Quantitative Assessment of the Impact of EMS Standards on the Firms’ Attitude towards Product Safety

In response to regulatory policies on environmental and consumer safety, firms implement various initiatives to enhance their environmental compliance to enter or stay in the markets where those regulatory policies are present. Using firm-level data from Japan, this paper examines the impact of ISO14001 adoption and internationalisation status of firms on their compliance with product-related environmental regulations (PRERs) imposed by the European Union. We apply a bivariate probit model to estimate the relationship between adoption of ISO14001 and compliance with the European Union’s RoHS (Restriction of Hazardous Substances) Directive and REACH (Registration, Evaluation, and Authorisation and Restriction of Chemicals) Regulation, taking into account the potential simultaneity between ISO adoption and PRER compliance. Also, the effect of internationalisation status such as participation in global value chains on PRER compliance is examined. The results indicate that the effect of ISO14001 on those PRERs may occur only when firms operate in a stringent regulatory environment.

ERIA-DP-2018-07