Towards sustainable management: Exploring the role of internal monitoring in pollution prevention

Abstract

Researchers in the field of sustainable management have recently dedicated significant efforts to understand why organizations exhibit diverse responses to environmental responsibilities. Ethical scholars assert that internal management plays a pivotal role in promoting sustainability because of its attitude toward sustainable issues. In alignment with this perspective, our study formulates a framework for internal monitoring that underscores the significance of independent, female, international, and politically connected directors. We investigate how these internal monitors influence a company’s commitment to promote sustainable investments for pollution prevention. By employing fixed effect model and generalized method of moments (GMM) on a dataset obtained from the largest emerging market—China over the period 2012 to 2019, our findings indicate that the mentioned monitors demonstrate a stronger commitment to pollution prevention by promoting corporate sustainable investments. In addition, our analysis reveals that when the government withdraws its involvement in enterprises, it has a notable negative impact on the connection between internal monitors and a company’s efforts in pollution prevention. Our results imply that implementation of sustainable policies for pollution prevention fundamentally result from not only internal management, but also from powerful stakeholders (like government involvement). Moreover, our study educates the policy makers regarding the social consequences of governmental withdrawal.