Paper Title
Pay for Environmental Performance: The Effect of Incentive Provision on Carbon Emissions
Location
University of Washington Tacoma, Philip Hall
Event Website
http://www.tacoma.uw.edu/clsr/academic-conference
Start Date
12-7-2013 9:00 AM
End Date
12-7-2013 10:30 AM
Description
An increasing number of companies are striving to reduce their carbon emissions and, as a result, they provide incentives to their employees linked to the reduction of carbon emissions. Using both fixed effects models and matching samples we find evidence that the use of monetary incentives is associated with higher carbon emissions. Moreover, we find that the use of nonmonetary incentives is associated with lower carbon emissions. Consistent with monetary incentives crowding out motivation for prosocial behavior, we find that the effect of monetary incentives on carbon emissions is fully eliminated when these incentives are provided to employees with formally assigned responsibility for environmental performance. Furthermore, by employing a two-stage multinomial logistic model, we provide insights into factors affecting companies’ decisions on incentive provision, as well as showing that the impact of monetary incentives on carbon emissions remains significant after controlling for potential selection bias in our sample.
Pay for Environmental Performance: The Effect of Incentive Provision on Carbon Emissions
University of Washington Tacoma, Philip Hall
An increasing number of companies are striving to reduce their carbon emissions and, as a result, they provide incentives to their employees linked to the reduction of carbon emissions. Using both fixed effects models and matching samples we find evidence that the use of monetary incentives is associated with higher carbon emissions. Moreover, we find that the use of nonmonetary incentives is associated with lower carbon emissions. Consistent with monetary incentives crowding out motivation for prosocial behavior, we find that the effect of monetary incentives on carbon emissions is fully eliminated when these incentives are provided to employees with formally assigned responsibility for environmental performance. Furthermore, by employing a two-stage multinomial logistic model, we provide insights into factors affecting companies’ decisions on incentive provision, as well as showing that the impact of monetary incentives on carbon emissions remains significant after controlling for potential selection bias in our sample.
https://digitalcommons.tacoma.uw.edu/clsr_academic/2013/pres/4
Comments
Robert G. Eccles is a Professor of Management Practice at Harvard Business School. Ioannis Ioannou is an Assistant Professor of Strategy and Entrepreneurship at London Business School. Shelley Xin Li is a doctoral candidate at Harvard Business School. George Serafeim is an Assistant Professor of Business Administration at Harvard Business School. We are grateful to the Carbon Disclosure Project and in particular to Maia Kutner for giving access to the investor survey data. We thank Joshua Margolis, Eugene Soltes, Gwen Yu, and seminar participants at Harvard Business School, London School of Economics, London Business School, and the 2013 Management Accounting Section of the American Accounting Association for giving us helpful comments. Andrew Knauer provided excellent research assistance. All errors are solely our own responsibility.
Contact author: George Serafeim gserafeim@hbs.edu.