Informed Management?

Corporate activity is a major contributor to environmental pollution, so much is known.  The extent to which individual firms affect the environment, however, remains relatively unclear, possibly even to firms’ management. As a result, the growing efforts to collect information on firms’ environmental footprints – e.g., motivated by external reporting requirements or driven by independent monitoring initiatives (e.g., Climate TRACE) – may help firms’ management incorporate environmental considerations more efficiently in their decision making.

This Decarbonization Seminar / Joint Seminar ZEW and MISES focuses on exploring the potential of information-collection initiatives that provide firms with data on their environmental footprints. Using a survey experiment administered to millions of firms via email, information is collected on firms’ beliefs about their environmental footprints, and a subset of firms is randomly informed about independent estimates of their footprints. It is explored whether firms’ beliefs align with their actual footprints, whether beliefs are updated when diverging footprint information is presented, and whether updated beliefs influence firms’ actions, including their decision to disclose their footprint, their stated intention to change their environmental footprint, and their observed operational actions and environmental footprint.