Actual Environmental Performance Research Articles

Identifying exaggeration in ESG reports using machine learning techniques

Exaggeration is a specific way in which companies potentially overstate certain aspects of their actual environmental performance, strategically disclosing positive information about their environmental performance. This research aims to identify instances of exaggerated information within environmental, social, and governance (ESG) reports by employing machine learning techniques. We crawled 594 ESG reports and employed a variety of machine learning algorithms to identify instances of exaggeration. Through the cross-validation, we found that random forest exhibits the best performance in predicting exaggeration and ridge regression demonstrates superior performance in predicting the exaggeration scores. A significant contribution of our study is the development of an exaggerated thesaurus tailored specifically to this domain. Ultimately, our study lays a foundation for further investigations into addressing the impact of exaggerated information in ESG reporting.

Bright is the moon over my home village: Chinese local executives and environmental decoupling

This study investigates whether and how local executives' hometown identities affect enterprises' environmental decoupling. Environmental decoupling refers to the discrepancy between a company's environmental sustainability promises and its actual environmental sustainability performance. Based on the place attachment theory, we expect local executives to engage in fewer corporate environmental decoupling actions than non-local executives. Using the annual data for Chinese companies listed on the A-share market between 2009 and 2021, we tested this hypothesis. Our findings reveal that local executives' sense of identification and belonging to their hometowns lessens the likelihood of businesses engaging in environmental decoupling. This result is more pronounced for companies located in regions with low population mobility, a slow marketization process, strict environmental regulations, and companies with high financing constraints and low corporate governance levels. Furthermore, we find that local executives decrease underreporting of the environmental performance of firms, thereby reducing firms' environmental decoupling. Following several robustness tests, the primary conclusions remain valid. This study offers new evidence that executive characteristics affect company sustainability from an environmental performance decoupling standpoint. It shows that identifying the executives' hometowns motivates them to uphold a sincere commitment to corporate social responsibility.

Evaluation of Environmental and Social Safeguards Performance Assessment Method using Corrective Action Plan Compliance Rate in Financing and Investment

This study evaluates the environmental and social safeguards (ESS) performance assessment method of PT Sarana Multi Infrastruktur (Persero) (PT SMI), focusing on the corrective action plan (CAP) compliance rate in financing and investment. Despite the utility of the compliance rate in monitoring adherence to financing agreements, it often inaccurately reflect actual environmental and social performance due to its inherent ambiguities. This research employed a qualitative method, employing observations of 146 active financing facilities and equity investment, surveys, and discussions with PT SMI’s ESS personnel. The study reveals that projects with higher CAP compliance rates may still have unresolved issues, while projects with fewer CAPs can be unfairly categorized as underperforming. To address these limitations, the study proposes a new, comprehensive framework that incorporates multiple variables to better capture ESS performance. This approach aligns with sustainable practices, enhances legitimacy, and meets stakeholder expectations more effectively. In addition, the proposed framework offers opportunities for incentives or disincentives based on ESS performance. Future research should focus on developing and validating this new framework to ensure accurate assessments of ESS performance in financing and investment activities.

THE MITIGATING FACTORS OF GREENWASHING : A SYSTEMATIC LITERATURE REVIEW

Greenwashing is a strategy carried out by companies by presenting an image of good sustainable performance but hiding their actual environmental performance. Greenwashing harms investors and consumers. Therefore, this research will examine mitigation factors that can minimize the occurrence of greenwashing practices. This research method uses a Systematic Literature Review (SLR) with a database sourced from Scopus as many as 21 articles that are relevant to the topic of this study. It is hoped that the final results of this research will be useful in making policies related to greenwashing and as a basis for a development model for researchers related to greenwashing topics in the future.

Symbol or substance? Environmental regulations and corporate environmental actions decoupling

Our paper focuses on how firms strategically respond to environmental regulations on environmental actions. Given the greater discretion in environmental information disclosure and relaxed environmental regulations enforcement in China, we propose that firms tend to say more while do less to obtain environmental legitimacy, namely corporate environmental actions decoupling. Using a sample of 5422 Chinese firm-year observations over the period of 2012–2018, we document that stringent environmental regulations contribute to a significant inconsistency between environmental reporting and actual environmental performance. Moreover, we demonstrate that this inconsistency is exacerbated when firms possess greater bargaining power and fewer financial resources. Our paper not only advances the understanding of how firms navigate external regulations by examining the tradeoffs between symbolic and substantive actions, but also sheds light on factors influencing decoupling/greenwashing practices from the perspective of government-business relations in China, and potentially in other emerging economies.

The power of the CEO and environmental decoupling

AbstractThis paper examines the impact of the power of the chief executive officer (CEO) on environmental decoupling. We define environmental decoupling as a gap between firm's claims about the environmental sustainability and actual environmental sustainability performance. Based on the managerial power theory, we argue that powerful managers are more involved in environmental decoupling and use environmental reporting in a more opportunistic manner than their less powerful peers. We analyse a dataset of 4576 firm‐year observations of US‐listed firms for the period 2002–2017. We find that powerful CEOs decouple firm's environmental performance from environmental reporting. These findings are robust to a battery of analyses and show that powerful CEOs do not show true commitment towards corporate environmental sustainability. The results provide important implications for investors, policymakers and fund managers. Useful future research recommendations are also provided to guide the research in the domain of environmental sustainability.

Can user reviews on online shopping websites contribute to user-involved green product innovation: a case study of household refrigerators

ABSTRACT User reviews (URs) have been regarded as a novel way of promoting user-involved green product innovation (GPI) in theory. However, the actual relationships between URs and GPI are still underexamined. This study adopted the method of content analysis to exemplify the effectiveness of user reviews on online shopping websites (OSURs) in user-involved GPI. Specifically, 62,909 effective OSURs on 24 green household refrigerators and 43 conventional refrigerators were collected and analyzed. The results show that 8.41% of all the pre-processed OSURs contain green information, which cannot be a dominant information source for promoting GPI. Yet, the identified green reviews (GRs) are still valuable for developing and diffusing GPI. On the one hand, three green topics related to energy efficiency, environmental friendliness, green materials and technologies are intensively generated, massive user experiences can objectively reflect the actual environmental performance of existing products. On the other hand, GRs account for 12.62% and 6.19% of all the OSURs on green refrigerators and conventional refrigerators, respectively. Users prefer to generate positive rather than negative GRs on green refrigerators. The implementation of GPI has a positive impact on OSURs in return. Firms can actively collect and analyze OSURs of extant green products, thus promoting the green innovation of their own products. This study adds to the literature of user-involved GPI by exploring the actual relationships between OSURs and GPI. A practical analysis framework and valuable implications are also proposed to advance GPI, green growth at firm level and sustainable development at social level.

Improving environmental sustainability in agri-food supply chains: Evidence from an eco-intensity-based method application

Focal companies in food supply chains face increasing pressure to produce food sustainably and lower the environmental impact across their supply chain (SC). Although governance mechanisms to manage suppliers and sub-suppliers have been established, focal companies in the food sector still lack effective tools to capture the actual environmental sustainability performance of their multi-tier SCs, which could support them to decrease the environmental impact associated to their products.This work thus aims to showcase how assessing the environmental sustainability performance of a multi-tier food SC made up by SMEs can support decisions in order to drive evidence-based green improvements in the SC operations. A low-input eco-intensity-based multicriteria performance assessment method was applied to a bread SC, adopting a longitudinal case study design, to evaluate its applicability for decision-making in an operating context.Following the identification of environmental hotspots along the SC, targeted green operational improvements were implemented within individual organisations, resulting in a decrease of the eco-intensity values both at the targeted SC tiers and at the overall SC level. These results demonstrated that the method was able to support the improvement of the SC environmental performance.This work is the first longitudinal study in the multi-tier green supply chain management (GSCM) area. It contributes to the multi-tier food GSCM and GSCM performance assessment fields by demonstrating how the integration of environmental sustainability performance assessment methods and SC governance mechanisms can effectively support across time the deployment of GSCM within food SCs, while adopting an indirect SC management approach. Finally, the application of the method within a supply chain consisting of SMEs, inexperienced in sustainability assessment, demonstrates its potential to achieve SC-wide sustainability assessment and contributes to the wider GSCM field by providing insights on the implementation of GSCM in supply chains dominated by SMEs.

Corporate Social Responsibility Disclosure, Market Supervision, and Green Investment

ABSTRACT As a crucial business practice, corporate social responsibility (CSR) has attracted the attention of companies and market participants worldwide. This study examines the effects of CSR disclosure on green investment and analyses whether effects vary during China’s stock market crash. The results reveal a mismatch between green investment and CSR disclosure and that the market supervisions act as a moderator. Furthermore, we observe that the nature of CSR disclosure as a self-interested tool becomes highly pronounced during extreme risk events. This observation suggests that a company facing downside market risk will compromise many of its environmental performances. Accordingly, we propose improved measures for regulators and investors in response to the gap between CSR disclosure and actual environmental performance.

Do environmental and emission disclosure affect firms’ performance?

This study analyzes the relationship between firms’ financial performance and their environmental performance, with a particular focus on greenhouse gas-intensive industries. Using financial and environmental data of international listed companies from 2011 to 2017, the financial impact of environmental performances was estimated, measured with multiple indicators that take into account disclosure aspects. The analysis was conducted across different industry aggregation levels, namely the entire group of industries, the Global Industry Classification System (GICS) Industry Group, and the GICS Industry. We found that environmental disclosure indexes are mostly not significant after controlling for environmental performance, suggesting that the effect of environmental disclosure on corporate financial performance is limited, if not altogether absent. In contrast, environmental performance seems to play an important role, and that holds even for high-emitting companies. Overall, our results were consistent with the interpretation that financial markets effectively consider the actual environmental performance of listed companies and, only to a minor extent, the quality of their disclosure.

Detecting Patterns in Energy Use and Greenhouse Gas Emissions of Cities Using Machine Learning

Cities are expected to play a major role in managing climate change in the coming decades. The actual environmental performance of urban centres is difficult to predict due to the complex interplay of technologies and infrastructure with social, economic, and political factors. Machine learning (ML) techniques can be used to detect patterns in high-level city data to determine factors that influence favourable climate performance. In this work, rough set-based ML (RSML) is used to identify such patterns in the Sustainable Cities Index (SCI), which ranks 100 of the world’s major urban centres based on three broad criteria that cover social, environmental, and economic dimensions. These main criteria are further broken down into 18 detailed criteria that are used to calculate the aggregate SCI scores of the listed cities. Two of the environmental criteria measure energy intensity and greenhouse gas (GHG) emissions. RSML is used to generate interpretable rule-based (if/then) models that predict energy utilisation and GHG emissions performance of cities based on the other criteria in the database. Attribute reduction techniques are used to identify a set of 7 non-redundant criteria for energy use and 9 non-redundant criteria for GHG emissions; 6 criteria are common to these two sets. Then, RSML is used to generate rule-based models. A 10-rule model is determined for energy intensity, while an 11-rule model is found for GHG emissions. Both models were reduced further by eliminating rules with weak generalisation capability. A key insight from the rule-based models is that social, environmental, and economic attributes are associated with energy intensity and GHG emissions due to indirect effects.

Does the resource-dependent motivation to disclose environmental information impact company financing? Evidence from renewable energy companies of China

Corporate environmental information disclosure systems are important for controlling pollution caused by corporate activities. However, different motives associated with environmental information disclosure have different influences on the financing of companies. This paper adopts renewable energy companies instead of high pollution industries as a research object. The study analyzes the resource-dependent disclosure motivation of renewable energy companies, and the impact of environmental information disclosure on the scale and cost of direct and indirect financing. The results show the following. First, renewable energy companies in China have a resource-dependent motivation to disclose environmental information, with a gap between the level of environmental information disclosure and their actual environmental performance. Second, renewable energy companies may obtain more direct financing amount and lower indirect financing costs, but cannot obtain lower direct financing costs and more indirect financing amount by improving the level of environmental information disclosure with the resource-dependent motivation. Third, there are differences in the specific incentives for environmental information disclosure among the Eastern, Middle, and Western regions of China. The government needs to standardize the detailed rules and standards of the corporate environmental information disclosure system, and improve the environmental protection awareness and the implementation of green credit in the Western region.

Corporate Environmental Disclosure Quality and Impression Management Theory in Nigeria

Corporate environmental disclosure acts as a means of providing environmental information to fulfill firms’ accountability relationship with stakeholders and to express firm’s environmental awareness. However, the level of environmental disclosure by Nigerian firms is still low and the relationship with actual environmental performance is still inclusive. This study examines this phenomenon using the impression management theory. The theory asserts that firms provide environmental information as an attempt to control the impression of the public and the stakeholders. The sample of the study comprises of firms listed on the Nigerian stock exchange as at 31 st December, 2020. GRI disclosure index is used in collecting environmental disclosure data from the annual reports of the sampled firms. The environmental performance (EP) data was collected from the ministry of environment website. The result of this study reveals that EP does not have any influence on companies’ disclosure of environmental information. The result of the study provides motivation for the NSE to review all existing CSR reporting framework so as to provide a guidance to firms to prepare a more objective voluntary environmental disclosure.

Corporate climate‐related voluntary disclosures: Does potential greenwash exist among Australian high emitters reports?

AbstractThis study examines the issue of greenwashing among corporate high emitters subject to government scrutiny. To do so, we investigate the relationship between the actual environmental performance, measured as carbon emissions, of companies subject to the Australian National Greenhouse Energy Reporting Act 2007 (NGER) and their climate‐related voluntary disclosures. To measure climate‐related disclosure, we construct a climate‐related disclosure index based on four prominent frameworks and score corporate report content against that Index. Using a sample of 150 companies with NGER emissions data for Years 2016 and 2017, a period that precedes the issuance of recommendations for disclosure by the Task Force on Climate‐Related Financial Disclosure (TCFD), our regression results show a disappointingly low level of climate‐related disclosure by most companies. We also find a negative relationship between climate‐related disclosure and 1‐year lagged environmental performance among companies exhibiting a year‐on‐year rise in carbon emissions. That is, our findings provide evidence of potential greenwashing by poor environmental performers, presumably to change negative perceptions by stakeholders, as predicted by socio‐political theories. In contrast, we find no evidence of greenwashing among companies experiencing a year‐on‐year decrease in emissions.

Reflections and Suggestions on China's Sponge City Construction

This article first introduces the development of China’s urban water system management and the Sponge City construction. Generally speaking, China’s urban water system management has progressively turned into addressing water problems with integrated solutions, with the focus shifting from problem finding towards objective-setting and emphasizing theoretical significance. Meanwhile, the evaluation criterion has adopted more indicators valuing the quality and efficiency of projects’ actual performance, rather than a rough quantitative measurement. Then this article addresses the potential reasons for the public questioning China’s Sponge City construction since the implementation of pilot projects in 2015, such as the misunderstanding of its connotation, public perception of the projects’ actual environmental performance, and construction quality. Only by recognizing the reality and identifying difficulties and primary goals, can the targeted and systematic solutions solving on-site water relevant problems and meeting public needs be proposed. In response, the authors put forward the major difficulties in future Sponge City construction promotion, which include 1) coordinating the Sponge City construction and urban storm water management to facilitate onsite runoff retention and address urban waterlogging problems; 2) establishing a whole-process management system for China’s Sponge City construction projects that involves a series of stages; 3) identifying the accountability and responsibilities of the administration, design, and construction parties; and 4) updating knowledge and technical perception. Furthermore, the authors emphasized the importance of expertise collaboration and talent training to provide professionals with ability in practice, in-depth inter-professional and technical coordination, and active learning. Finally, the authors encouraged the key topics in the future—introduction of new market mechanisms such as storm water billing system, optimization of the current policy mechanism, and institutionalization of Sponge City construction.

Setting ambitious goals for agriculture to meet environmental targets

Setting ambitious goals for agriculture to meet environmental targets

Editorial Introduction: Advances in Theory and Practice of Policy Research from National to Local Level

Editorial Introduction: Advances in Theory and Practice of Policy Research from National to Local Level

How do external conditions affect the design of local governments' sustainability strategies?

AbstractLocal governments nationwide have been adopting a variety of sustainability practices in the absence of strong federal guidance. The collection of these practices, which differ in design, forms the local government's sustainability strategy. Some local governments may develop a more focused sustainability strategy to achieve more predictable environmental benefits around a narrower array of environmental issues. By contrast, other local governments are developing a more comprehensive sustainability strategy that is more broadly focused to address complex, interconnected environmental issues. However, the external conditions that give rise to these different strategies is not well understood. Drawing on data for more than 950 U.S. municipal governments, this study provides important evidence that local governments' comprehensive sustainability strategies are influenced more by their community contituents and external environmental settings, with greater pressures in particular from constituents in new economy industries and environmental NGOs. These strategies are also more strongly related to higher disaster risk in the external environmental setting than more focused sustainability strategies. These findings broaden our understanding about why local governments' sustainability strategies differ in their design, which may provide a starting point for understanding how different sustainability strategies relate to actual environmental performance outcomes.

Impact of environmental performance and policy on firm environmental reputation

PurposeThis study investigates the impact of corporate environmentalism on corporate environmental reputation. Corporate environmentalism comprises both environmental performance and environmental policy, thus distinguishing a firm's actual environmental performance from the intent of its environmental policy. The moderating effect of advertising is also investigated.Design/methodology/approachThe study derives four hypotheses from the literature and tests these by means of a Tobit model and a unique combination of databases.FindingsResults show a link between environmental policy and corporate environmental reputation, but not between environmental performance and corporate environmental reputation. Additionally, results reveal the moderating effect of advertising to be negative, suggesting that advertising contributes only marginally toward improving corporate environmental reputation.Originality/valueThis study is one of the first to investigate the complementary effect of environmental management, environmental policy and advertising on corporate reputation.

A Case Study of LightStay (2010–2017)—Hilton’s Corporate Responsibility Management System

This paper focuses on Hilton’s proprietary sustainability performance measurement system (SPMS) called LightStay (2010–2017). It draws on the case-study method and relies on three principal sources of information: in-house documents, a questionnaire completed by users of LightStay and interviews conducted with external experts. Specifically, the paper traces the system’s evolution and highlights its distinctive features, exploring the challenges and trade-offs related to the design and workings of an SPMS in a hotel multinational. The study shows, among other things, how LightStay, using an internationally approved methodology of data collection, calculation, metrics and benchmarking, compares a hotel’s predicted and actual environmental performance. It concludes by arguing that LightStay is a holistic platform that not only integrates precise measurement of the firm’s environmental effects with its business operations and strategic goals but also acts as a repository of sustainability knowledge and a facilitator of organisational learning. Its value and originality lie in providing unique insights into the workings of a proprietary SPMS at a nonanonymised hotel company.