Friendly environmental policies implementation within the company: An ESG ratings analysis and its applicability to companies´ environmental performance enhancement

Abstract

In order to move towards a more environmentally oriented economy, society needs to be aware and able to recognize environmental friendly practices. Firms are increasingly relying on environmental scores ratings to make strategic decisions. In this context, understanding how day-to-day company´s decisions affect environment scores is crucial. This paper examines the impact of social policies on the environmental scores of companies. Using data on for 3895 firms from the ASSET4 database between 2006 and 2010, we report on how employment quality, health and safety, training and development and diversity policies affect firms’ environmental scores. An ANOVA test, followed by a regression analysis, was ran to test differences between the major markets. Also, the interaction between the selected variables and environmental scores, was tested in order to investigate the individual effects of social policies and location on environmental performance. Results show that environmental scores increase with the presence of social policies, and that the location of the company is a differentiating factor. The paper concludes with a discussion of the implications of these findings for future environmental promotion within companies.