Catholic Social Teaching as an Explanation of Firm Environmental Impact

Abstract

Catholic Social Teaching theory is examined to identify business variables consistent with Papal Encyclicals. We identified top compensation (pay disparity), stock options (employee autonomy), and number of employees (primacy of labor over capital) as factors that are consistent with Catholic Social Teaching. We then used the “CSR Hub” environmental scores of manufacturing firms. We chose to look at manufacturing companies because of their potential for environmental impact. We find that firms that are consistent with Catholic Social Teaching have stronger environmental practices. Specifically, our research suggests that the greater the investment in labor, measured by cost of goods sold per employee, and the smaller a firm’s top compensation, the more a firm participates in environmentally sustainable practices. Although stock options are congruent with Catholic Social Teaching, they were determined to not be a relevant factor when measuring a firm’s environmental sustainability. Accordingly, our results indicate that stock options are not an accurate measure of employee autonomy. Although we do not assert that firms are acting the way they are because of Catholic Social Teaching, our results verify that their actions are consistent with the theory. This research is important in academics in both business and philosophy. The research is important in business academia as professors are teaching about the importance of Corporate Social Responsibility, and how that can positively affect the environment.​ This research can be beneficial to policy makers as it can help in identifying firms in a better environmental position and factors that are correlated to better environmental practices. Policy makers can consider these factors when ​incentivizing firms to practice environmental sustainability. Finally, this research is important to business people, as they recognize the implications of catholic social teaching in business on the environment.