ABSTRACT This study explores the effect of corporate social responsibility (CSR)‐related compensation or CSR contracting where executive compensation is tied to environmental, social, and governance (ESG) targets on waste management strategies. It also investigates the role of eco‐innovation in shaping CSR contracting‐waste management relationships. Using an international panel of 10,886 firm‐year observations across 43 countries from 2011 to 2022, we show that CSR contracting is associated with decreased waste generation and increased waste recycling. By tying executive compensation to sustainability metrics, firms create stronger incentives for managers to prioritize resource efficiency and circular economy practices. This effect is accentuated in environmentally innovative firms indicating that CSR contracting is particularly effective when embedded within a broader organizational commitment to innovation strategies. Further analyses show that the effect is also stronger for hazardous waste, in firms with CSR committees and following the implementation of sustainable development goals (SDGs) in 2015. This study provides insights into CSR contracting effectiveness and highlights its potential to complement regulatory policies. The results have implications for corporate boards, policymakers, and stakeholders aiming to embed sustainability into strategic and managerial systems.
Boukattaya et al. (Fri,) studied this question.