Do Firms Follow through on Environmental Commitments? An Empirical Examination

Abstract

In response to ever-increasing pressure from stakeholders to reduce the impact of their operations and supply chain on the natural environment, firms frequently make public commitments to improve environmental performance. However, the commitments are difficult to validate and thus of unknown quality. Understanding whether and when the commitments are valid proxies for action is essential because they are used by environmentally conscious stakeholders to assess firm environmental performance in anticipation of buying from, investing in, working for, or selling to a firm. Results from examining 442 U.S. manufacturing firms show that firms generally follow through on such commitments. Larger firms and firms with better environmental performance are more likely to follow through. However, firms tend not to follow through if they are experiencing negative environmental publicity or resource constraints at the time of the commitment. The results provide important insights for environmentally conscious stakeholders who use the commitments to determine whether to buy from, invest in, work for, or supply to a firm. The study also highlights the benefits to firm leaders of following through and provides input towards ideas that can increase follow-through. Finally, the study contributes to several streams of the research literature, including the literature evaluating environmental management, environment commitments, and environmental accidents.