Environmental standards and labor productivity: Understanding the mechanisms that sustain sustainability

In the last decade, a rising number of firms have adopted voluntary international environmental management and product standards, such as the international ISO 14001 management standard or organic certification. Although emerging research analyzes the impact of these standards on environmental and financial performance, there is to our knowledge no empirical research on how they affect the productivity of employees. In this paper, we investigate the direct relationship between environmental standards and labor productivity, as well as two mediating mechanisms through which environmental standards influence labor productivity: employee training and enhanced interpersonal contacts within the firm. Our empirical results, based on a French employer-employee survey from 5220 firms, reveal that firms that have adopted environmental standards enjoy a one standard deviation higher labor productivity than firms that have not adopted such standards. © 2012 John Wiley & Sons, Ltd