The Israeli Childcare Experiment and Its Implications for ESG Compliance in Construction - A Case Study.

Imagine for a moment that you are the manager of a day-care center. You have a clearly stated policy that children are supposed to be picked up by 4 P.M. But very often, parents are late. The result: at day's end, you have some anxious children and at least one teacher who must wait around for the parents to arrive. What to do?

A pair of economists who heard of this dilemma—it turned out to be a rather common one—offered a solution: fine the tardy parents. Why, after all, should the day-care center take care of these kids for free?

The economists decided to test their solution by conducting a study of ten day-care centers in Haifa, Israel. The study lasted twenty weeks, but the fine was not introduced immediately. For the first four weeks, the economists simply kept track of the number of parents who came late; there were, on average, eight late pickups per week per day-care center. In the fifth week, the fine was enacted. It was announced that any parent arriving more than ten minutes late would pay $3 per child for each incident. The fee would be added to the parents' monthly bill, which was roughly $380.

Outcome: After the fine was enacted, the number of late pickups promptly doubled. As soon as the parents had the option to pay a small fine and avoid the guilt of making a teacher wait, they took it en masse. The incentive had plainly backfired.

Takeaway: This study suggests that effective methods of changing behaviors should combine economic, moral, and social incentives.

Now, let’s connect this example to the implementation of ESG (Environmental, Social, and Governance) standards at construction sites. Can simply imposing fines for non-compliance solve the problem, or might it increase non-compliance as people find ways to easily avoid serious repercussions by paying a penalty?

The question is how to implement ESG at construction sites so that people take it seriously,

recognizing its importance for the sustainability of the environment, society, and governance.

What kind of implications should the government impose to ensure compliance before a construction project initiates?

Here are some ideas:

1. Stop the Project Permanently: If a construction site fails to comply with ESG standards, the project could be halted permanently. This would send a strong message that non-compliance is not tolerated.

2. Levy Heavy Penalties: Instead of nominal and affordable penalties, impose significantly higher fines. For example, the government could take inspiration from wrong parking penalties in Mumbai at some critical places where heavy fines are imposed to deter violations.

3. Mandatory Compliance Audits: Regular and mandatory compliance audits should be conducted, with severe consequences for failing to meet standards.

4. Public Accountability: Publish the names of non-compliant companies and projects, making their shortcomings known to the public, which could affect their reputation and future business opportunities.

5. Incentives for Compliance: Offer incentives for companies that consistently meet or exceed ESG standards, such as tax breaks, recognition awards, or preferred status in government contracts.

The goal is to create a framework where compliance is not just an economic decision but also a moral and social imperative.

Please share this article widely to raise awareness and encourage governments to start thinking about robust solutions for enforcing ESG compliance.

Let's work together to make ESG a fundamental part of our construction industry, ensuring a sustainable future for all.