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Blockchain‐based incentive mechanism for environmental, social, and governance disclosure: A principal‐agent perspective

Author

Listed:
  • Yuxiang Niu
  • Yelin Fu
  • Xinlai Liu
  • Arjun Rachana Harish
  • Ming Li
  • George Q. Huang

Abstract

Environmental, social, and governance (ESG) disclosure has drawn much attention from listed companies, investors, and regulators. In response to the increasing demand of investors and regulators for non‐financial information, listed companies have paid attention to publishing ESG reports consisting of environmental, social, and governance information. Listed companies are increasingly required to provide high‐quality information that is clear and comparable. However, the lack of incentive to listed companies makes it hard to improve the quality of ESG disclosure, and the cost of ESG disclosure leads to the uncontrollable quality of ESG reports and may even manipulation by opportunistic behaviors. In this paper, we illustrate the moral hazard problem in ESG disclosure from the perspective of investors and listed companies, in which the effort level for listed companies to provide high‐quality ESG report cannot be observed by investors. Then we propose a blockchain‐based incentive mechanism for ESG disclosure from a principal‐agent perspective to improve the information quality of ESG disclosure, where investors act as principal and listed companies act as agents. Token in blockchain technology is utilized as the rewards to improve the listed companies' reputation, thus increasing their chance of being promoted to investors for preferential investment opportunities in the blockchain platform. We then design the first‐best (FB) and second‐best (SB) optimal contracts based on classic principal‐agent model to overcome the moral hazard problem. Extensive simulations are conducted to demonstrate the effectiveness and feasibility of the incentive mechanism.

Suggested Citation

  • Yuxiang Niu & Yelin Fu & Xinlai Liu & Arjun Rachana Harish & Ming Li & George Q. Huang, 2024. "Blockchain‐based incentive mechanism for environmental, social, and governance disclosure: A principal‐agent perspective," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(6), pages 6318-6334, November.
    • Handle: RePEc:wly:corsem:v:31:y:2024:i:6:p:6318-6334
    DOI: 10.1002/csr.2916
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    References listed on IDEAS

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    Cited by:

    1. Rachana Harish, Arjun & Liu, Xinlai & Wang, Xin & Pan, Shenle & Dai, Hong-Ning & Li, Ming & Huang, George Q., 2025. "Blockchain For Logistics 4.0: A Systematic Review and Prospects," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 201(C).
    2. Qiang Wang & Yulei Qi & Rongrong Li, 2026. "Artificial Intelligence and Corporate Sustainability: Shaping the Future of ESG in the Age of Industry 5.0," Sustainable Development, John Wiley & Sons, Ltd., vol. 34(1), pages 1-26, February.
    3. Monica Singhania & Ibna Bhan & Surabhi Seth, 2025. "Digitalisation and Firm‐Level ESG Performance and Disclosures: A Scientometric Review and Research Agenda," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(4), pages 4212-4236, October.
    4. Wang, Zhongli & Nishihara, Michi, 2025. "Investment and information asymmetry in corporate sustainability: Incentive-auditing contracts and policy insights," International Review of Financial Analysis, Elsevier, vol. 105(C).
    5. Rachana Harish, Arjun & Liu, Xinlai & Li, Ming & Zhong, Ray Y. & Huang, George Q., 2025. "The new supply chain information sharing Renaissance through crypto valuation mechanism of digital assets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 195(C).
    6. Imen Ben Tahar & Dylan Possamai & Xiaolu Tan, 2026. "Optimal incentive scheme for ESG disclosure," Papers 2604.24344, arXiv.org.
    7. Khanh Huy Nguyen & Anh Thuy Trinh & Mai Dong Tran & Trang Thi‐Thuy Duong, 2025. "Uncovering the Evolution of Brand Transparency in Corporate Social Responsibility: A Holistic Perspective," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(6), pages 7671-7696, November.

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