Signaling Environmental Commitment to stakeholders: Creating Corporate Environmental Reputation

Abstract

Firms earn corporate environmental reputation when the stakeholders interpret that the firm is able to create value in the environmental dimension. Although the relevance of corporate environmental reputation has been shown in the literature, little is known about its development to date. Previous research examining its construction has mainly focused on the role of corporate environmental disclosure. In contrast to these studies, we focus on how other substantive proactive environmental practices (signals) can have a positive influence on corporate environmental reputation and, how these practices have a moderating effect on the relationship between disclosure and corporate environmental reputation. We test these relationships using a sample of 160 North American companies. Our results show that in order to improve corporate environmental reputation it is not enough to disclosure, but it is necessary that the company sends additional signals to convince stakeholders that it effectively is creating value in the environmental dimension.