According to a new study from Durham University Business School, corporate culture can have a significant effect on an organization’s environmental performance.
The study shows that establishing a strong cultural foundation can improve environmental performance. It also shows that there are financial benefits to be gained.
The study was led by Dr Mabel Costa and Dr Solomon Opare from Massey University. It aimed to understand the relationship between corporate cultures and the ability of a company to achieve its sustainability and environmental goals.
Researchers have found that companies are increasingly required to adopt sustainable and ethical practices. This is not only for compliance with the evolving legal requirements, but also for human welfare.
According to Dr Costa, a report by The Lancet Planetary Health states that air pollution and toxic chemicals are responsible for up to 9 million premature deaths each year. Businesses are responsible for pollution, including the release toxic chemicals. This has a negative impact on the environment and long-term health issues.
Two factors are suggested to be responsible for the relationship between corporate culture and environmental performance.
- First, managers who are concerned about their environmental impact invest more in innovative and greener methods of operating. Researchers say that organisations with a culture of innovation and creativity are more likely to be successful in implementing such creativity.
- Altruism in management is second. Investors typically take into account corporate social responsibility from the perspective of stakeholders. Altruistic managers will invest in environmentally-friendly technologies and encourage ethical business practices to reduce their carbon footprint. They are therefore more appealing as an investment. A company’s environmental damage can lead to increased litigation costs, and more scrutiny by regulators. This will have long-term consequences on the financial performance of a firm, as well reputation and standing. These firms are less appealing as an investment.
Researchers found that a change in corporate culture can result in a reduction of 3.85% in toxic chemical releases, which is equivalent to 44,584 pounds.
The most effective ways to improve environmental performance are cultural values like innovation, teamwork, and quality. Managers who encourage these attributes in their organisation will reap the greatest rewards.
Competence in management and institutional ownership are key factors. They increase the positive impact on corporate performance of corporate culture by driving beyond compliance.
It is expected that businesses will emit toxic chemicals into the environment. However, releasing toxic chemicals above the level expected by the business is unethical. Our results show that companies with strong corporate culture and leadership support ethical behaviour and, as a consequence, exert greater efforts in reducing both the expected toxic chemical release and excess toxic chemicals, thus improving both environmental and financial performance,” Dr Costa says.
The study was published in the Journal of Business Ethics.
The original version of this article, Managers who create strong corporate cultures see environmental and financial performance soar, first appeared at HR News.
