Impact of Corporate Culture on Environmental Performance

Costa, Mabel D.; Opare, Solomon

Abstract

We examine the impact of corporate culture on environmental performance using a sample of 7199 firm-year observations over the period of 2002–2018. We find that stronger corporate culture improves environmental performance, measured by the amount of toxic chemical release (TCR). Our result is both statistically and economically significant. We also show that cultural norms of innovation, quality and teamwork as well as a technology-oriented corporate culture have a greater impact on enhancing environmental performance. Further analyses show that managerial competence and strong institutional ownership moderate the relationship between corporate culture and environmental performance. We introduce the decomposition of expected and unexpected components of TCR and document that firms with a strong corporate culture implement strategies to reduce the unexpected component of TCR in addition to the expected component of TCR. Finally, we document that strong corporate culture and environmental performance improve firms’ financial performance. Our results are robust to several sensitivity tests and procedures to mitigate endogeneity and self-selection problems. From a practical point of view, our findings suggest that a firm’s culture can determine its environmental sustainability and ethical practices.

Citation

Costa, M. D., & Opare, S. (online). Impact of Corporate Culture on Environmental Performance. Journal of Business Ethics, https://doi.org/10.1007/s10551-024-05674-3

• Journal Article Type: Article
• Acceptance Date: Mar 19, 2024
• Online Publication Date: May 12, 2024
• Deposit Date: May 22, 2024
• Publicly Available Date: May 22, 2024
• Journal: Journal of Business Ethics
• Print ISSN: 0167-4544
• Electronic ISSN: 1573-0697
• Publisher: Springer
• Peer Reviewed: Peer Reviewed
• DOI: https://doi.org/10.1007/s10551-024-05674-3
• Public URL: https://durham-repository.worktribe.com/output/2455728
• Additional Information: Received: 15 March 2023; Accepted: 19 March 2024; First Online: 12 May 2024