Environmental Misconduct Research Articles

Impact of entrepreneur's socioeconomic status on corporate environmental conduct and misconduct: The moderating role of family ownership

AbstractThe impact of an actor's status on corporate ethical issues has been debated in strategy management. Drawing on upper echelons theory and status theory, our study aims to address this theoretical puzzle by examining how an entrepreneur's socioeconomic status affects a firm's engagement in positive environmental conduct and negative environmental misconduct, as well as the moderating effects of family ownership in China's emerging economy. Our analysis of 3281 private firms from a national survey in China reveals that an entrepreneur's socioeconomic status not only promotes corporate environmental conduct but also stimulates environmental misconduct. These effects are more pronounced in firms with higher levels of family ownership. By uncovering the complex impact of an entrepreneur's socioeconomic status on corporate environmental actions, our study contributes novel insights to the environmental management literature.

Does Cultural Embeddedness on Cigarette Packages Mitigate Environmental Information Credibility? Evidence from China

ABSTRACT Drawing on the behavioral consistency theory, we examine whether cultural embeddedness on cigarette packages as a sinful behavior window dressing affects environmental information credibility, and further investigate the moderating role of high-quality external audit (Big4 auditors). Using hand-collected data from China, our findings reveal that cultural embeddedness on cigarette packages at the province level is significantly negatively associated with corporate environmental information credibility, suggesting that cultural embeddedness on cigarette packages shapes unethical social atmosphere around firms, triggers managers to cover up environmental misconducts, and eventually mitigates environmental information credibility. Moreover, Big4 auditors weaken the negative relation between cultural embeddedness on cigarette packages and environmental information credibility. Above findings are robust to a variety of sensitivity tests using alternative proxies for cultural embeddedness on cigarette packages and environmental information credibility, and further our conclusions are still valid after using the propensity score matching method, two-stage instrumental variable OLS-TOBIT regression procedures, and Heckman two-stage regression approach to address the endogeneity issues. Furthermore, cultural embeddedness on cigarette packages significantly positively induces greenwashing. Lastly, our main findings are more pronounced for firms without pollution control departments, with lower investment in environmental technologies, with less media coverage and in provinces with lower legal enforcement.

The reputational costs of corporate environmental underperformance: evidence from China

AbstractThis study evaluates the relative importance of regulative and reputational pressures on corporate environmental performance by exploiting a novel research setting in China, where the financial penalties for corporate environmental wrongdoing are small. Despite the small monetary penalties, we still document a surprisingly strong negative stock price reaction to the news of corporate environmental violations. Additionally, we show that the negative stock market reaction weakens in firms with strong voluntary environmental commitment. But the effect of voluntary environmental commitment is less pronounced in state‐ or foreign‐owned firms. Our study yields important managerial implications: our findings reveal considerable reputational losses associated with environmental misconducts and demonstrate the benefit of voluntary environmental commitment in upholding corporate reputation and helping firms recover during unfavorable environmental crises.

Does environmental footprint influence the resilience of firms facing environmental penalties?

AbstractThis study aims to understand whether prior environmental footprint helps firms to be more resilient against penalties following environmental violations. While the allocation of resources to diminish the company's environmental footprint might be considered detrimental to its financial recovery, the natural resource‐based view argues that environmental capabilities may foster firm resilience when faced with the shocks of environmental penalties. We collected data from press releases using Factiva between 2006 and 2019 to constitute an original sample of 143 events concerning US‐listed firms subjected to fines for environmental misconduct initiated by the Environmental Protection Agency. Using survival analysis methodology, we empirically find that firms with lower environmental footprints prior to the penalty recover sooner from the financial shock, hence exhibiting higher capabilities of resilience. This finding is robust to different survival analysis models and time windows. Our empirical analysis expands the range of studies supporting environmental performance as a way for organizations to improve resilience in the face of disruptions, in providing clear evidence in the case of environmental fines.

Firms' responses to environmental misconduct accusations under the condition of contested practice complexity: Evidence from the palm oil production industry

AbstractPublic accusations of misconduct by environmental organizations exert reputational pressure on firms. The targeted firms are thus faced with the decision of responding accommodatively or defensively. Situational crisis communication theory (SCCT) holds that such accusations require an accommodative response to reduce the reputational threat. However, defensive response behavior is frequently observed, and insights from the sociocognitive perspective explain that corporate conceptualizations of the contested practice (and hence threat) shape targets' responses. We integrate and extend prior research by (1) explicating the need for attention to the condition of contested practice complexity and (2) theoretically developing and empirically testing (using a sample of palm oil producers accused of illegal deforestation by Greenpeace) the impact of targeted firms' engagement in environmental alliances and past environmental misconduct experience, two key manifestation variables of practice meaningfulness. Overall, in line with calls for a more comprehensive understanding, we provide new insights into the question of when and why targeted firms respond accommodatively or defensively to environmental organizations' demands that they change their practices.

Transmission of environmentally responsible behavior between tourist destination employees and tourists: The role of moral elevation and environmental knowledge.

Tourists' environmental misconduct is the primary reason for the environmental destruction that tourist sites experience; nevertheless, their environmentally responsible behavior is also a major push for the improvement of the environment. The main goal of this study is to induce tourists to adopt proactive environmental responsibility behaviors. A total of 455 valid questionnaires were obtained from China and analyzed using multiple linear regression. The findings of this study indicate employees' environmentally responsible behavior (E-ERB) in tourist destinations has a positive impact on tourists' environmentally responsible behavior (T-ERB). In the mediating variable of moral elevation, the correlation between E-ERB and T-ERB is mediated by elevating emotions and views of humanity. And desire to be a better person did not play a mediating role in the relationship between E-ERB and T-ERB. Additionally, environmental knowledge moderates the transmission path of the impact of E-ERB and T-ERB via elevating emotions. With high environmental knowledge, the transmission path of the impact of employees' environmentally responsible behavior of the tourist destination on tourists' environmentally responsible behavior via elevating emotions will be enhanced. We propose a new perspective to explain the transmission mechanism between employees' environmentally responsible behavior and tourists' environmentally responsible behavior in tourism destinations, which will help to expand our understanding of the relationship between employees' behavior and tourists' behavior. We expect our study to spark more exploration of the contagion of positive behavior in the field of environmental psychology.

Sustainability claim, environmental misconduct and perceived hypocrisy in luxury branding

Purpose This paper aims to examine consumers’ evaluation of and reaction to the coexistence of brand misconduct and sustainability claims through a series of studies. Design/methodology/approach The research questions are examined across three studies. Consumer’s scepticism of corporate social responsibility (CSR) is considered the driver of brand distance. Brand hypocrisy is postulated to mediate the relationship between scepticism to CSR and brand distance. Furthermore, brand trust and desire for exclusivity are tested as moderators of brand hypocrisy and brand distance. Findings The findings showed that environmental misconduct leads to perceived brand hypocrisy and brand distancing. When luxury brands take action to remedy their actions, the perceived brand hypocrisy and brand distancing decrease. In addition, brand trust and desire for exclusivity dilute the relationship between brand hypocrisy and brand distance. Originality/value The findings show that, standing in a contradictory position, brands can still reduce the consumers’ perceived brand distance by building a strong consumers’ trust toward the brand. At the same time, relating the luxury consumers’ yearning for the exclusive products and services, the findings show that the consumers with a strong desire for exclusivity feel a lower level of brand distance even if the brand gets involved in misconduct.

Rehabilitating from Environmental Misconduct: The Potential of Orchestrating Corrective Actions

Most firms attempt to regain lost public reputation after reports of corporate misconduct. Prior research has focused on identifying individual corretive actions for reputation repair, suggesting a costly and disruptive action such as replacing organizational leadership is necessary. This research, however, gave limited consideration to the use of multiple corrective actions over time. Integrating signaling theory and the literature on rehabilitation and corrective actions, we argue that the orchestration of corrective actions can restore reputation, even if individually taken these actions do not meet the conventional criteria of successful repair signals. We find support for our theory in a sample of publicly traded U.S. firms implicated in environmental misconduct between 2008 and 2018. We advance the literature on rehabilitation by providing insights into the orchestration of corrective actions over time and caution firm stakeholders that well-crafted reform efforts do not necessarily reflect underlying attributes of the firm. In doing so, we also alert signaling research to the importance of signal orchestartion when combining multiple signals to form a set.

Stock market reaction to environmental lawsuits: Empirical evidence from the case against Boliden-Apirsa

The aim of this paper is to assess investors' environmental awareness using reputational losses as a punishment for environmental misconduct. To do so, we examine the 17-year court case against Boliden-Apirsa, implicated in one of the worst environmental catastrophes in the European mining industry. We conduct a short-term standard event study on 55 court rulings, published between 2002 and 2015, to analyze the financial market reaction, differentiating between 34 negative court rulings that blame Boliden-Apirsa for the catastrophe and 21 positive court rulings that exonerate the company from any liability. We also estimate the reputational damage faced by the company considering the fine claimed during the judicial process. Using a financial approach (Reputational Cumulative Abnormal Returns, Rep CAR), we identify and isolate the reputational risk linked to environmental lawsuits. The results reveal an immediate negative market response to announcements of court rulings. In addition, our study indicates that investors are more sensitive to announcements of positive court rulings than to negative ones. However, our study does not provide empirical evidence on the existence of reputational damage, in terms of RepCARs, suggesting that the stock market is selective in reacting to these announcements of environmental court rulings.

Green innovation and environmental misconduct

PurposeThe aim of this study is to discuss the idea that the legal cost of environmental violations, along with reputational concerns, may persuade firms to generate more green patents.Design/methodology/approachThis study examines the relationship between firms generating green patents and environmental violations. The authors show the green innovation trend over the past two decades and explore the potential motivations behind it. In addition, the authors investigate the impact of regulatory actions, such as governmental finds, on green innovation.FindingsThe authors find that firms that commit environmental violations switch to producing green patents in the long-run. The authors also document that market reaction following environmental offenses is negative for firms with a high ratio of green patents in their portfolio.Originality/valueThis study explores innovation. The authors investigate the literature and trends of green innovation over the past 20 years. The authors also find that green innovation is growing at a relatively slow rate. Overall, this study highlights the importance of green innovation and firms’ response to corporate wrongdoing.

Cut Them Loose? Firms’ Response Strategies to Environmental Misconduct by Supplying Firms

Firms are increasingly held accountable for their suppliers’ environmental misconduct and often face significant stakeholder pressure to respond or even end their affiliations with misbehaving suppliers. Despite the importance of the subject, we know little about antecedents to supplier exclusion. In this article, we build on the assumption of stakeholder expectations being a core mechanism—and adopt an expectancy-violation theory lens. Drawing also on complementary insights into signaling theory, we argue that the severity of the misconduct affects the decision to cut ties. Furthermore, we argue that the engagement in environmental partnerships of client firms as well as suppliers moderates this relationship. To test our hypotheses, we use a unique sample of 434 client firm–supplier dyads, including 27 focal firms pressured by Greenpeace to remove “dirty” palm oil suppliers, accused of illegal deforestation. The study’s findings provide contributions to several literature streams related to inter-organizational dynamics and environmental sustainability.

The Reputational Costs of Corporate Environmental Misconducts: Evidence from China

The Reputational Costs of Corporate Environmental Misconducts: Evidence from China

Repression or indulgence? Distinctive government influence on firm financial and environmental misconduct in China

Repression or indulgence? Distinctive government influence on firm financial and environmental misconduct in China

Can radical innovation mitigate environmental and animal welfare misconduct in global value chains? The case of cell-based tuna

Organizational misconduct, defined as illegal, unethical or irresponsible organizational behavior, concerning the environment can lead to resource depletion, threats to biodiversity, animal suffering and environmental damage. Some chains have been scrutinized due to the massive depletion of environmental resources caused by illegal exploitation, such as the tuna chain. In search for solutions, regulations and product traceability have been used. Despite the urgency of the subject, less attention has been given to how radical innovations may lead to preventing animal welfare and environmental misconduct. Technological radical innovations are characterized by their uniqueness, novelty, and potential to promote significant transformations in a chain. Thus, we adopted an exploratory approach to analyze the case of a radical technological innovation – cell-based meat – which can substantially transform the meat value chain and, more specifically, mitigate overwhelming environmental and animal welfare misconduct in the tuna global chain. The case illustrates how radical innovation can significantly change global value chain's activities and redefine its geographic scope; it may also represent a shift from natural resource-intensive to technology-intensive activities. More importantly, by substituting animal-based inputs, severe environmental and animal welfare issues will be mitigated.

How and when does top management team regulatory focus influence firm environmental misconduct?

Does top management team (TMT) regulatory focus impact firm environmental misconduct (FEM)? If so, how and when? Integrating upper echelons theory with regulatory focus theory, we examine how regulatory focus, as one of the most direct and important psychological characteristics of TMT, impacts FEM. Additionally, we explore how this relationship is moderated by external and internal environmental dynamism from the perspective of regulatory fit. Based on a sample of Chinese listed firms from 2011 to 2017, we conduct computer-aided content analysis to quantify TMT regulatory focus. Results show that TMTs high in promotion focus are more likely to engage in FEM, whereas TMTs high in prevention focus are less likely to misconduct. Moreover, external environmental dynamism strengthens (weakens) the positive (negative) relationship between promotion (prevention) focus and FEM. Internal environmental dynamism strengthens the positive relationship between TMT promotion focus and FEM. By examining this motivation-based psychological characteristic of TMT, the findings suggest the need to consider TMT regulatory focus when analyzing the antecedents of FEM.

Generous charity to preserve green image? Exploring linkage between strategic donations and environmental misconduct

In this study, we identify two typical donation strategies, i.e., the fire-suppressing approach and the proactive approach, for window-dressing environmental misconduct. For a sample of 2582 small Chinese companies, we find that pollution fines are positively associated with corporate charitable donations, implying that firms use charitable donations as a fire-suppressing method to address the negative impact of environmental misconduct. We also found a positive relationship between pollutant emissions and corporate charitable donations, which supports the hypothesis that firms use a proactive approach (i.e., more consistent charitable donations) to reduce the negative impact of environmental misconduct. The relationship between pollution fines and corporate charitable donations is positively moderated by advertising expenses, suggesting that small and medium-size enterprises (SMEs) with higher branding expenses are more likely to take a fire-suppressing approach. Politically connected SMEs are more likely to take a proactive approach whereas SMEs without political connections are more likely to take a fire-suppressing approach.

Busy Directors and The Occurrence of Corporate Environmental Misconduct

The occurrence of corporate misconduct is a significant organizational event that adversely affects not only the firm’s performance but also its relationships with key stakeholders. Corporate direc...

From Signals to Reform Narrative: Reputation Repair Following Corporate Environmental Misconduct

Past research has devoted significant attention to understanding how firms behave in the aftermath of misconduct to counter reputational threats. This research, however, primarily focused on identi...

The contagion effect of environmental violations: The case of Dieselgate in Germany

AbstractWe examine how environmental violations affect the stock returns of the violating firm and how these financial implications then spread to industry peers. Volkswagen's diesel emissions scandal (Dieselgate) and the German automotive industry serve as a seminal case for the examination. Research often limits examinations of corporate environmental scandals to the primary event announcement. Yet the Dieselgate scandal exhibits a processual character that requires the examination of multiple events over time. We identify 10 Dieselgate events and employ event study methodology to detect abnormal stock reactions. Based on agency and signaling theory, the results indicate that Dieselgate has harmed the stock returns of Volkswagen and its industry peers substantially. Surprisingly, Volkswagen suffered financial damage only upon the initial event of Dieselgate. Subsequent events had significant effects only on industry peers. These findings contribute comprehensively to the research of environmental misconduct and provide valuable implications for practitioners.

De-Escalate Commitment? Firm Responses to the Threat of Negative Reputation Spillovers from Alliance Partners’ Environmental Misconduct

When faced with the threat of negative reputation spillover from an alliance partner accused of environmental misconduct, the focal firm must decide whether to adopt a supportive or non-supportive response. We argue that this decision denotes a commitment escalation dilemma, but that factors previously found to increase escalation tendencies lead to de-escalation in our crisis contagion context. Specifically, we derive four hypotheses from this reverse effect proposition, and test these using a policy-capturing survey targeting Norwegian CEOs. We found that firms are more likely to select an adversary response when the alliance is of high strategic importance and has high termination costs. Conversely, firms are more likely to select an advocacy response when the alliance is of low strategic importance and has low termination costs and when the CEO was not involved in the formation of the alliance. Overall, our study answers a call for a more nuanced understanding of commitment escalation and the theory’s boundary conditions by introducing reputation spillover crisis as a contextual influencer of escalation behavior. It also extends the reputation literature and provides new evidence that reputation concerns can instigate ethical decision-making.