Ethics

Evidence on Whether Banks Consider Carbon Risk in Their Lending Decisions Abstract Banks face a dilemma in choosing between maximising profits and facilitating the sustainable use of resources within a carbon-constrained future. This study provides empirical evidence on this dilemma, investigating whether a bank loan announcement for a firm with high carbon risk conveys information to investors about the firm’s carbon risk exposure collected through a bank’s pre-loan screening and ongoing monitoring. We use a sample of 120 bank loan announcements for ASX-listed firms over the period 2009–2015. We measure high (low) carbon risk exposure based on whether firms meet (do not meet) the reporting threshold of the NGER scheme. We document positive and significant excess loan announcement returns for loan renewals for high carbon risk firms, but not for loan initiations. Further, we document a more significant loan announcement return for renewals with favourable term revisions. Finally, we find no evidence that the market differentiates between domestic and foreign lenders. Taken together, our results suggest that investors perceive that banks incorporate carbon risk considerations into their lending decisions. Our results highlight the value of banks as financial intermediaries given the information asymmetry surrounding firms’ carbon risk exposure, and more generally the need to extend modern banking theory to consider issues such as the impact of banks’ CSR reputation on lending decisions.

In Search of Sustainable Behaviour: The Role of Core Values and Personality Traits Abstract Understanding the individual-level factors associated with sustainable behaviour in the workplace is important to advance corporate ethics and sustainability efforts. In two studies, we simultaneously assess the role of core values and personality traits in relation to a broad set of sustainability actions, both beneficial and harmful. Results from a student sample (N = 411) and then a national sample (N = 639) confirm that values and personality are distinct constructs that incrementally and differentially predict economic, social, and environmental outcomes. We successfully replicate previous findings pertaining to values and find that, controlling for values, the personality dimension of Honesty–Humility is the strongest negative predictor of harmful actions. Our analyses highlight the unique characteristics of values and personality and their distinct implications for ethical and sustainable management practice. By assessing values and personality together, we also contribute to more general efforts within psychology to develop an integrative view of the person.

Deeds Not Words: A Cosmopolitan Perspective on the Influences of Corporate Sustainability and NGO Engagement on the Adoption of Sustainable Products in China Abstract To make a business case for corporate sustainability, firms must be able to sell their sustainable products. The influence that firm engagement with non-governmental organizations (NGOs) may have on consumer adoption of sustainable products has been neglected in previous research. We address this by embedding corporate sustainability in a cosmopolitan framework that connects firms, consumers, and civil society organizations based on the understanding of responsibility for global humanity that underlies both the sustainability and cosmopolitanism concepts. We hypothesize that firms’ sustainability engagement and their NGO engagement influence consumer adoption of sustainable products. Empirically, we investigate the adoption of sustainable Eco-circle products made from recycled fibers marketed by Li Ning, a China-based global sportswear brand. We apply a stepwise regression approach to test our hypotheses with paper-and-pencil survey data from 217 Chinese consumers. We find adoption to be positively associated with consumers’ sustainability attitude but not with firms’ sustainability engagement. For firm–NGO engagement, these relationships are reversed: Adoption is positively associated with firm–NGO engagement, but not with consumers’ related attitude. Our results present a picture of the Chinese context in which there is a business case for corporate sustainability if firms’ words about sustainable product strategies are supported by signals from civil society about firm deeds. The results imply that in a Chinese context, firms need to be particularly aware of the role of NGOs when hoping to be rewarded for sustainability.

Environmental Behavior On and Off the Job: A Configurational Approach Abstract The current literature on environmental sustainability acknowledges that habits are often shaped in private life and that experiences with environmental activities in a non-work setting positively influence environmental behaviors in the work domain. However, the conditions that lead individuals to behave responsibly at work based on their environmental commitment outside the workplace remain poorly understood. We address this issue by pursuing two objectives. First, we outline archetypes of environmental behavior on and off the job and classify individuals into four profiles: Apathetic, Conformist, Citizen and Enthusiast. Second, we examine a set of organizational and psychological variables that explain the likelihood of behaving in accordance with the principles of an archetype in terms of pro-environmental behavior at work. Our findings show that supervisory support, job self-efficacy and affective commitment increase the likelihood of being green at work but that environmental management practices do not. The results differ according to the profiles identified, allowing a better understanding of employees’ commitment to environmental sustainability. We conclude the paper by discussing the theoretical and managerial implications of our findings.

Drilling their Own Graves: How the European Oil and Gas Supermajors Avoid Sustainability Tensions Through Mythmaking Abstract This study explores how paradoxical tensions between economic growth and environmental protection are avoided through organizational mythmaking. By examining the European oil and gas supermajors’ “CEO-speak” about climate change, we show how mythmaking facilitates the disregarding, diverting, and/or displacing of sustainability tensions. In doing so, our findings further illustrate how certain defensive responses are employed: (1) regression, or retreating to the comforts of past familiarities, (2) fantasy, or escaping the harsh reality that fossil fuels and climate change are indeed irreconcilable, and (3) projecting, or shifting blame to external actors for failing to address climate change. By highlighting the discursive effects of enacting these responses, we illustrate how the European oil and gas supermajors self-determine their inability to substantively address the complexities of climate change. We thus argue that defensive responses are not merely a form of mismanagement as the paradox and corporate sustainability literature commonly suggests, but a strategic resource that poses serious ethical concerns given the imminent danger of issues such as climate change.

ISO 14001 Certification and Corporate Technological Innovation: Evidence from Chinese Firms Abstract While a growing body of literature has examined the link between green activities and firm innovation, little attention has been paid to the underlying mechanisms through which green activities take effect. This paper leverages the context of ISO 14001 certification among Chinese listed firms to investigate how the certification of environmental management system (EMS) to ISO 14001 shapes corporate technological innovation. Drawing from the resource-based view and the resource management perspective, we argue that EMS certification to ISO 14001 facilitates corporate technological innovation through the mediating effects of firms’ internal resource management practices, namely resource utilization, resource accumulation, and resource allocation. A difference-in-differences research design, together with the propensity score matching approach and the instrumental variable technique, provides corroborating evidence for our predictions. The current research not only makes substantial contributions to the literature, but also provides important ethical implications for both policymakers and firm managers.

Managing Carbon Aspirations: The Influence of Corporate Climate Change Targets on Environmental Performance Abstract Addressing climate change is among the most challenging ethical issues facing contemporary business and society. Unsustainable business activities are causing significant distributional and procedural injustices in areas such as public health and vulnerability to extreme weather events, primarily because of a distinction between primary emitters and those already experiencing the impacts of climate change. Business, as a significant contributor to climate change and beneficiary of externalizing environmental costs, has an obligation to address its environmental impacts. In this paper, we explore the role of firms’ climate change targets in shaping their emissions trends in the context of a large multi-country sample of companies. We contrast two intentions for setting emissions reductions targets: symbolic attempts to manage external stakeholder perceptions via “greenwashing” and substantive commitments to reducing environmental impacts. We argue that the attributes of firms’ climate change targets (their extent, form, and time horizon) are diagnostic of firms’ underlying intentions. Consistent with our hypotheses, while we find no overall effect of setting climate change targets on emissions, we show that targets characterized by a commitment to more ambitious emissions reductions, a longer target time frame, and absolute reductions in emissions are associated with significant reductions in firms’ emissions. Our evidence suggests the need for vigilance among policy-makers and environmental campaigners regarding the underlying intentions that accompany environmental management practices and shows that these can to some extent be diagnosed analytically.

Legitimacy Strategies in Corporate Environmental Reporting: A Longitudinal Analysis of German DAX Companies’ Disclosed Objectives Abstract Ecological objectives in environmental reports usually promise a high degree of environmental responsibilities in a company’s activities. Several studies have already highlighted that most companies do not keep their promises since stakeholders’ expectations and a company’s capabilities for internal adjustments do not always match. Thus, a company might use strategic reporting in order not to endanger its legitimacy. However, no study so far has demonstrated how companies use different legitimacy strategies in reporting their environmental objectives over time. To achieve this in our study, we focus primarily on findings from legitimacy theory in combination with the legitimacy strategies suggested by Lindblom (in: Gray, Bebbington, Gray (eds) Social and environmental accounting: developing the field, Sage, Los Angeles, pp 51–63, 2010). To test our theoretical framework empirically, we analyze 260 corporate environmental reports of German DAX companies between the years 2000–2014 by coding all disclosed objectives within these reports. Based on this longitudinal approach, we are able to identify reporting patterns of the different companies that provide insights into those companies’ environmental reporting legitimacy strategies. Overall, this study contributes to research on voluntary disclosure by showing that a comprehensive analysis of the reporting pattern of disclosed objectives allows the identification of certain legitimacy strategies.

The Commercialization of the Microfinance Industry: Is There a ‘Personal Mission Drift’ Among Credit Officers? Abstract Recent research suggests that many microfinance institutions increasingly focus on financial performance at the expense of the social component of their dual objectives. Existing studies typically assume that capital providers and managers mainly drive this so-called mission drift. In this study, we investigate whether ‘personal mission drift’ at the credit officer level can further explain the reduced emphasis on poorer clients among microfinance institutions. We present both qualitative and quantitative evidence that more experienced credit officers tend to serve fewer vulnerable clients. Specifically, we show that all else being equal, credit officer experience is negatively correlated with the provision of small loans, loans to young clients, and loans to clients with disabilities. Our qualitative analysis suggests that perceived client risk and preferences for increased time efficiency mainly drive more experienced credit officers’ relative neglect of more vulnerable clients. This drift appears to be reinforced by the industry’s incentive schemes. Therefore, credit officer incentives and training should be designed to prevent this mission drift, which is observed at the microfinance institution level but is actually initiated at the credit officer level.

Drivers of Green Innovations: The Impact of Export Intensity, Women Leaders, and Absorptive Capacity Abstract Little research has considered the potential influence of distant, external pressures on the implementation of firms’ ‘green’ innovations, nor how internal firm resources might moderate this relationship. By combining institutional and resource-based theories and examining 649 firms in Australia, I find that export intensity is positively associated with green innovations. Further, as women in leadership roles increase in firms, the relationship strengthens between export intensity and green innovations. The results also suggest that greater levels of absorptive capacity among firms strengthen the relationship between export intensity and green innovations. Contributions of the findings are discussed along with limitations and future research opportunities.