How Do Public Disclosure Pollution Control Programs Work? Evidence from Indonesia

Although a growing body of evidence suggests that publicly disclosing information about plants' environmental performance can motivate emissions reductions, this phenomenon remains poorly understood. To help fill this gap, this paper presents original data from a survey of plants participating in the Program for Pollution Control, Evaluation and Rating (PROPER), Indonesia's widely-acclaimed public disclosure program. These data suggest that a key means by which PROPER spurs abatement is improving factory managers' information about their own plants' emissions and abatement opportunities. This finding contrasts with the prevailing view in the literature that public disclosure enhances pressures to abate placed on firms by external agents such as community groups and shareholders. But our data also suggest that PROPER's "environmental audit" effect operates in concert with external pressures. Therefore, simply supplying new information to plant managers without making that information public may not be sufficient to motivate significant abatement.