Third-party Certifications

Third party certifications

Why would businesses spend time and money to obtain certifications they do not promote?

Alberta School of Business researcher finds:

  • Firms often seek third-party certifications to validate their sustainability practices (for example, Fairtrade, LEED, USDA Organic).
  • But not all firms tout their certifications. Why? Contextual distinctiveness: certified firms promote their "clean" credentials more when surrounded by "dirty" firms.
  • Whereas certification membership is driven by the pressure to "fit in", certification promotion is driven by the opportunity to "stand out".
  • This dynamic poses a strategic challenge for certification providers, as the firms most likely to certify are not always likely to promote.

Research Abstract:

Why would an organization pursue membership in an organizational category, yet forego opportunities to subsequently promote that membership? Drawing on prior research, we develop a theoretical model that distinguishes between basic and subordinate categories and highlights how organizations may differ in their promotion of the same subordinate category. We hypothesize that a subordinate category's contextual distinctiveness within different basic categories increases promotion and that these effects are amplified in relatively larger subordinate category peer groups. To test our hypotheses, we developed a proprietary web-based software toolset and gathered textual and graphical data regarding B Corporations' web-based promotion of their certification. We supplemented our statistical analysis with interviews of Certified B Corporation entrepreneurs and executives. Our findings challenge prior assumptions about the causes of promotional forbearance while extending our understanding of category distinctiveness within contexts as well as sources of intra-category variation.

The article, "Hidden Badge of Honor: How Contextual Distinctiveness Affects Category Promotion Among Certified B Corporations" is co-authored by Joel Gehman and is published in the Academy of Management Journal.

Joel Gehman Joel Gehman is the Alberta School of Business Chair in Free Enterprise and the Associate Director of the Canadian Centre for Corporate Social Responsibility. He studies sustainability, innovation and strategy. In particular, he investigates how grand challenges related to sustainability and values affect organizational strategies, technology innovation, and institutional arrangements. And reciprocally, how organizations, innovation and institutions affect the emergence and trajectories of grand challenges related to sustainability and values. He holds a BS from Cornell University and PhD from Pennsylvania State University.