Signals of Legitimacy

IMG_4713Business ethics often involves a division of labor between stakeholders as moral principals and companies as moral agents.  Stakeholders can use environmental certifications and ratings to monitor this division of moral labor, but the legitimacy of these programs may vary significantly.  This paper identifies transparency, expertise, and independence as three characteristics that certifications and ratings can use to signal their legitimacy to stakeholders.  It uses the concepts of credibility and accountability to explain why these characteristics may be effective signals of legitimacy to different stakeholder groups.

The paper develops multi-dimensional typologies for each of these characteristics that are used to analyze a sample of 245 product eco-labels and corporate sustainability ratings.  The results reveal that transparency is the most common of these signals of legitimacy, followed by independence and then expertise.  These results may be explained by differences in the difficulty in producing these signals.  Alternatively, the relative importance of transparency, independence, and expertise may be dependent on who the organizations believe are their principals – advocacy organizations, experts, or the public at large.  The paper contributes to our theoretical understanding of the role that these three characteristics play as signals of legitimacy, credibility, and accountability in the context of environmental certifications and ratings.

This paper was published in Business and Politics in 2015, and is available here.

Researchers Involved in this Project: Graham Bullock, Hayley Currier