It Pays to Reduce Your Carbon Footprint: Business and Policy Leaders Take Note

by

Framing corporate engagement with carbon pricing policy as either proactive or compliant plays a significant role in consumer attitudes and behaviours towards companies and the carbon pricing policy itself.

Framing corporate engagement with carbon pricing policy as either proactive or compliant plays a significant role in determining consumer attitudes and behaviours towards both companies and carbon pricing policy.

You might be willing to pay more in a cafe for fair-trade coffee and you might be persuaded to purchase a reusable bag for a higher fee when grocery shopping. As consumers, there are factors besides price that weigh in on our decision-making about what types of goods to buy and where to buy them from. Organizations and governmental agencies promoting environmental policy must understand what drives consumer behaviour regarding socially and environmentally responsible companies.

Our latest research at The Decision Lab is shedding light on how corporate action on climate change —  especially in response to carbon pricing policies—influences consumer attitudes towards the company and how interested they are in being their customer. The findings also offer important insight into the framing effects associated with Canada’s carbon pricing policies.

Assessing Consumer Response to Carbon Pricing

The goal of this research was to assess how Canadian consumers respond to framing around industry involvement with carbon pricing policy – a goal inspired by the Federal government’s recent carbon pricing initiatives [4]. Frames can be considered as subtle alterations in the statement or presentation of judgement and choice problems [2]. Framing triggers individual’s unconscious perception of information by the way in which information is provided—in this instance, information about policy compliance.

When designing the study we had two key questions. First, how does a company’s participation with carbon pricing affect consumer evaluations of individual companies? Second, how does a company’s participation influence public support for carbon pricing more generally?

To answer these questions we recruited 118 Canadians online.  The participants were randomly assigned to one of two hypothetical scenarios about company engagement with a carbon tax.  Participants read the following statement: “Suppose that national carbon pricing legislation gives businesses a choice in how they contribute to reducing carbon emissions.” The participant was then given potential scenarios regarding whether a company (called Standard Inc.)  decides to either pay a fee proportional to their carbon-use or to invest the amount in carbon-reducing practices. We called the companies that invest in carbon-reducing activities ‘Proactive’ companies and the companies that simply comply and pay the fee-per carbon use ‘Compliant Companies’.  Participants then rated how much they agreed with a series of statements about their evaluation of the company’s behaviour and the tax policy itself.

What did we find?

Our first key finding was that consumers are more likely to describe the proactive company that invested in carbon-reducing activities as helping the environment, not hurting the environment, morally good, and engaging in acceptable business practices in comparison to the compliant companies that simply paid the tax. Additionally, consumers expressed a higher willingness to engage in business with the proactive companies.

Our second finding has wider political implications which supports research showing that differently framed messages can influence the opinions and attitudes of the public[2]. If the framing involved the proactive company investing in emissions-reducing activities, participants were more likely to rate the carbon pricing policy as fair, support the political party that implemented it, rate the policy as helping the environment, rate it as helping Canada’s image and reflecting Canadian values, and helping the economy. The opposite was true for the compliant company frame.

What can we learn from these findings?

We offer a few key explanations and takeaways of our results for industry leaders and policymakers. From a business perspective, consumers responded positively to the actions of proactively engaging companies. There are tangible benefits for companies to actively reduce their greenhouse gas emissions, though these results will only be realized if the private sector can communicate their actions to the public. Other research on environmental compliance has found that it can be costly for corporations that do not keep their actions aligned with the current ethical landscape [7]. Additionally, according to green consumer theory, firms may respond proactively to policy that appeal to environmentally conscious consumers, who are willing to pay more for green products or redirect their demand toward environmentally friendly firms [1, 5].

From a policy standpoint, when industry action reflects the spirit of a policy’s goal (i.e addressing climate change) it legitimizes the value of the policy in the eyes of the public. Other research shows that when the public has trust in the specific actors engaged in environmental policy there is increased public support for the policy. For example in the domain of forestry management, a high confidence in forestry agencies, experts and industry has been positively associated with acceptance of forest management policies and their implied risks [6].This research demonstrates that trust in responsible agencies is essential when the public lacks familiarity with, but values the outcomes, of environmental practices.

These results are particularly relevant to the complex issue of climate change. Members of the public are not necessarily informed on the science behind climate change or the mechanisms to reduce emissions, but are nonetheless concerned about addressing it [3]. Our findings illustrate that if members of the public develop trust in proactive companies, they will increase their overall support for the climate pricing policy. This relationship is of concern to policymakers who are framing and articulating policy aimed at industry-level behavioural and attitudinal change.

Final Thoughts

Our research offers insight into how public support can be fostered for carbon pricing policies during a time when climate change policy is one of the most salient and divisive political topics in Canada.  Our results clearly illustrate that Canadians react positively to carbon pricing policy which directly incentivizes companies to reduce greenhouse gas emissions as opposed to merely promoting compliance with carbon taxes. Consumers take signals from industry in their overall assessments on the legitimacy of a given policy.

As the effects of climate change become increasingly evident and public support more imperative, our research suggests that simple framing has an important role to play. Governments should focus on communicating the positive returns of proactive engagement to industry to encourage emissions reduction. We suggest that future research on this topic should examine the relationship between framing effects and the type of emitting company in order to determine if industry type factors into consumer evaluations of policy.

Sources:

[1]: Arora, Seema, and Shubhashis Gangopadhyay. 1995. “Toward a Theoretical Model of Voluntary Overcompliance.” Journal of Economic Behavior & Organization 28 (3): 289–309. https://doi.org/10.1016/0167-2681(95)00037-2.

[2]: Chong, Dennis, and James N. Druckman. 2007. “Framing Theory.” Annual Review of Political Science 10 (1): 103–26. https://doi.org/10.1146/annurev.polisci.10.072805.103054.

[3]: Dale Beugin, Brendan Frank, Glen Hodgson, Richard Lipsey, Nancy Olewiler, and Chris Ragan, Ecofiscal. n.d. “Clearing the Air – How Carbon Pricing Helps Canada Fight Climate Change – by the Ecofiscal Commission.” Canada’s Ecofiscal Commission. Accessed February 1, 2019. https://ecofiscal.ca/carbon-pricing-works/.

[4]: “Federal Carbon Price Impacts on Households in Alberta, Saskatchewan and Ontario.” n.d. EnviroEconomics. Accessed January 17, 2019. www.enviroeconomics.org/single-post/2018/09/21/Federal-Carbon-Price-Impacts-on-Households-in-Alberta-Saskatchewan-and-Ontario

[5]: Lin, Hsiu-Yi, and Meng-Hsiang Hsu. 2015. “Using Social Cognitive Theory to Investigate Green Consumer Behavior: Using Social Cognitive Theory to Investigate Green   Consumer Behavior.” Business Strategy and the Environment 24 (5): 326–43. https://doi.org/10.1002/bse.1820.

[6]: Peterson, St-Laurent, Guillaume, Shannon Hagerman, Robert Kozak, and George Hoberg. 2018. “Public Perceptions about Climate Change Mitigation in British Columbia’s Forest Sector.” Edited by RunGuo Zang. PLOS ONE 13 (4): e0195999. https://doi.org/10.1371/journal.pone.0195999.

[7]: Wu, JunJie. 2009. “Environmental Compliance: The Good, the Bad, and the Super Green.” Journal of Environmental Management 90 (11): 3363–81. https://doi.org/10.1016/j.jenvman.2009.05.017.

Jayden Rae
About Jayden Rae:

Jayden is a BCL/LLB candidate at the McGill Faculty of Law with a particular interest in studying how public policy can be used as a tool to help individuals and organizations make decisions to protect the environment. She has worked in environmental policy at the Ontario Ministry of the Environment where she utilized data analytics to support evidence-based environmental policy. Jayden received her bachelor’s degree from McGill University in environment and political science.