Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcast
  • Managing the Future of Work Podcast
  • About Us
  • Book
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Podcasts
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    Pay for Environmental Performance: The Effect of Incentive Provision on Carbon Emissions
    10 Jan 2013Working Paper Summaries

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

    by Robert G. Eccles, Ioannis Ioannou, Shelley Xin Li and George Serafeim
    Research has shown that reducing carbon emissions and exhibiting good environmental performance are important for corporations. But how exactly are these environmental goals carried out within organizations? In this paper, the authors analyze the incentive structures of climate change management for a sample of large, predominantly multinational organizations. The authors then characterize and assess the effectiveness of different types of incentive schemes that corporations have adopted to encourage employees to reduce carbon emissions. Results suggest that contrary to widespread belief in the effectiveness of monetary incentives, in fact the adoption of monetary incentives is associated with higher carbon emissions. By contrast, the use of nonmonetary incentives is associated with lower carbon emissions. Overall, the study suggests that socially positive tasks significantly impact the effectiveness of different types of incentives and should be considered in the design of accounting and control systems. Key concepts include:
    • Monetary incentives are associated with higher carbon emissions.
    • Non-monetary incentives are associated with lower carbon emissions.
    • When employees perceive their action as socially positive, the adoption of non-monetary incentives might be more effective than monetary incentives in reducing carbon emissions.
    • For tasks involving socially positive behavior, monetary incentives are not effective and actually detrimental unless they are provided to people for whom such tasks constitute part of their formal job responsibility.
    LinkedIn
    Email

    Author 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.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: November 2012
    • HBS Working Paper Number: 13-043
    • Faculty Unit(s): Accounting and Management; Organizational Behavior
      Trending
        • 23 Jun 2022
        • Research & Ideas

        All Those Zoom Meetings May Boost Connection and Curb Loneliness

        • 06 Aug 2021
        • Book

        Steve Jobs and the Rise of the Celebrity CEO

        • 28 Jun 2022
        • Book

        The Moral Enterprise: How Two Companies Profit with Purpose

        • 22 Jun 2022
        • Book

        Four Elements for Finding the Right Career Path

        • 18 Apr 2022
        • HBS Case

        Dick’s Sporting Goods Followed Its Conscience on Guns—and It Paid Off

    George Serafeim
    George Serafeim
    Charles M. Williams Professor of Business Administration
    Contact
    Send an email
    → More Articles
    Find Related Articles
    • Energy
    • Environmental Sustainability
    • Government and Politics

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
    ǁ
    Campus Map
    Harvard Business School Working Knowledge
    Baker Library | Bloomberg Center
    Soldiers Field
    Boston, MA 02163
    Email: Editor-in-Chief
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Accessibility
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College