Greening industry in Vietnam: Environmental management standards and resource efficiency in SMEs

Abstract

Over the past decade, enterprises have sought to minimize their ecological footprints through cleaner production strategies. Evidence can be gathered to support either the view that adopting environmental management standards (EMS) is a cost burden on firms and is detrimental to competitiveness, or that adopting standards increases savings giving firms competitive advantage in the long run. To resolve this seeming paradox in an emerging country context, the relationship between adopting EMS certificate and resource efficiency is examined empirically using a panel sample of 1333 manufacturing SMEs in Vietnam for the (2011-2013) period. Applying an instrumental variable approach, the results indicate that certification leads to resource savings reflected by less use of electricity, fuel and water for each unit of output. Additionally, there is a heterogeneous effect of certification on the extent of resource saving depending on the sector of operation. The paper also highlights determinants of certificate adoption among SMEs which should be considered in the promotion of environmental certificates, especially in developing countries. To successfully roll out the adoption of environmental certificates on a larger scale, better knowledge among business owners on potential competitive and environmental sustainability gains from EMS must be disseminated.