The impact of environmental innovation and national culture on ESG practices: a study of Latin American companies

Abstract

PurposeThis paper aims to examine how environmental, social and governance (ESG) practices are influenced by environmental innovations and how cultural dimensions moderate this interaction in Latin American companies.Design/methodology/approachIn this paper 157 companies from 6 Latin American countries were studied between 2010 and 2021, with a total of 1,204 observations. Data were collected from Refinitiv Eikon®, and results were generated using ordinary least squares regression, with country and year as controls.FindingsESG performance is higher in companies that invest in environmental innovation; innovation positively affects individual ESG factors; and masculinity, individualism, indulgence and power distance positively or negatively moderate the relationship between innovation and ESG performance, as well as environmental and social dimensions.Research limitations/implicationsOur findings contribute to the body of knowledge on sustainable practices in different cultures. We draw the attention of standard setters to the impact of innovation and culture on ESG practices in different countries.Practical implicationsBetter understanding of how environmental innovation can mitigate inequality, poverty and environmental issues in Latin America, promoting equitable development and environmental preservation.Social implicationsLatin American countries show significant levels of poverty, social and productive heterogeneity, and deficiencies in sustainable practices. Therefore, providing information on innovation as an incentive for better sustainable policies can promote these practices.Originality/valueOur study fills a gap by examining the specific influence of environmental innovation on ESG performance, particularly through its interactions with cultural dimensions, in a sample of Latin American firms.