To assure that decision makers make decisions that are consistent with attaining long-term (sustainability) objectives it is imperative that employees are incited to consider the long-term effect of their decisions. In this paper I discuss whether the choice of performance metrics potentially affects the likelihood of agents to consider the long-term effects of their decisions. Some existing research would suggest that accounting return metrics -like residual income- and nonfinancial metrics may lead agents to redirect attention from the short to the long-term effect of their actions. I observe potential avenues for future research. At this stage we know little of how firms prioritize in deciding what metrics to use, how many metrics to use, or what weights they want to put on these metrics.
Policy makers put great emphasis on the role of information about carbon emissions in achieving sustainable decisions by consumers. We conduct two studies to understand the optimal targeting of such information and its effects. First, we conduct an incentivized and representative survey among US consumers (N = 1, 022) to investigate awareness of climate impact and willingness to mitigate it. We find a large variation in the perceptions of the carbon emissions of different consumption behaviors, with an overall tendency to underestimate these emissions. We also find a positive but highly concave willingness to mitigate climate impact. We combine elicited misperceptions and willingness to mitigate in a structural model that delivers sharp predictions about where to best target information campaigns. In an experiment with actual consumption decisions (N = 2, 081), we then test for the effect of CO2 information on the demand for beef, a product predicted to be a productive target for information. Correcting misperceptions has no effect on the demand for beef, both in absolute terms and compared to a predictably less productive target of information, i.e. the demand for poultry. Our dataset allows us to hone in on the underlying reason for this null effect.
*Co-authored with T. Imai , D.D. Pace (both LMU) and P. Schwardmann (Carnegie Mellon University)