Why PROPER Works

In a research paper published by Resources for the Future, the authors examine why PROPER (Program for Pollution Control, Evaluation and Rating), the successful environmental corporate disclosure program in Indonesia, works.

In 1995, Indonesia’s Environmental Impact and Management Agency (BAPEDAL) created PROPER to “honor and shame” companies into environmental compliance. The country’s command-and-control regulatory system wasn’t working due to lack of enforcement. The program publicizes company compliance with emission standards (good and bad) by assigning individual plants ratings – black, red, blue, green or gold. Ratings are assigned based on very simple, straightforward criteria. They are simple enough for the public to easily understand and to provide incentives for firms to move from one category to the next. It has been a great success and is being widely imitated.

What is behind the strong correlation between company environmental performance and public disclosure? The prevailing assumption is that companies respond to external pressure from the public and media. Based on a survey of from firms participating in the PROPER program, the authors found another important contributor: by participating in the program factory managers learned about their plant’s emissions and how to curtail them. The authors suggest that both internal feedback on performance – the environmental audit effect – and external pressure are necessary to motivate improved environmental performance. Simply providing new information to plant managers without making that information public may not be sufficient to motivate significant abatement.

“How Do Public Disclosure Pollution Control Programs Work?
Evidence from Indonesia,” Shakeb Afsah, Allen Blackman and Damayanti Ratunanda: [sorry this link is no longer available]

Background on PROPER: [sorry this link is no longer available]
Afsah, S., and J. Vincent. 1997. Putting Pressure on Polluters: Indonesia’ s PROPER Program. Case Study for Harvard Institute for International Development, Asia Environmental Economics Policy Seminar. Washington, DC: International Resources Group.