Greening the Narrative: How Organizational Culture Impacts Environmental Disclosures

Abstract

In light of existential dangers to our planet, the urgency to reevaluate corporate practices has never been more palpable. With an emphasis on disclosures, this groundbreaking research sets out to analyze the complex relationship between corporate culture and its significant influence on environmental sustainability within firms. Amidst environmental instability and ongoing calls for corporate responsibility, this study makes use of the comprehensive Competing Values Framework (CVF) to carefully investigate the impact of four key subcultures: control, collaboration, creation, and competition on environmental disclosures. Analyzing the data from 2821 10‐K reports of 403 US companies listed on the S&P 500 index between 2016 and 2022, we utilized Python‐based textual analysis to quantify cultural orientation scores and employed flexible pseudo maximum likelihood estimation (Flex) modeling to address the inherent challenges of analyzing double‐bounded environmental sustainability disclosure data. Results revealed a favorable association between only the “creation” subculture and environmental sustainability disclosures, whereas the “control” and “competition” subcultures acted as barriers to progress with no substantial impact exhibited by the “collaboration” subculture. The significance of organizational culture variables in the presence of board variables emphasizes the distinct nature of corporate culture from top management and highlights the importance of this study, which rectifies the endogeneity present in sustainability models due to the disregard of accounting for corporate culture. This study not only uncovers the way forward, amid unexampled environmental challenges, but also ignites an incendiary call to action that reverberates through boardrooms around the world to create cultures that breed innovation to internalize environmental sustainability.