Journal of Risk and Uncertainty

, Volume 56, Issue 1, pp 51–81 | Cite as

Corporate apology for environmental damage

Article

Abstract

Apologies are a powerful way to restore trust and reduce punishment costs in bilateral settings. But what do we know about public apologies for large scale man-made disasters? Herein we report on results from an experiment with apologies in a multilateral setting: a firm-caused environmental disaster. Subjects read about an oil spill scenario, and learned whether the oil firm made a full apology, a partial apology, or no apology, and whether the firm had a good, bad, or no environmental reputation. A partial apology is one that fails to accept full material responsibility for damages, such as by shifting the blame to another party. We find that full apologies and better reputation reduce the demand for punishment. However, full apologies and reputation are substitutes, with reputation being significantly more important. Additionally, apologies do not reduce the demand for compensation and may increase it if the firm is clearly a bad actor, or if admission of guilt is the only information subjects have. Our results help explain corporate social responsibility investments and greenwashing, and why many public apologies over an environmental disaster are only partial apologies.

Keywords

Corporate social responsibility Greenwashing Apologies Environmental disaster Cheap talk 

JEL Classifications

Q54 L14 

Supplementary material

11166_2018_9276_MOESM1_ESM.pdf (572 kb)
(PDF 572 KB)

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  • Ben Gilbert
    • 1
  • Alexander James
    • 2
  • Jason F. Shogren
    • 3
  1. 1.Division of Economics and BusinessColorado School of MinesGoldenUSA
  2. 2.Department of Economics and Public PolicyUniversity of Alaska AnchorageAnchorageUSA
  3. 3.Department of EconomicsUniversity of WyomingLaramieUSA

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