Environmental Legitimacy Research Articles

Reinvigorating radioactive wastewater to the ocean: Investigate the effect of board diversity on environmental corporate social responsibility in the context of Japan

The discharge of radioactive wastewater into the eastern ocean from the Fukushima Daiichi nuclear plant, a decision that comes from the Japanese government and TEPCO (Tokyo Electric Power Company), has subjected Japanese firms to reputational damage risks and increasing environmental legitimacy pressure from multiple stakeholders in environmental corporate social performance (ECSR) than ever. In the present research endeavor, we draw upon the existing body of scholarly literature pertaining to gender-diverse board and business ethics as a critical element of steering ocean and coastal environmental management. This undertaking aims to provide original insights into the factors influencing board gender diversity (BGD) and its subsequent impact on ECSR within the specific context of Japan. Grounded in the theoretical framework of legitimacy theory, we put forth a conceptual model designed to elucidate the relationship between BGD and ECSR. Additionally, this study delves into the moderating influence of financial constraints between BGD and ECSR. To empirically examine our conceptual framework, we collected data from two primary sources: Toyo Keizai Inc. and Nikkei Inc. The findings of our investigation reveal a statistically significant positive relationship between BGD and ECSR performance. Furthermore, our results indicate that financial constraints serve to intensify the association between BGD and engagement in ECSR initiatives. Finally, we corroborate the robustness of our findings through various extensions of our analytical models.

Environmental Justice and Corporate Green Innovation: The Role of Legitimacy Pressures

This study examines the impact of environmental judicial reinforcement on green technology innovation, constructing a progressive difference-in-differences model using firm- and city-level panel data from 2006 to 2019 and taking the successive establishment of environmental courts by the Intermediate People’s Court in Chinese prefectural-level cities as a quasi-natural experiment. We find that establishing environmental courts in China promotes green technology innovation. This finding still holds after a series of robustness tests such as selected fixed-effects Poisson model regression. The mechanism analysis suggests that environmental courts primarily promote increased green innovation output by heavily polluting firms by exerting more substantial pressure regarding environmental legitimacy. The heterogeneity analysis reveals that the positive impact of the establishment of environmental courts on green technology innovation is more pronounced in water pollution-intensive industries and areas with high public participation and media attention. Our findings provide new insights into how environmental justice affects firms’ green innovation and validate the Porter hypothesis. Also, they serves as a reference for constructing environmental courts in China and other policy jurisdictions that may be interested.

Substantive or symbolic ? The strategic choice of sustainable environmental strategy for enterprises induced by the new environmental protection law

AbstractThe new “Environmental Protection Law” (abbreviated as NEPL) holds milestone significance for the construction of China's ecological legal system. However, evidence regarding the impact of NEPL on sustainable environmental strategy (abbreviated as SES) still lacks empirical analysis. This study aims to examine the mechanisms and boundary conditions through which the NEPL influences SES. Utilizing a difference‐in‐differences approach, an empirical analysis is conducted on the data of listed companies on the Shanghai and Shenzhen A‐shares from 2008 to 2021. The findings are as follows: (1) NEPL has significantly promoted both the substantive environmental strategy (abbreviated as SUB) and symbolic environmental strategy (abbreviated as SYM) of heavily polluting enterprises. Compared with SYM, the impact of NEPL on SUB is more significant. (2) Analyst coverage plays a significantly positive moderating role in the relationship between NEPL and SUB, while managerial myopia plays a significantly positive moderating role in the relationship between NEPL and SYM. (3) Environmental legitimacy pressure exerts a mediating effect on the relationship between NEPL and SES. The research findings enrich existing theories related to strategic choice and environmental policy under government intervention and provide policy recommendations for enterprises to achieve sustainable development in the context of NEPL.

Can Industry 4.0-enabled smart manufacturing help firms in emerging economies move toward carbon-neutrality?

The manufacturing industry plays a pivotal role in the economic growth of all countries. Most manufacturing firms consume large amounts of energy and fail to adopt sustainable practices. However, Industry 4.0 is expected to help firms move toward carbon neutrality. Hence, this study focuses on 10 manufacturing firms in India and the opinions of industry experts to analyze the factors that motivate organizations to implement carbon neutrality. First, the driving factors of the shift toward carbon neutrality were investigated and ranked using the fuzzy analytic hierarchy process. Fuzzy interpretive structural modeling was then used to explain the interrelationships among the identified factors, providing a seven-level hierarchy model with 14 factors. Focusing on “Sustainable Business Value”, “Environmental Legitimacy” and “Government Policies” can help managers to develop strategies that are both socially responsible and profitable. These key findings have significant strategic implications for industry and policymakers.

Promoting blockchain technology in low-carbon management to achieve firm performance from a socio-economic perspective: Empirical evidence from China

Blockchain technology is a disruptive innovation that can accelerate carbon neutrality while maintaining business growth. However, its full potential has yet to be fully understood due to the complexity of its technical and socio-environmental characteristics. Drawing on socio-technical theory, this study aims to explore the main antecedents and their influencing mechanisms on blockchain-based low-carbon emission management, as well as investigate whether reducing carbon emissions leads to improved firm performance. Using data from 395 online respondents recruited from Chinese companies, the results of PLS-SEM indicate that cost-benefit efficiency, socio-environmental competitive pressure, and environmental legitimacy positively influence both the basic and auxiliary adoption of blockchain in low-carbon emission management. Additionally, relative advantage and regulatory policy partially influence the adoption of blockchain, while technology readiness has no significant effect on either basic or auxiliary adoption. Furthermore, both the basic and auxiliary adoption of blockchain contribute to carbon emission reduction and improve firm performance (i.e., operational, economic, and social performance). The findings of this study will contribute to the growing literature and managerial practice regarding blockchain technology and carbon neutrality.

Environmental protection taxes and green productivity: Evidence from listed companies in China

Enforcing an environmental protection tax is a pivotal institutional measure for addressing environmental and climate change challenges and marking a substantial advancement in ecological development. This study aims to explore the influence of environmental protection taxes on the "green" productivity of the manufacturing industry through an analysis of Chinese listed companies. Initially, the Dynamic Slacks-Based Measure (DSBM) method is employed to estimate the "green" production efficiency levels of 175 listed companies in China from 2016 to 2020. Subsequently, by aligning pollution tax standards issued by local governments and relevant environmental protection departments with microlevel data from the CSMAR database, wind database, listed company annual reports, and social responsibility reports, the sample was refined to 833 data points. Using the implementation of the environmental protection tax policy in 2018 as a natural experiment, a Difference-in-Differences (DID) model is applied for empirical testing. The empirical results reveal a counterintuitive negative correlation between the environmental protection tax and the "green" productivity of companies, contradicting the predictions of the Porter hypothesis. This suggests that stringent environmental regulations hinder the development of green technologies. The adverse impact of environmental protection taxes on "green" productivity is attributed to heightened environmental legitimacy pressures and increasing environmental uncertainty risks companies face. Further exploratory analysis indicated that the digital economy and green finance have a positive moderating effect, significantly mitigating the negative impact of environmental protection taxes on companies' overall "green" productivity. Consequently, dynamically optimizing environmental tax policies is imperative to alleviate companies' environmental legitimacy pressures and uncertainty risks. Additionally, capitalizing on the opportunities the digital economy presents and leveraging green finance policies have emerged as effective strategies for realizing the Porter effect of environmental protection taxes.

Analyst coverage and manufacturing enterprise green transition: An empirical study based on Chinese enterprises.

This study used the entropy weight method to develop an index of green transition and empirically examined the influence of analyst coverage on green transitions by manufacturing enterprises in China. We examined A-share listed manufacturing firms from 2010-2020, using patent data, media reports from Chinese Research Data Services, and other data from the Cathay Capital Database. After excluding cases with missing data, our final sample comprised 16,576 observations. The following conclusions were drawn. First, analyst coverage significantly contributed to green transition. Second, the analysis of the impact mechanism showed that improving information transparency, weakening principal-agent conflict, and increasing environmental legitimacy pressure are the paths through which analyst coverage affects manufacturing's corporate green transition. Third, the effect of analyst coverage was stronger for large-scale and state-owned manufacturing companies.

Beyond environmental actions: How environmental regulations stimulate strategic-political CSR engagement in China?

Departing from conventional approaches of environmental actions in response to stricter environmental regulations, our paper leverages the rent-seeking theory to propose that firms engage in strategic-political corporate social responsibility (CSR) activities to obtain environmental legitimacy, which complements the local government's duty of social welfare provision. By selecting the enforcement of China's new Environmental Protection Law (NEPL) as an exogenous shock, our standard difference-in-difference model confirms that NEPL has significantly increased the strategic-political CSR engagement, and it creates a shelter against environmental penalty. The findings remain robust when employing the continuous difference-in-difference model and the triple difference model to relieve concerns regarding comparability between the treated group and control group. Further, the positive effect is attenuated by sound financial condition and strong law enforcement. Our paper extends the understanding of the reciprocal relationship between regulated firms and local governments during the environmental transition process in China, and, potentially, in other developing countries with similar decentralization system and government intervention.

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.

Economic policy uncertainty and firm green commitment

As coercive regulatory control amplifies, environmental responsibility is one of the most important dimensions in stakeholder demands for corporate social responsibilities. This study interprets green commitments as the approach adopted by firms to seek environmental legitimacy and stakeholder recognition in situations of high environmental uncertainty in the external environment. Then, this study delves into the effects of economic policy uncertainty (EPU) on firm-level green commitment using data of 1914 firms in the A-share market. Specifically, the evidence illustrates that: (1) EPU has a significant positive effect on firm green commitment; (2) R&D investment has a partial intermediary effect between EPU and firm-level green commitments; (3) EPU has a stronger impact on green commitments for non-SOE, manufacturing, and non-heavily polluting firms than others; and (4) positive commitments under uncertainties can improve firm resilience in swaths of economic output, supply chain financing, and debt accessibility.

Confucianism and corporate environmental protection investment: Evidence from heavily polluting listed companies in China

AbstractThis study investigates the influence of Confucianism on corporate environmental protection investment among heavily polluting companies in China from 2013 to 2020. We find that Confucianism is positively associated with corporate environmental protection investment. This correlation is mainly reflected in preventive environmental protection investment. Mechanism tests reveal that Confucianism promotes corporate environmental protection investment by increasing environmental legitimacy pressure. Additionally, in areas with a high environmental regulation level, Confucianism plays a stronger role in promoting corporate environmental protection investment. These findings illustrate the factors that influence corporate environmental protection investment and provide insights into the impact of Confucianism on corporate behavior.

Top management team characteristics, technological innovation and firm's greenwashing: Evidence from China's heavy-polluting industries

Greenwashing has become an important strategy for firms to cope with the huge pressure brought by environmental sustainability and win environmental legitimacy. Based on the upper echelon theory and legitimacy theory, this study uses the grounded theory research method to develop the scale of firm's degree of greenwashing specialized with Chinese characteristics, and empirically tests the relationships among top management team (TMT) characteristics, technological innovation, and firm's greenwashing. The results show that TMT education level has a significantly negative effect on firm's greenwashing, while TMT functional background diversity has a significantly positive effect on firm's greenwashing. Technological innovation has a significantly negative impact on firm's greenwashing, and significantly moderates the relationships between TMT age and firm's greenwashing and between TMT functional background diversity and firm's greenwashing, respectively. Our findings provide references for managers and policy makers to understand the influence of TMT characteristics on firm's greenwashing as well as the effective weakening effect of technological innovation on firm's greenwashing.

Does the greening of the tax system promote the green transformation of China’s heavily polluting enterprises?

Climate change and pollution are the major environmental problems facing the world today. The emission of industrial pollution is not only related to the development of low carbon and green economy but also affects the ecological environment and climate change of human beings. The greening of the tax system is an important reform to help China's green development. From the perspective of internal green innovation and external legal pressure of heavily polluting enterprises, this paper discusses the impact mechanism of implementing the greening of the tax system on the green transformation of heavily polluting enterprises in China and uses DID model to conduct a quasi-natural experiment on the green transformation of heavily polluting enterprises in China. This paper finds that the implementation of the greening of the tax system has a significant impact on the green transformation of China's heavily polluting enterprises; the greening of the tax system policy realizes the "win-win" situation of green environmental governance and the development of heavily polluting enterprises through green technology innovation and forces heavily polluting enterprises in China to conduct environmental protection through the environmental legitimacy pressure. The effect of the greening of the tax system policy has obvious heterogeneity: The greening of the tax system has a more obvious improvement effect on heavily polluting enterprises with low and high market concentration. Compared with state-owned holding enterprises, non-state-owned holding enterprises are more significantly affected by the greening of the tax system. The positive impact of the greening of the tax system on the green transformation of heavily polluting enterprises is mainly reflected in enterprises with low financing costs, while it is not significant in enterprises with high financing costs. This paper enriches the research on the effect of green tax policy, explores solutions based on quasi-nature, and provides policy references for the green transformation of heavily polluting enterprises.

The scope of implementation of ISO 14001 by multinational enterprises: The role of liabilities of origin

This research contends that MNEs from polluting and emerging countries are subject to liabilities of origin that compel them to signal that they differ from the stereotypes of their home countries to attain environmental legitimacy. ISO 14001 adoption, which signals a commitment to environmental protection, may help MNEs from polluting and emerging countries overcome their legitimacy deficits. The wider the scope of ISO 14001 adoption, the greater its power to signal environmental awareness, and therefore, the greater its efficacy in counteracting liabilities of origin. Accordingly, this research proposes that the scope of ISO 14001 adoption by MNEs from the considered countries is wider than that of MNEs that are not subject to liabilities of origin. This contention is tested in a multisector sample of 733 MNEs over the period 2002–2019.

Top-down or bottom-up? How environmental state attention and civic participation coordinate with green innovation

ABSTRACT Green innovation is a key driver of sustainable competitive advantage and environmental protection, but requires significant long-term investment. Prior findings suggest that firms are passively pressured to invest in green innovation by their institutional environment. In this study, we combine green innovation with legitimacy theory to examine how environmental legitimacy affects firms’ green innovation. Using a dataset of Chinese publicly-listed firms from 2003 to 2015, we find that firms actively invest in green innovation to acquire both individual legitimacy from citizens and collective legitimacy from the government. We also find that the positive effects on green innovation are heightened when the firm is state owned and weakened when the firm is involved in a pollution-intensive industry.

Are small and medium enterprises defining their business models to reach a symbolic or substantive environmental legitimacy?

Involvement of small and medium enterprises (SMEs) is critical to the decarbonization of economies; however, legitimacy theory, climate change strategies, and the business model (BM) literature have not addressed this issue in depth. This research analyses whether SMEs define their environmental BMs to achieve substantive legitimacy by reducing their carbon dioxide (CO2) emissions. We analyze the relationships among environmental value proposition, creation, and capture using partial least-squares structural equation modeling with the data for 695 SMEs. The results show that SMEs’ environmental value proposition takes into account symbolic and substantive environmental legitimacy. This broad definition of the value proposition drives SMEs to undertake environmental value creation initiatives, but these initiatives are not very effective in reducing CO2 emissions. These results indicate that SMEs seek symbolic legitimacy more than substantive legitimacy, which has important implications for managers and policymakers who want SMEs to contribute to the transition to a low-carbon economy.

Lessons from failure: Pollution blacklisting and firm's green innovation

AbstractThis article investigates the impact of pollution blacklisting on firm green innovation (GI) by a unique information disclosure project from 782 Chinese listed firms in heavily polluting industries during 2015–2019. Our research found that pollution blacklisting establishes a poor environmental perception and puts firms under greater legitimacy pressure than their peers, forcing them to go beyond compliance through more substantial long‐term solutions like GI to reestablish environmental legitimacy and win social support again. For firms with high levels of media coverage, the positive effect of pollution blacklisting on GI is strengthened, while for firms with bureaucratic political connections, the positive effect is weakened. The findings have important theoretical and practical implications for GI management and relevant information disclosure practice.

Carbon neutrality drivers and implications for firm performance and supply chain management

AbstractMany nations have committed to achieving carbon neutrality to combat climate change, but little is known about its drivers at the micro level and implications for firm performance and supply chain management. To address the knowledge gap, this research conducts case studies of seven early movers in the initiative by exploring the key drivers, influential stakeholders and effects of institutional pressures. We find four major drivers: ‘customer enforcement’, ‘sustainable business value’, ‘environmental legitimacy’ and ‘competitive pressures’. Customers and competitors were the most influential external stakeholders. Shareholders and top management with intrinsic environmental values, being internal stakeholders, played pivotal roles in a proactive move to carbon neutrality when there was limited regulatory pressure. The early movers believed in the long‐term economic benefits of transitioning to carbon neutrality. We also identify the implications of carbon neutrality initiatives for supply chain management. Based on the research findings, we develop a decision support framework to guide firms in transitioning towards carbon neutrality in a multi‐tier supply chain context.

Investigating the impact of restaurants' sustainable practices on consumers' satisfaction and revisit intentions: a study on leading green restaurants

PurposeThis study aims at analyzing the impact of green restaurants' sustainable practices (food safety, food sustainability practices, food quality, and environmental sensitivity) on consumer satisfaction and revisit intention.Design/methodology/approachA self-administered questionnaire was used to collect data from 417 participants who had recently experienced the services of leading green restaurants. The study draws upon the prevailing literature to test a series of research hypotheses through structural equation modeling.FindingsThe findings of the study have confirmed that sustainable practices such as food safety, food sustainability practices, environmental sensitivity, and food quality significantly influence consumers' satisfaction and revisit intentions. The willingness to pay has been found as a sensitive issue as it moderates the relationship between consumer satisfaction and revisit intention.Practical implicationsThis study provides important insights for the businesses operating in foodservice industry. The study suggests important strategies to the restaurant business owners for improving their consumers' satisfaction and revisit intentions. These strategies may help foodservice businesses in building strong brand reputation and a competitive edge over others.Originality/valueThis study contributes to the food service literature by examining the restaurants' environmental legitimacy (food safety, food sustainability practices, food quality, and environmental sensitivity) from consumers' perspective. Moreover, the current study also fills the gap in literature by expanding the knowledge of consumers' pro-environmental behavior in the context of developing nations. Besides, to the best of the authors' knowledge, this is among very few studies, which have emphasized on analyzing consumer satisfaction and revisit intention based on their experience in a green restaurant on particular sustainable parameters.

Sustainability, non-financial, integrated, and value reporting (extended external reporting): a conceptual framework and an agenda for future research

PurposeThis paper aims to develop a conceptual framework for extended external reporting (EER) influences (EERI), including sustainability, non-financial, integrated and value reporting. Using the Environmental Legitimacy, Accountability, and Proactivity (ELAP) framework as the base, we modify its proposed concepts and linkages using relevant conceptual models, prior reviews and findings of recent studies on EER. This paper presents contributions of the special issue on “non-financial and integrated reporting, governance and value creation” and avenues for future research.Design/methodology/approachDrawing on relevant conceptual models, prior reviews and recent EER studies, we reframed the ELAP framework into a framework that theorises the factors that affects, or are affected by, EER.FindingsThe EERI framework poses relationships between and within proactivity, external verification, accountability and legitimacy. It also consolidates possible determinants and consequences of EER. The papers published in this special issue contribute further insights on factors that influence reporting practices, processes and suggestions for capturing and communicating value creation information, and the value of integrated reports and assurance to capital providers.Originality/valueAlong with the insights provided by papers in this special issue, the conceptual framework can be used to theorise influences of EER and guide future research.