Environmental Externalities of Corporate Culture: Evidence from Firm Pollution

This paper examines the impact of corporate culture on corporate environmental policies. We find that a strong corporate culture leads to decreases in firm toxic emission levels and pollution intensity. These reductions are genuine and not a result of “greenwashing”, as these firms mitigate harmful toxic releases without selectively targeting specific environmental acts. The primary cultural values driving the reduction in toxic emissions include teamwork, innovation, respect, and integrity. To address potential endogeneity concerns, we exploit the quasi-exogenous variation induced by the BP Deepwater Horizon oil spill, instrumental variables, and propensity score matching approaches. Furthermore, we find that improved diversity and increased research and development (R&D) expenses are among the potential channels through which this effect occurs. The reduction in firms’ toxic releases does not come at the expense of production. Finally, we show that less stringent environmental policies strengthen the role of a strong culture in controlling pollution.