Analysing the role of available organisational slack resources in affecting environmental performance. A structural equation modelling approach

Abstract

Purpose: This paper aims to investigate the relationships between business slack resources and environmental performance and considers the possible effects that management commitment, corporate strategy to sustainability and innovation intensity can have on such interactions. Design/methodology/approach: We performed partial least squares path modeling regressions on a sample of 697 non-financial listed companies worldwide, considering a time frame of 13 years. Findings: Operational and financial slack resources are both detrimental to environmental performance in the short term. Nevertheless, financial slack resources are useful to boost innovation that enhances environmental performance. Environmental performance improvement seems to be more a matter of managerial commitment and strategic approach towards sustainability, rather than the availability of slack resources. Research limitations/implications: Due to literature shortcomings on which effects slack resources can have on environmental performance, this paper sheds some light on the topic while also highlighting the role of management commitment, corporate sustainability strategy and innovation. Practical implications: Managers should use financial slack resources in innovation activities to improve environmental performance. In doing so, they need to create retaining earnings to offset any costs using financial slack resources. Originality/value: Adopting a holistic and net of endogeneity analytical perspective, this paper highlights some virtuous and critical interactions between the managerial commitment and strategic approach to sustainability, the availability of slack resources, innovation intensity and environmental performance to understand which aspects may foster or hinder the ecological transition of businesses.