Issue opacity and sustainability standard effectiveness

Frank Wijen and Mallory Elise Flowers

Regulation & Governance, 2023, vol. 17, issue 3, 772-790

Abstract: Many voluntary sustainability standards govern opaque environmental and social issues, which are difficult to understand and address. Extant studies show mixed evidence around the effectiveness of such standards. We develop a theoretical framework that relates different degrees and types of opacity to standard effectiveness. Systemic opacity results from issues embedded in complex, diverse, and dynamic settings, whereas behavioral opacity stems from human challenges in interpreting and acting upon focal issues. Rigid sustainability standards, oriented toward compliance, are effective for addressing issues that are transparent or enshrouded by behavioral opacity, but are counterproductive for issues with systemic opacity. The trade‐off between rigidity and flexibility leads to optimal effectiveness when standards governing systemically and behaviorally opaque issues are moderately rigid. Our ideas are illustrated with two leading sustainability standards in the fisheries and real estate sectors, which effectively address transparent issues but show limited success when facing opacity. We conclude that unpacking issue opacity is instrumental in designing and implementing more effective sustainability standards.

Date: 2023
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https://doi.org/10.1111/rego.12485

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Persistent link: https://EconPapers.repec.org/RePEc:wly:reggov:v:17:y:2023:i:3:p:772-790

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