Network governance

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Network governance is "interfirm coordination that is characterized by organic or informal social system, in contrast to bureaucratic structures within firms and formal relationships between them. [1] The concepts of privatization, public private partnership, and contracting are defined in this context." Network governance constitutes a "distinct form of coordinating economic activity" (Powell, 1990:301) which contrasts and competes with markets and hierarchies. [2]

Contents

Definition

Network governance involves a select, persistent, and structured set of autonomous firms (as well as nonprofit agencies) engaged in creating products or services based on implicit and open-ended contracts adapt to environmental contingencies and to coordinate and safeguard ex-changes. These contracts are socially—not legally—binding. As such, governance networks distinguish themselves from the hierarchical control of the state and the competitive regulation of the market in at least three ways: [3]

  1. In terms of the relationship between the actors, governance networks can be described as a pluricentric system as opposed to the unicentric system. [4] Governance networks involve a large number of interdependent actors who interact with each other in order to produce an outcome. [3]
  2. In terms of decision-making, governance networks are based on negotiation rationality as opposed to the substantial rationality that governs state rule and the procedural rationality that governs market competition. [5]
  3. Compliance is ensured through trust and political obligation which, over time, becomes sustained by self-constituted rules and norms. [6]

As a concept, network governance explains increased efficiency and reduced agency problems for organizations existing in highly turbulent environments. On the one hand, the efficiency is enhanced through distributed knowledge acquisition and decentralised problem-solving; on the other, the effectiveness is improved through the emergence of collective solutions to global problems in different self-regulated sectors of activity. [2] Due to the rapid pace of modern society and competitive pressures from globalization, transnational network governance has gained prominence. [7]

Network governance first depends on the comprehension of the short- and long-term global business risks. It is based on the definition of the IT key objectives and their influence on the network. It includes the negotiation of the satisfaction criteria for the business lines and integrates processes for the measurement and improvement of the global efficiency and end user satisfaction. Beyond that, it allows the constitution and piloting of internal teams and external partners as well as the setting up of a control system enabling to validate the performance of the whole. Finally, it ensures permanent communication at all the various management levels.

In the public sector, network governance is not universally accepted as a positive development by all public administration scholars. Some doubt its ability to adequately perform as a democratic governance structure while others view it as phenomenon that promotes efficient and effective delivery of public goods and services. Examining managed networks in health care, Ferlie and colleagues [8] [9] suggest that networks may be the 'least bad' form of governance addressing wicked problems, such as providing health care for the increasing number of older people.

Types

Provan and Kenis categorize network governance forms along two different dimensions: [10]

Participant-governed networks

In participant governance a network is governed by its members themselves.

They call such networks that involve most or all network members interacting on a relatively equal basis in the process of governance "shared participant governance".

Lead organization-governed networks

More centralized networks may be governed by and through a lead organization that is a network member.

Historical and modern examples of network governance

These examples show how network governance worked in the eras of increased trade and cooperation between merchants and nations ranging from the 10th century to the 17th century. Ron Harris, in his article "Reputation at the Birth of Corporate Governance", writes: "The questions of who had a good reputation and who had a bad one, whom one could trust and entrust money to, were unaltered, but the relationships to which they applied changed, as did the institutions that provided answers to these questions." [12]

Importance of governmental relations

Relationships among governing positions and governing institutions are absolutely vital for the success of the internal workings of the governments that aid the public. While federal, state, and local governments differ in their policies, they all work in coherence in order for the foundations to work efficiently. [14] "Checks and balances" is a prime synonym when referring to intergovernmental relations. All participating parties of the government must adhere to specific guidelines in order to cultivate a fair and even playing field that is both beneficial and just to the population it affects. [9] A primary principal in governmental relationships is the balance of power between the parties. [15] The federal government has a large amount of control in terms of national security, national finances and foreign affairs. However, in order to balance that control, state-level governments have a significant voice in intrastate politics. [16] Specific examples of state-level policies include topics such as state highways, borderlines, and state parks. This allows states to still have flexibility while bonding to national policy.

Unfortunately, creating relationships among different level governments and government agencies is a complicated, and often grueling process. [17] However, many agencies make deals or compromise within the party in order to further benefit both institutions. For example, a state may fund a county in order to better the county roads because it could be a direct reflection of the state. Intra-governmental relations between agencies, state-level, local-level, and federal-level government must work together in order to prosper and create policies or laws that are beneficial to both the agencies and the public. [18]

Role in environmental governance

In the wake of apparent failures to govern complex environmental problems by the central state, "new" modes of governance have been proposed in recent years. [16] Network governance is the mode most commonly associated with the concept of governance, in which autonomous stakeholders work together to achieve common goals.

The emergence of network governance can be characterised by an attempt to take into account the increasing importance of non-governmental organizations (NGOs), the private sector, scientific networks and international institutions in the performance of various functions of governance. [19] Embedding interventions to make society better and to transform conflicts within "relational webs" [20] can ensure better coordination with existing initiatives and institutions [21] and greater local acceptance and buy-in, which makes the intervention more sustainable. [22] Prominent examples of such networks that have been instrumental in forming successful working arrangements are the World Commission on Dams, the Global Environmental Facility and the flexible mechanism of the Kyoto Protocol. [23] Another ongoing effort is the United Nations Global Compact, which combines multiple stakeholders in a trilateral construction including representatives from governments, private sector and the NGO community. [24] : 6 

One main reason for the proliferation of network approaches in environmental governance is their potential to integrate and make available different sources of knowledge and competences and to encourage individual and collective learning. [2] [24] Currently, environmental governance faces various challenges that are characterised by complexities and uncertainties inherent to environmental and sustainable problems. [25] Network governance can provide a means to address these governance problems by institutionalising learning on facts and deliberation on value judgements. [26] For example, in the realm of global chemical safety, transnational networks have formed around initiatives by international organisations and successfully developed rules for addressing global chemical issues, many of which have been implemented by national legislations. Most notably, these transnational networks made it possible to avoid the institutional apathy that is typically found in political settings with many actors of conflicting interests, especially on a global level. [18]

Through integration of actors from different sectors, governance networks are able to provide an innovative environment of learning, laying the way for adaptive and effective governance. [2] One particular form of networks important to governance problems is epistemic communities in which actors share the same basic casual beliefs and normative values. [17] : 3  Although participation in these epistemic communities requires an interest in the problem at stake, the actors involved do not necessarily share the same interest. In general, the interests are interdependent but can also be different or sometimes contesting, stressing the need for consensus building and the development of cognitive commodities. [16] : 26 

The main argument in the literature for the advantage of network governance over traditional command and control regulation or, alternatively, recourse to market regulation, is its capacity to deal with situations of intrinsic uncertainty and decision-making under bounded rationality. [24] This is typically the case in the field of global environmental governance where one has to deal with complex and interrelated problems. In these situations, network institutions can create a synergy between different competences and sources of knowledge allowing dealing with complex and interlined problems. [2]

Enhancement of corporate social responsibility

As increasing amounts of scientific data validate concerns about the deterioration of our environment, the role of non-governmental organizations (NGOs) in network governance is being utilized in ever-increasing ways to halt or at least slow this deterioration. One of the ways they are accomplishing this is by directing their activities to focus on improving corporate social responsibility (CSR). As a concept, CSR has existed since the first business was formed in civilization. The French philosopher Rousseau described it as the "social contract" between business and society. [27] As theories about CSR have evolved in keeping with their times, today it is increasingly associated with sustainable practices and development, meaning that businesses have a "moral responsibility" to conduct their operations in an ecologically sustainable manner. [28] It is no longer acceptable for corporations just to grow "the bottom line" and increase profits for their shareholders. Businesses remain free to pursue profits but are increasingly obligated to minimize their negative impact on the environment. [28]

Network governance, in the form of NGOs, is effectively bringing to light "bad practices" by corporations, as well as highlighting those actively working to reduce their carbon footprints. Private governance networks such as CSRHUB and the Carbon Disclosure Project (CDP) are entities that hold corporations accountable for their amount of corporate social responsibility. Founded to accelerate solutions to climate change and water management, the CDP discloses information and data on water management, greenhouse gas emissions, and climate change strategies on over 3,000 companies worldwide. [29] It is the only global climate change reporting system and encourages corporations to engage in "best practices" regarding environmental impact by making their formerly private or unknown environmental impact information available to anyone, including the general public. This information can be used (by a variety of entities) to make consumer purchase and investment decisions, formulate governmental as well as corporate policy, educate people, develop less harmful business methods for corporations and formulate action plans by environmental advocacy groups, to name a few. Lord Adair Turner, Chairman of the UK Financial Services Authority, explains how network governance enhances CSR: "The first step towards managing carbon emissions is to measure them because in business what gets measured gets managed. The Carbon Disclosure Project has played a crucial role in encouraging companies to take the first steps in that measurement and management path". [30]

Leading European business schools joined with more than sixty multinationals to launch the Academy of Business in Society, the mission of which is to push CSR to the forefront of business practice. Their main activities in pursuing this goal are: 1) developing 'best-in-class' training practices and learning resources for businesses and corporate academies, 2) including the changing role of business in society in business education and 3) creating a global research bank on the role of business in society and delivering interdisciplinary research on CSR. [28] This is an example of network governance using education to improve corporate social responsibility. Use of organization of networks in today's society is a valid means of moving forward in preserving the environment.

See also

Related Research Articles

<span class="mw-page-title-main">Corporate social responsibility</span> Form of corporate self-regulation aimed at contributing to social or charitable goals

Corporate social responsibility (CSR) or corporate social impact is a form of international private business self-regulation which aims to contribute to societal goals of a philanthropic, activist, or charitable nature by engaging in, with, or supporting professional service volunteering through pro bono programs, community development, administering monetary grants to non-profit organizations for the public benefit, or to conduct ethically oriented business and investment practices. While once it was possible to describe CSR as an internal organizational policy or a corporate ethic strategy similar to what is now known today as Environmental, Social, Governance (ESG); that time has passed as various companies have pledged to go beyond that or have been mandated or incentivized by governments to have a better impact on the surrounding community. In addition, national and international standards, laws, and business models have been developed to facilitate and incentivize this phenomenon. Various organizations have used their authority to push it beyond individual or industry-wide initiatives. In contrast, it has been considered a form of corporate self-regulation for some time, over the last decade or so it has moved considerably from voluntary decisions at the level of individual organizations to mandatory schemes at regional, national, and international levels. Moreover, scholars and firms are using the term "creating shared value", an extension of corporate social responsibility, to explain ways of doing business in a socially responsible way while making profits.

Governance is the overall complex system or framework of processes, functions, structures, rules, laws and norms borne out of the relationships, interactions, power dynamics and communication within an organized group of individuals which not only sets the boundaries of acceptable conduct and practices of different actors of the group and controls their decision-making processes through the creation and enforcement of rules and guidelines, but also manages, allocates and mobilizes relevant resources and capacities of different members and sets the overall direction of the group in order to effectively address its specific collective needs, problems and challenges. The concept of governance can be applied to social, political or economic entities such as a state and its government, a governed territory, a society, a community, a social group, a formal or informal organization, a corporation, a non-governmental organization, a non-profit organization, a project team, a market, a network or even the global stage. Governance can also pertain to a specific sector of activities such as land, environment, health, internet, security, etc. The degree of formality in governance depends on the internal rules of a given entity and its external interactions with similar entities. As such, governance may take many forms, driven by many different motivations and with many different results.

<span class="mw-page-title-main">United Nations Global Compact</span> Non-binding United Nations pact

The United Nations Global Compact is a non-binding United Nations pact to get businesses and firms worldwide to adopt sustainable and socially responsible policies, and to report on their implementation. The UN Global Compact is the world's largest corporate sustainability and corporate social responsibility initiative, with more than 20,000 corporate participants and other stakeholders in over 167 countries. The organization consists of a global agency, and local "networks" or agencies for each participating country. Under the Global Compact, companies are brought together with UN agencies, labour groups and civil society.

<span class="mw-page-title-main">Forest Stewardship Council</span> Global forest certification system

The Forest Stewardship Council GmbH (FSC) is an international non-profit, multistakeholder organization established in 1993 that promotes responsible management of the world's forests via timber certification. This organization uses a market-based approach to transnational environmental policy.

Global governance refers to institutions that coordinate the behavior of transnational actors, facilitate cooperation, resolve disputes, and alleviate collective action problems. Global governance broadly entails making, monitoring, and enforcing rules. Within global governance, a variety of types of actors – not just states – exercise power. Governance is thus broader than government.

Sustainability reporting refers to the disclosure, whether voluntary, solicited, or required, of non-financial performance information to outsiders of the organization. Sustainability reporting deals with qualitative and quantitative information concerning environmental, social, economic and governance issues. These are the criteria often gathered under the acronym ESG.

<span class="mw-page-title-main">Ceres (organization)</span> U.S. nonprofit organization

Ceres is a non-profit sustainability advocacy organization based in Boston, Massachusetts, and founded in 1989. As of May 2017, its president is Mindy Lubber.

<span class="mw-page-title-main">Global Reporting Initiative</span> International standards organization

The Global Reporting Initiative is an international independent standards organization that helps businesses, governments, and other organizations understand and communicate their impacts on issues such as climate change, human rights, and corruption.

<span class="mw-page-title-main">Hybrid organization</span> Theoretical concept

A hybrid organization is an organization that mixes elements, value systems and action logics of various sectors of society, i.e. the public sector, the private sector and the voluntary sector. A more general notion of hybridity can be found in Hybrid institutions and governance.

Environmental governance (EG) consists of a system of laws, norms, rules, policies and practices that dictate how the board members of an environment related regulatory body should manage and oversee the affairs of any environment related regulatory body which is responsible for ensuring sustainability (sustainable development) and manage all human activities—political, social and economic. Environmental governance includes government, business and civil society, and emphasizes whole system management. To capture this diverse range of elements, environmental governance often employs alternative systems of governance, for example watershed-based management. Obviously, in fact the EG arrangements are very diversed and not at all as inclusive as we could wish them to be.

Climate governance is the diplomacy, mechanisms and response measures "aimed at steering social systems towards preventing, mitigating or adapting to the risks posed by climate change". A definitive interpretation is complicated by the wide range of political and social science traditions that are engaged in conceiving and analysing climate governance at different levels and across different arenas. In academia, climate governance has become the concern of geographers, anthropologists, economists and business studies scholars.

A corporate social entrepreneur (CSE) is someone who attempts to advance a social agenda in addition to a formal job role as part of a corporation. It is possible for CSEs to work in organizational contexts that are favourable to corporate social responsibility (CSR). CSEs focus on developing both social capital, economic capital and their formal job role may not always align with corporate social responsibility. A person in a non-executive or managerial position can still be considered a CSE.

Environmental, social, and governance (ESG) is shorthand for an investing principle that prioritizes environmental issues, social issues, and corporate governance. Investing with ESG considerations is sometimes referred to as responsible investing or, in more proactive cases, impact investing.

Sustainability standards and certifications are voluntary guidelines used by producers, manufacturers, traders, retailers, and service providers to demonstrate their commitment to good environmental, social, ethical, and food safety practices. There are over 400 such standards across the world.

Type II partnerships were developed at the Johannesburg World Summit on Sustainable Development in 2002. Arising in opposition to the state-centred eco-governmentality of previous approaches to sustainable development policy, the partnerships facilitate the inclusion of private and civil actors into the management of sustainable development. The partnerships are employed alongside traditional intergovernmental mechanisms in order to effectively implement the United Nations' Agenda 21 and Millennium Development Goals, particularly at sub-national level. Although widely acknowledged as one of the most innovative and effective developments in global environmental governance in recent years, the partnerships have faced criticism due to fears of a lack of accountability, and the risk that they may exacerbate inequalities of power between Northern and Southern states. Despite these reservations, there is a general consensus among state and non-governmental actors that Type II partnerships are a significantly progressive step in global environmental governance in general, and sustainable development discourse in particular.

Territorialisation of Carbon Governance (ToCG) is a concept used in political geography or environmental policy which is considered to be a new logic of environmental governance. This method creates carbon-relevant citizens who become enrolled in the process of governing the climate. The territorialisation of carbon governance transforms climate change from a global to local issue. It embodies political practices that serve to connect the causes and consequences of global climate change to local communities.

Small and Medium Enterprises (SMEs) are defined by the European Commission as having less than 250 employees, independent and with an annual turnover of no more than €50 million or annual balance sheet of €43 million.

<span class="mw-page-title-main">Earth system governance</span> Field of scholarly inquiry in the social sciences

Earth system governance is a broad area of scholarly inquiry that builds on earlier notions of environmental policy and nature conservation, but puts these into the broader context of human-induced transformations of the entire earth system. The integrative paradigm of earth system governance (ESG) has evolved into an active research area that brings together a variety of disciplines including political science, sociology, economics, ecology, policy studies, geography, sustainability science, and law.

The term ‘hybrid institution’ is not yet well-established or clearly defined in academic literature. German and Keller possibly introduced the term in 2009, describing it as "an institutional arrangement governing the interdependencies among discrete property holders and regimes". Abbot and Faude have suggested more recently that most areas in world politics today are governed "neither by individual institutions nor by regime complexes composed of formal interstate institutions. Rather, they are governed by “hybrid institutional complexes” comprising heterogeneous interstate, infra-state, public–private and private transnational institutions, formal and informal." Whether they are anything more than euphemisms for public-private partnerships, which are nothing new, is yet to be firmly established.

Multistakeholder governance is a practice of governance that employs bringing multiple stakeholders together to participate in dialogue, decision making, and implementation of responses to jointly perceived problems. The principle behind such a structure is that if enough input is provided by multiple types of actors involved in a question, the eventual consensual decision gains more legitimacy, and can be more effectively implemented than a traditional state-based response. While the evolution of multistakeholder governance is occurring principally at the international level, public-private partnerships (PPPs) are domestic analogues.

References

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