We're happy to share our work in progress with the intent to generate conversation with our community and partners.
Environmental damage is usually an unseen byproduct of other activities, with consumers and those around them unaware of the harm they are causing. Private information about the environmental impact of their own actions can help consumers reduce the costs of conservation behavior or increase the moral benefit of conserving. If this same information is disclosed publicly, it provides an additional motivation for conservation – reputation. By making green actions visible, public information allows environmentally friendly behaviors to act as a signal of green virtue. In this paper we contrast the efficacy of private information with that of public information in a unique field experiment in the residence halls at the University of California – Los Angeles. We provide private information to residents in the form of real-time feedback over energy usage and social norms, while public information takes the form of a publicly visible energy conservation rating. While we find no average effect of private information, we did find that that public information effectively motivated electricity users to reduce consumption by 20 percent. This reduction was sustained even after public information was no longer being disclosed.
Delmas, Magali and Lessem, Neil, Saving Power to Conserve Your Reputation? The effectiveness of private versus public information.
January 27 2012
A "third wave" of environmental policy has recently emerged that emphasizes information provision as an integral part of the risk mitigation strategy. While theory suggests that information programs may correct market failures and improve welfare, the empirical effectiveness of these programs remains largely undetermined. We show that mandatory information disclosure programs in the electricity industry achieve stated policy goals. We find that the average proportion of fossil fuels decreases and the average proportion of clean fuels increases in response to disclosure programs. However, the programs also produce unintended consequences. Customer composition and pre-existing fuel mix significantly affect program response, suggesting that effective information disclosure policies may not be efficient.
Delmas, M., Montes-Sancho, M. and Shimshack, J. 2010. “Mandatory Information Disclosure Policy: Evidence from the electric utility industry,” Economic Inquiry. 48(2): 483–498.
April 13 2010
Eco-labeling signals that a product has been eco-certified. While there is increasing use of eco-labeling practices, there is still little understanding of the conditions under which eco-labels can command price premiums. In this paper, we argue that the certification of environmental practices by a third party should be analyzed as a strategy distinct from although related to the advertisement of the eco-certification through a label posted on the product. By assessing eco-labeling and eco-certification strategies separately, we are able to identify benefits associated with the certification process independently from those associated with the actual label. More specifically, we argue in the context of the wine industry that eco-certification can provide benefits, such as improved reputation in the industry or increased product quality, which can lead to a price premium without the need to use the eco-label. We estimate this price premium of wine due to the eco-certification of grapes using 13,400 observations of wine price, quality rating, varietals, vintage, and number of bottles produced, for the period 1998-2005. Overall, certifying wine increases the price by 13%, yet including an eco-label reduces the price by 20%. This result confirms the negative connotation associated by consumers with organic wine. The price premium of this luxury good due to certification acts independently from its label, a confounding result not previously demonstrated by related literature.
Delmas, Magali A. and Grant, Laura E., Eco-Labeling Strategies: The Eco-Premium Puzzle in the Wine Industry.
January 09 2008
We examine the role of signaling and of intrinsic benefits in the adoption of the individual elements of the voluntary LEED (Leadership in Energy and Environmental Design) standards for green buildings. We use goodness-of-fit tests on data for all 442 LEED certified buildings and find that neither signaling nor pursuit of intrinsic benefits can independently explain the observed adoption pattern, but that a combination of the two factors can. We also find tentative evidence that the adoption decision is made sequentially: organizations first choose a level of certification (consistent with signaling), and then choose how many LEED elements to adopt given their chosen level of certification (consistent with pursuing intrinsic benefits). We relate our findings to some open questions in the literature on diffusion of technology and draw implications for the design and the future development of similar voluntary standards and eco-labels.
Keywords: green building, LEED standards, diffusion, real estate, goodness-of-fit tests.
Corbett, Charles J. and Muthulingam, Suresh. Adoption of Voluntary Environmental Standards: The Role of Signaling and Intrinsic Benefits in the Diffusion of the LEED Green Building Standards.
August 16 2007
The view that adopting an environmental perspective on operations can lead to improved operations is in itself not novel; phrases such as "lean is green" are increasingly commonplace. The implication is that any operational system that has minimized inefficiencies is also more environmentally sustainable. However, in this paper we argue that the underlying mechanism is one of extending the horizons of analysis and that this applies to both theory and practice of operations management. We illustrate this through two principal areas of lean operations, where we identify how successive extensions of the prevailing research horizon in each area have led to major advances in theory and practice. First, in quality management, the initial emphasis on statistical quality control of individual operations was extended through total quality management to include a broader process encompassing customer requirements and suppliers’ operations. More recently, the environmental perspective extended the definition of customers to stakeholders and defects to any form of waste. Second, in supply chain management, the horizon first expanded from the initial focus on optimizing inventory control with a single planner to including multiple organizations with conflicting objectives and private information. The environmental perspective draws attention to aspects such as reverse flows and end-of-life product disposal, again potentially improving the performance of the overall supply chain. In both cases, these developments were initially driven by practice, where many of the benefits of adopting an environmental perspective were unexpected. Given that these unexpected side benefits seem to recur so frequently, we refer to this phenomenon as the "law of the expected unexpected side benefits." We conclude by extrapolating from the developmental paths of total quality management and supply chain management to speculate about the future of environmental research in operations management.
Keywords: environmental management; sustainability; quality management; supply chain management
Corbett, Charles J. and Klassen, Robert D. Extending the Horizons: Environmental Excellence as Key to Improving Operations.
January 07 2007
This report summarizes the findings of the 2-year project on "Motion Picture Industry Sustainability" conducted through the UCLA Institute of the Environment, under contract to the California Integrated Waste Management Board, during Summer 2003 - Spring 2005.
The objectives of the study were to identify existing environmental best practices within the industry, based on interviews and case studies, to develop a "green production guide" based on those practices, and to organize forums for disseminating the findings to the motion picture industry. Throughout, the "motion picture industry" includes film and television production. The focus of the study was exclusively on the production side of the industry, not on distribution or on content.
Corbett, Charles J. and Turco, Richard P., Sustainability in the Motion Picture Industry.
November 16 2007
This paper uses several California data sets to test for differences in consumption patterns between greens and browns. A person's "environmentalism" is rarely observed in consumer data sets. In California, a community's share of Green Party registered voters is a viable proxy for community environmentalism. Environmentalists are more likely to commute by public transit, purchase hybrid vehicles, and consume less gasoline than non-environmentalists.
Kahn, Matthew E., Do greens drive Hummers or hybrids? Environmental ideology as a determinant of consumer choice.
November 14 2006
The ISO 9000 series of quality management systems standards, introduced in 1986, has been adopted at over 560,000 locations worldwide. Anecdotal evidence suggests that firms can achieve internal benefits such as quality or productivity improvements or that certification can help firms maintain or increase their market share, or both. Others argue that the standard is too generic to cause performance improvement but can be seen as a signal of good management. In this paper, we track financial performance from 1987 to 1997 of all publicly traded ISO 9000 certified manufacturing firms in the United States with SIC codes 2000–3999, and test whether ISO 9000 certification leads to productivity improvements, market benefits, and improved financial performance. We employ event-study methods, matching each certified firm to a control group of one or more noncertified firms in the same industry with similar precertification size and/or return on assets. We find that firms’ decision to seek their first ISO 9000 certification was indeed followed by significant abnormal improvements in financial performance, though the exact timing and magnitude of this effect depend on the specification of the control group. Three years after certification, the certified firms do display strongly significant abnormal performance under all control-group specifications. The degree to which the precise results vary across control-group specifications indicates that event studies should always include extensive sensitivity analysis, for instance matching by size and performance separately and jointly, using both single firms and portfolios as controls.
Corbett, Charles J., Montes-Sancho, María J. and Kirsch, David A., The Financial Impact of ISO 9000 Certiﬁcation in the United States: An Empirical Analysis.
July 14 2005
Large-scale industrial production processes face increasingly tight environmental constraints, which can be addressed through costly but relatively simple end-of-pipe solutions, or through cheaper but more subtle pollution prevention approaches. Achieving the process improvements necessary for pollution prevention is challenging due to the inherent complexity and unpredictability of several types of processes found in the food processing, pharmaceuticals, biotechnology, and specialty chemical industries. We propose an iterative procedure to achieve process improvements through model-based process redesign. This procedure is based on successive convex approximations of the process performance model, where product flows and process settings are optimized for a given configuration and the solution and dual variables ofthis optimization problem are used to update the process configuration following a greedy capacity reallocation procedure. We implemented this procedure over a five-year period at Cerestar, a major European producer of starch products, which led to a dramatic simplification in process configuration. Reduced energy and water consumption led to an estimated $3 million annual cost savings. Moreover, the reduction in environmental impacts allowed Cerestar to maintain current production levels without investing $100 million in additional wastewater treatment capacity to comply with new environmental constraints.
Corbett, Charles J. and Rajaram, Kumar. Achieving Environmental And Productivity Improvements Through Model-Based Process Redesign.
January 01 2002