Epstein (1994, p. 15) reported on innovations at Browning-Ferris Industries in the United States, where

one-third of total compensation is at-risk pay based on performance, and the environmental component is integrated through the use of an "environmental multiplier." The amount of the individual's bonus based on business-unit and other performance variables is multiplied by an environmental performance score. Thus, employees receiving a score of 80 out of 100 on meeting the environmental objectives, receive 80 percent of their bonus. A score of less than 70 is considered unacceptable: a multiplier of 0 is assigned and the entire bonus lost. It is with such approaches that corporations can effectively change their cultures and provide for a significant change in the environmental sensitivity of all employees at all levels.

Such developments in incentives do not seem to be widespread at present. However, individuals are essential elements of the sustainable development process, both as decision-makers in the company and as decision-makers in the government. The implication is that "sustainability can no longer be decoupled from individual responsibility" (Whelan, 1994, p. 16). If the accounting incentive-reward structure for individual organizational members is not brought into line with environmental objectives, it will be difficult for the organization as a whole to respond effectively to the environmental challenge. At Monsanto, an internal tax is imposed on all internally generated waste, thereby doubly penalizing—and doubly motivating—management responsible for waste production. Such initiatives are pointers to the kinds of developments that may be experimented with (Gray et al., 1993).

Small Firms

A particular issue, identified in a recent white paper on sustainable development (U.K. Government, 1994), is how small firms, including agricultural enterprises, are to be given incentive to adopt more environmentally responsible behaviors. Their access to information about environmental issues and opportunities may be much more restricted than that of larger firms. For such firms, cost savings from environmental investment may also differ from those for larger firms. For example, savings in labor costs may not be apparent if a firm's labor costs are a function of what the company can bear rather than the real workload (Tellus Institute, 1992), and there may be other diseconomics of scale. However, Epstein (1994, p. 18) provides the example of Hyde Tools in Massachusetts, which employs some 300 people and uses "sound business analysis to improve both its bottom line and the environment." The company has eliminated the use of toxic chemicals and reduced annual wastewater production from 29 million gallons to 1 million gallons in 3 years.

The National Academies of Sciences, Engineering, and Medicine
500 Fifth St. N.W. | Washington, D.C. 20001

Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement