Exploring the role of language in shaping corporate environmental practices

Abstract

While heterogeneity in languages has been shown to explain the variation in environmental behavior at the individual and country levels, we do not know whether these language effects also shape the behavior of firms. To address this gap, our study examines the relationship between corporate environmental behavior and language structure around the world. Using a large dataset of 26,390 observations over the 2007–2015 period, we find that firms’ environmental damages are lower where speakers are required to grammatically distinguish between future and present events (i.e., strong future time reference). Our findings suggest that perceiving future events as more distant and precise in time may help corporate managers better understand the consequences of environmental damages and take actions to reduce their impact. Language structure therefore appears to be a determinant of corporate environmental performance.