Green incentives for environmental goals

Abstract

This paper examines antecedents of firms’ use of green incentives. We analyse a cross-industry panel of 531 firms from the 2007–2013 Carbon Disclosure Project investor survey. In line with predictions from the management control literature, we find that the use of green incentives is positively associated with a firm’s experience in monitoring environmental performance, supporting a sequential model of management control systems’ implementation. We also find that conformity pressure to industry peer practices and to enhancing environmental performance affects the firm’s use of green incentives in accordance with social conformity theory. We further find that green incentives behave differently across the organizational hierarchy. Consistent with managerial and social arguments explaining time-to-adoption of management practices across organizations, we also observe that green strategy and monitoring experience are associated with an earlier adoption of green incentives. Conversely, conformity pressure to industry peer practices predicts a later adoption.