Green from the inside? a Comparative Study on the Relationship Between Corporate Governance Institutions and Corporations' Environmental Behavior

Corporations are increasingly under the spotlight for their role in the causes of greenhouse gas emissions. For instance, German corporations are the largest single emitters of the country’s total carbon dioxide emissions and responsible for two thirds of overall electricity consumption. When it comes to corporations’ environmental activities, however, even controlling for sector and size, we see wide variation in the extent of these activities. Such differences become even more pronounced when we look at corporations from different countries. Thus, questions arise about which institutional dynamics lead to this diversity and how these institutional dynamics influence corporations’ activities. Corporations’ environmental activities, often labeled as Corporate Social Responsibility (CSR), encompass both symbolic and substantive activities and highlight the reciprocal interdependency between the corporation and broader societal expectations, norms and values (Aguilera et al. 2007; Brammer et al. 2012; Meyer/Rowan 1977; Oliver 1991).

The paper approaches this variation by focusing on the processes within the organization. It conceptualizes corporations’ environmental behavior as a result of intra-organizational decision-making, understanding the organization as a collection of actors with varying interests (Crozier/Friedberg 1995; Cyert/March 1963). It is assumed that different organizational actors have more or less power/influence and are more or less involved in particular corporations’ decisions, highly depending on the particular institutional context. Hence, the central argument proposed in this paper is that corporate governance institutions affect corporations’ environmental behavior (Aguilera et al. 2008; Aguilera/Jackson 2003, 2010).

Employing a comparative perspective, the paper empirically seeks a better understanding of how institutional settings structure the power and interests of actors and how this is related to corporations’ environmental behavior. Within corporate governance institutions the paper focuses on three actor groups: management, capital and labor (Aguilera/Jackson 2003). While this paper is the first part of a larger dissertation project, it starts the investigation with a large-N comparative study to detect relevant relations between corporate governance and corporations’ environmental behavior. For this purpose, the study uses the existing corporate governance literature to examine hypotheses about the structuration of corporations’ environmental behavior. The paper will present results from the analysis, using detailed data on companies’ corporate governance characteristics and environmental CSR efforts. This first study aims to work out broad patterns, before a qualitative stage will intensify the understanding of the intra-organizational processes.

The paper aims to contribute to the recent literature on CSR that conceptualizes corporate environmental efforts as the result of institutional influences. This literature mostly focused on the external drivers of CSR behavior. In contrast, this paper aims to advance this strand of research by focusing on intra-organizational mechanisms and processes, drawing on work on corporate governance and internal organizational structure. Whereas the recent literature has largely overlooked these structures and processes, this paper aims to open the black box in order to better understand the actor groups’ interests and strategies. This is important to better understand why corporations differ in their environmental behavior, how diverse institutional contexts influence the relevant intra-organizational decision-making and how political efforts reducing global warming may advance improvements within organizations.