The Mechanisms Of The Effect Of ‘Best Practice' Environmental Action On Company Performance

There have been increasing calls,especially from academia for companies to amend their environmental actions to ensure that they adequately contribute to the natural environment maintaining main functions even after being subject to damage.Governments and academia will be interested in understanding the effective means for companies amending their environmental actions,and companies will be interested in understanding whether by amending their environmental actions they will reap private benefits and which stakeholder group will contribute this.The ‘pays to be green' literature has extensively studied the effect of companies' environmental actions on their financial performance,but has not considered that companies' environmental actions are in different varieties and,therefore,have different strengths on the repair of the natural environment.This literature has also investigated the impact of companies' environmental performance on their financial performance but has not investigated a mediating mechanism of customer satisfaction.The environmental strategies literature has studied the factors that drive companies to voluntarily adopt radical environmental actions but has not studied the role of successful companies with orientations to adequately contributing to the natural environment maintaining main functions influencing amendment of environmental actions by companies.This dissertation fills these gaps in the literature in three ways.First,it provides an understanding of the process companies follow in adopting environmental actions that adequately contribute to the natural environment maintaining main functions even after being subject to damage—that is,ecological sustainability.Second,it provides an understanding of the financial performance effects of amendment in environmental actions,through mediators of environmental performance and environmental legitimacy.Finally,it provides an understanding of the mediators—customer satisfaction and company reputation—that link companies' improvement in environmental performance to their profitability.These are investigated empirically with the use of fixed-effects and pooled ordinary least squares(OLS)regressions and partial least squares structural equations modeling(PLS-SEM).Empirical analyses are based on data of samples of large U.S.-based companies over the base years 2013-2015.These years follow the 2009 U.S.fiscal stimulus package—the American Recovery and Reinvestment Act—that had a component on the promotion of clean energy in the U.S.Empirical analyses use data from multiple sources including the Newsweek green rankings,the 100 Best Corporate Citizens listing,text mining of companies' annual sustainability reports,COMPUSTAT and the American Customer Satisfaction Index LLC.Nine hypotheses tested are developed in reference to institutional,competitive dynamics and stakeholder theories,in addition to an environmental orientation framework.This dissertation bridges institutional and competitive dynamics theories,and extends an existing environmental orientation framework to account for the variety of levels to companies' environmental actions and for varying strengths of their relationships with their stakeholders.Results show that companies voluntarily amend their environmental actions to ensure that they adequately contribute to the natural environment maintaining main functions when visible and successful companies in their industry sector display similar orientations.Neither the expectation of government regulation nor pressure from social movements affect this.This finding is robust when controlling the influence of the number of successful companies,their average environmental performance,and their average profitability.Results on whether or not companies can improve their financial performance when amending their environmental actions to adequately support the natural environmental maintaining main functions are mixed;by improving environmental actions,companies can attain positive profits,leverage and market value,but not inventory turnover.However,higher environmental legitimacy but not environmental performance can be obtained by amending environmental actions.Results also show that by improving their environmental performance,companies can stimulate customer satisfaction and this can improve their profitability.However,by improving their environmental performance companies do not affect their reputation and in turn,their profitability.The results of this dissertation add to calls for companies to amend their environmental actions but advances these calls by contributing evidence that amendment of environmental actions will reward companies with improved environmental legitimacy,and to some degree financial performance especially from among customers.The results somewhat discredit suggestions from among sustainability management scholars that the strategy of companies amending their environmental actions to adequately support the natural environment is in conflict with companies' financial performance.Results furthermore suggest that companies are not necessarily opposed to amending their environmental actions but require confirmation of value to doing so.In this regard,government policy is best directed to creating awareness of the private benefits that can result when companies amend their environmental actions.Furthermore,companies that need improvement in environmental legitimacy should consider amending their environmental actions.They should also consider the environmental demands of their customers.