Environmental Corporate Governance Practices: An Analysis of Structural Relations

Abstract

The aim of this study is to analyze the structural relations between strategy, environmental performance and disclosure, in view of the lack of research on these endogenous relations. To analyze these relations, an environmental governance proxy was developed for Brazilian companies, which consists of five dimensions. Hence, from an economic perspective, a trend is expected for companies to disclose more information and maintain an environmental governance structure, so as to avoid or reduce potential political costs. Using the structural equation technique, 573 Brazilian companies were analyzed. According to the results, the Brazilian companies’ mean compliance level with environmental governance practices is 49.2%. In addition, there is evidence of a positive association between the governance structure and the environmental management system (GSEM) and (1) environmental performance (EP) and (2) environmental disclosure level (DISC). In addition, the level of conflict of interests positively affects disclosure. The results demonstrate that the latent variables GSEM and EP exert a direct and indirect positive effect on DISC. In other words, companies with a more structured environmental management system have obtained better performance indicators and, consequently, are more encouraged to disseminate environmental information and reduce political costs.