The mediating effect of strategic posture on corporate governance and environmental reporting

Abstract

The aim of this study is to explain how corporate governance affects environmental reporting through the mediating effect of strategic position. The data were collected from chief executive managers and chief financial managers of 197 large companies in Malaysia. The partial least squares technique was used to test the proposed relationships. The results show that managers’ strategic posture mediates the impact of four aspects of corporate governance, namely, board size, board independency, CSR committee presence, and institutional ownership on environmental reporting. These findings extend the literature on the relationship between corporate governance and environmental reporting by providing insight into the reasons for these relationships. The results of the study will be useful for managers of companies and investors to become knowledgeable about those aspects of corporate governance which lead to higher environmental reporting. This study can also inform policy-makers about the types of firms that are less likely to disclose environmental reports and to develop effective enforcement of regulations.

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Appendix

Appendix

Index assessing the reporting about environmental policies, performance and inputs

N Disclosure items Score
Hard disclosure items
(A1) Governance structure and management systems (maximum score is 6 with each item evenly weighted)
 1 Existence of a department for pollution control and/or management positions for environment. management (0–1)
 2 Existence of an environmental and/or a public issues committee on the Board (0–1)
 3 Existence of terms and conditions applicable to suppliers and/or customers regarding environmental practices (0–1)
 4 Stakeholder involvement in setting corporate environmental policies (0–1)
 5 Implementation of ISO14001 at the plant/factory and/or firm level (0–1)
 6 Executive compensation is linked to environmental performance (0–1)
(A2) Credibility (max score is 10 with each item weighted evenly)
 1 Adoption of GRI sustainability reporting guidelines or provision of a CERES report (0–1)
 2 Independent verification/assurance about environmental information disclosed in the EP report/web (0–1)
 3 Periodic independent verifications/audits on environmental performance and/or systems (0–1)
 4 Certification of environmental programs by independent agencies (0–1)
 5 Product certification with respect to environmental impact (0–1)
 6 External environmental performance awards and/or inclusion in a sustainability index (0–1)
 7 Stakeholder involvement in the environmental disclosure processes (0–1)
 8 Participation in voluntary environmental initiatives endorsed by EPA or the Department of Energy (0–1)
 9 Participation in industry-specific associations/initiatives to improve environmental practices (0–1)
 10 Participation in other environmental organisations/associations to improve environmental practices (if not awarded under 8 or over 9) (0–1)
(A3) Environmental performance indicators (EPI) (max score is 60 with each item weighted from 0 to 6)
 1 EPI on energy use and/or energy efficiency (0–6)
 2 EPI on water use and/or water use efficiency (0–6)
 3 EPI on greenhouse gas emissions (0–6)
 4 EPI on other air emissions (0–6)
 5 EPI on TRI (land, water, air) (0–6)
 6 EPI on other discharges, releases and/or spills (not TRI) (0–6)
 7 EPI on waste generation and/or management (recycling, re-use, reducing, treatment and disposal) (0–6)
 8 EPI on land and resources use, biodiversity and conservation (0–6)
 9 EPI on environmental impacts of products and services (0–6)
 10 EPI on compliance performance (e.g., exceedances, reportable incidents) (0–6)
(A4) Environmental spending (max score is 3 with each item weighted evenly)
 1 Summary of dollar savings arising from environmental initiatives to the company (0–1)
 2 Amount spent on technologies, RandD and/or innovations to enhance environmental performance and/or efficiency (0–1)
 3 Amount spent on fines related to environmental issues (0–1)
Soft disclosure items
(A5) Vision and strategy claims (max score is 6 with each item evenly weighted)
 1 CEO statement on environmental performance in letter form to shareholders and/or stakeholders (0–1)
 2 A statement of corporate environmental policy, values and principles, environmental codes of conduct (0–1)
 3 A statement about formal management systems regarding environmental risk and performance (0–1)
 4 A statement that the firm undertakes periodic reviews and evaluations of its environmental performance (0–1)
 5 A statement of measurable goals in terms of future environmental performance (if not awarded under A3) (0–1)
 6 A statement about specific environmental innovations and/or new technologies (0–1)
(A6) Environmental profile (max score is 4 with each item evenly weighted)
 1 A statement about the firm’s compliance (or lack thereof) with specific environmental standards (0–1)
 2 An overview of the environmental impact of the industry (0–1)
 3 An overview of how the business operations and/or products and services impact the environment (0–1)
 4 An overview of corporate environmental performance relative to industry peers (0–1)
(A7) Environmental initiatives (max score is 6 with each item evenly weighted)
 1 A substantive description of employee training in environmental management and operations (0–1)
 2 Existence of response plans in case of environmental accidents (0–1)
 3 Internal environmental awards (0–1)
 4 Internal environmental audits (0–1)
 5 Internal certification of environmental programs (0–1)
 6 Community involvement and/or donations related to the environment (if not awarded under A1.4 or A2.7) (0–1)

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Shwairef, A., Amran, A., Iranmanesh, M. et al. The mediating effect of strategic posture on corporate governance and environmental reporting. Rev Manag Sci 15, 349–378 (2021). https://doi.org/10.1007/s11846-019-00343-6

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Keywords

  • Strategic posture
  • Corporate governance
  • Environmental reporting

Mathematics Subject Classification

  • 62G08