Pay for Environmental Performance: The Effect of Incentive Provision on Carbon Emissions

View/ Open
Metadata
Show full item recordCitation
Eccles, Robert G., Ioannis Ioannou, Shelley Xin Li, and George Serafeim. "Pay for Environmental Performance: The Effect of Incentive Provision on Carbon Emissions." Harvard Business School Working Paper, No. 13–043, November 2012.Abstract
Corporations are increasingly under pressure to improve their environmental performance and to account for potential risks and opportunities associated with climate change. In this paper, we examine the effectiveness of monetary and nonmonetary incentives provided by companies to their employees in order to reduce carbon emissions. Specifically, we find evidence that the use of monetary incentives is associated with higher carbon emissions. This result holds both in cross-sectional and time-series analysis. Moreover, we find that the use of nonmonetary incentives is associated with lower carbon emissions. Consistent with monetary incentives crowding out motivation for pro-social behavior, we find that the effect of monetary incentives on carbon emissions is mitigated 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 even when we control for potential selection bias in our sample.Terms of Use
This article is made available under the terms and conditions applicable to Open Access Policy Articles, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#OAPCitable link to this page
http://nrs.harvard.edu/urn-3:HUL.InstRepos:10018989
Collections
- HBS Scholarly Articles [838]
Contact administrator regarding this item (to report mistakes or request changes)