US climate policy has moved toward compliance-based policies such as the Regional Greenhouse Gas Initiative. However, Climate Leaders’ use of the Protocol was a significant contribution to its widespread uptake. The EPA’s funding and adoption of the Protocol lent legitimacy to the efforts of WRI and WBCSD: Given the active support of future regulators, potential users of the Protocol saw the value of getting a seat at the table.

54

Joanna Lee, email communication, 14 April 2009. Author's interview with Cummis. 56 Author's interview with Cummis. 55


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Table 1: GHG Programs using the Protocol Voluntary Governmental Initiatives

Industry Associations and Non-Governmental National Industry Initiatives Initiatives

Other Initiatives

US EPA Climate Leaders Program

International Aluminum Institute

ISO 14064-Part I

WWF Climate Savers

The California Climate International Council for Carbon Disclosure Program United Nations Action Registry Forest and Paper Association GHG Calculator The Climate Registry WBCSD Sustainable Cement Initiative

Carbon Trust Standard

Mexico GHG Program World Economic Forum Global GHG Register

Business Leaders Initiative on Climate Change

China Corporate International Petroleum Energy Conservation Industry Environmental and GHG Management Conservation Association Program

Climate Neutral Network

Brazil GHG Protocol New Zealand Business Program Council for Sustainable Development India GHG Inventory Taiwan Business Council for Program Sustainable Development Philippine Greenhouse Association des entreprises Gas Accounting and pour la réduction des gaz à Reporting Program effet de serre Australian National Greenhouse and Energy Reporting Guidelines Canadian GHG Challenge Registry New Mexico GHG Emissions Reporting57

58

Unlike the other initiatives in this column, the New Mexico initiative is mandatory for large emitters (i.e.

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