Recent empirical evidence of investors’ negative value perception of carbon disclosure (Alsaifi et al., 2020), and recent removal of Emmanuel Faber highlight the tensions between the investors and the firm as well as its top management in dealing simultaneously with the challenges and the trade-offs of pursuing profits and sustainability (ESG) goals (Hahn et al., 2015) to mitigate climate change risk (Hegerl and Cubasch, 1996). Consequently, we raise a question: Do investors penalize the firms disclosing higher environmental performance? The theoretical and empirical works suggest a positive role of ESG disclosure in effective allocation of capital by investors that should bring market pressure to improve sustainability practices and thus contribute to sustainable development (Mǎnescu, 2011; Qureshi et al., 2020; Zeidan and Spitzeck, 2015). However, we observe that public discourse on environmental issues and ensuing ‘policy generated environmental imperatives’ could not equally appeal to ‘corporate environmental conscience’ (Broadstock et al., 2018) across different cultures where firms are likely to have different environmental sensitivity in response to different normative and mimetic pressures from the society (Daddi et al., 2020; Jakučionytė-Skodienė and Liobikienė, 2021) as social norms shape environmental behavior (Yu et al., 2019). Even though more and more investors rely on ESG scores (Folqué et al.), yet certain value relevant ESG attributes are not efficiently reflected into the stock prices (Mǎnescu, 2011). Consequently, we observe a lot of variation in disclosure of different elements of ESG by the firms domiciled in different countries indicating stakeholders’ different perceptions about value relevance of different ESG endeavors in different settings necessitating to gather insights in a wider systemic cross-country context (Miska et al., 2018) focusing on investors’ value proposition in corporate environmental performance (CEP) that is generally overlooked in the literature. To fill this gap, this study uses the lens of country culture to understand and help resolve the tensions in corporate environmental endeavors in different temporal or spatial frames (Hahn et al., 2015). For this purpose, we propose an innovative integrative 3Ps framework – People, Planet, and Profit to investigate how investors (People) value (Profit/firm value) corporate environmental performance (Planet) in different cultures (People) to provide a global cross-cultural evidence and use it to answer the question raised above.
Some studies established positive relationship between ESG disclosure and firm value in different settings (Matsumura et al., 2013; Qureshi et al., 2020), a UK study indicates negative correlation (Alsaifi et al., 2020), a US study concludes value relevance of certain ESG attributes (Mǎnescu, 2011), a recent study concludes value irrelevance of environmental pillar of ESG (Jadoon et al., 2021), and another recent study of Chinese firms finds a positive association of CEP with corporate financial performance (CFP) as well as firm value of financially non-constrained firms however this relationship turns negative for financially constrained firms (Akbar et al., 2021). As such, ESG-value nexus is still inconclusive (Fatemi et al., 2018; Hannah et al., 2020) due to short-term-versus-long-term trade-offs experienced by the firms (Delmas et al., 2015) in different settings wherein culture as a value system (Meadows, 1998; Miska et al., 2018) shapes the practices of individuals as well as institutions of a society (G. Hofstede, 2001; Ioannou and Serafeim, 2012; Yu et al., 2019). However, none of the previous studies investigating ESG-value nexus used all six cultural dimensions (Geert Hofstede, 1984; Minkov et al., 2013) but some of the studies used some cultural dimensions (Gallego-Álvarez and Ortas, 2017; Hartmann and Uhlenbruck, 2015; Ho et al., 2012; Husted, 2005; Ioannou and Serafeim, 2012; Miska et al., 2018; Park et al., 2007; Ringov and Zollo, 2007) and only one study uses all six dimensions to investigate corporate environmental reporting (Gallego-Álvarez and Ortas, 2017). To fill this gap, this study uses all six cultural dimensions and contributes a theoretical 3Ps framework to stakeholders’ theory of the literature to investigate sustainability-value nexus. On the empirical side, the study contributes by demonstrating clear differences of the corporate environmental performance (CEP) as well as its valuation in different cultures to suggest a need for multidimensional cultural sensitivity in climate change policy in corporate arena.
We organize rest of the study as follows. Section 2 develops the theoretical framework and the hypotheses, Sect. 3 describes the data and the methodology, and Sect. 4 presents the results. Finally, Sect. 5 provides conclusions and policy implications. We furnish references at the end.