Using Market Forces for Social Good

Abstract

The environment has traditionally been the domain of nonprofit organizations. For decades, nonprofit organizations have worked to reduce the negative impact of market-based activity on the environment. However, more recently nonprofits have started to adopt the methods and values of the market to achieve sustainability goals. One of the primary strategies that nonprofits use is to disclose, or pressure corporations to disclose, information about the environmental impact of their products and processes. These information disclosure strategies seek to help stakeholders make green purchases or invest in corporations that use green practices, thus incentivizing corporations to reduce their negative environmental impact. In this chapter, we review the benefits and the challenges encountered by nonprofits in their attempt to use information disclosure strategies.In this chapter, we review how nonprofits are using information disclosure strategies to influence corporations. More specifically, we discuss three types of information disclosure strategies: certification of green or socially responsible products, also called eco-labeling; codification and certification of corporate disclosure of environmental performance; and certification of different types of firm governance structure.

Keywords: Benefit Corporation, Eco-label, Nonprofit, Environmental disclosure, Information disclosure

JEL Classification: L3, M14, Q01, Q56