This article has been reviewed according to Science X's editorial process and policies. Editors have highlighted the following attributes while ensuring the content's credibility: Amid increasingly stiff competition for capital, one way for a business to stand out is to make strong social impact pledges. For example, companies can voluntarily commit to environmental impact goals in hopes of attracting sustainability-minded investors and lowering the cost of capital.
However, it isn't easy to tell whether these commitments, in and of themselves, make a difference in the marketplace—or, for that matter, to the planet. "In regular settings, it's really hard to evaluate the real economic effect of providing environmental commitments, and also establish that in making the commitment, the company is catering to real stakeholder preferences as opposed to their own idiosyncratic preferences," says Yi Cao, assistant professor of accounting at Costello College of Business at George Mason University. Cao's paper in Review of Accounting Studies capitalizes on a unique setting that helps isolate the impact of environmental commitments.
It was co-authored by John (Jianqiu) Bai of Hong Kong Polytechnic University, Xiumin Martin of Washington University in St. Louis, and Chi Wan of San Diego State University. In 2018, the leading crowdfunding platform Kickstarter added an optional "Environmental Commitments" section to project pages where creators could post about their sustainable practices (e.g., responsible sourcing, recyclable packaging, and/or low-emission manufacturing).
The new feature was rolled out gradually across product categories, enabling the researchers to compare not only project-to-project differences but also overall changes within entire Kickstarter verticals. The researchers scraped information from Kickstarter pages to form a data set comprising 173,874 observations of unique projects from 2016 to 2021. They also gathered data on a host of outcome variables, such as whether the project was successfully funded, how much money each project ultimately raised, and how long it took fully funded creators to deliver products to backers.
The researchers found that, on average, about one-third of creators chose to declare an environmental commitment once doing so became possible in their category. Several of the largest categories (e.g., Design, Technology and Games) saw significantly higher take-up rates. On the whole, projects that included environmental commitments were 13.2% more likely to be funded and had pledged amounts relative to their funding goals that were 8.7% higher.
Using Google BERT, a natural language processing model, the research team separated projects into two categories: those with largely local appeal and those with a national market base. "We pre-trained the AI with all projects from 2010 to 2016 that had at least 50 backers, and measured the geographic dispersion of these projects' backers traced by their IP address," Cao explains. The purpose was to spare the human researchers the tedious and painstaking work of hand-classifying every project in the data set.
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