Monitoring and Compliance in Transnational Private Governance: Unpacking Process and Outcome Interactions Between Public Forest Policies and Audits for the Forest Stewardship Council

A growing research agenda on transnational private governance – organizations formed and backed by businesses and/or non-governmental organizations that set standards for responsible business practices – seeks to understand the drivers and effects of compliance with these governance initiatives. This interest aligns with a growing recognition among scholars working on varied substantive fields – from energy (Flanagan, Uyarra, & Laranja, 2011) and climate change (Auld, Burlica, Mallett, Poupart, & Slater, 2011) to environmental policy (Gunningham & Sinclair, 1999; OECD, 2007) and land-use management (Lambin et al., 2014) – that complex interactions between private standards and public policies must be examined to understand regulatory outcomes and impacts.

We contribute to this agenda by studying the impact of national forest policies on forest firms and operators’ compliance with private sustainable forestry standards. Empirically, we do this by examining the monitoring and compliance functions performed by a third-party auditor – the Rainforest Alliance’s SmartWood program – that is accredited to certify for the Forest Stewardship Council (FSC), a private certification programs that emerged in the early 1990s. Combining a dataset of all SmartWood audits (n=324) and data on the prescriptiveness of forest policies in major forestry jurisdictions (McDermott, Cashore, & Kanowski, 2010), we examine the relationship between public policies and the audit process and outcomes. To this end, we use proxies for the difficulty of the audit that differentiate process effects (audit duration) and outcome effects (number and type of corrective action requests), while controlling for variables external (e.g., the scale of the forestry operation) and internal (e.g., the timing of the audit in relation to the chronological development of the FSC) to the certification process. These two dependent variables (duration and corrective action requests) help determine whether a country’s forest policies affect how easy operators find the audit process (e.g., a quick audit) and how well they perform (e.g., fewer corrective action requests).

The outcomes of this work will contribute to existing scholarship that seeks to understand how the quality and character of public policies in different jurisdictions affect the decisions firms make to participate in private governance programs (e.g., Kollman & Prakash, 2001, 2002; Prakash & Potoski, 2014). Arguably, the unique character of our data that allows us to differentiate process and outcome effects should enable us to better specify what aspects of public policies are likely to lead to improved environmental outcomes when interacted with private governance.