Hamim, M.T. orcid.org/0000-0003-1041-6408 and Mollah, S. orcid.org/0000-0002-6342-8309 (2025) Corporate climate risk governance and environmental innovation. Business Strategy and the Environment. ISSN 0964-4733
Abstract
The existing body of literature with regard to climate-oriented governance focuses on carbon disclosure and climate change commitments, with a notable omission of an essential aspect of sustainable business practices and decarbonization, that is, environmental innovation. In this study, we examine the effect of climate risk governance on firm-level environmental innovation. Based on a panel of 4378 firm-year observations from the nonfinancial S&P 500 components over the period of 2011–2021, we provide novel empirical evidence that corporate climate risk governance is positively associated with environmental innovation. Firms with strong climate risk governance appear to engage more in environment-friendly innovation to reduce environmental costs and the burden on customers. Further analysis identifies a channel, namely, environmental investment, through which climate risk governance facilitates environmental innovation. Our results remain consistent after we employ an instrumental variable approach and propensity score matching estimates to address potential endogeneity bias. The empirical results also pass a battery of robustness tests with alternative variables and different estimation techniques. This study carries important implications for executive management, regulators, and other stakeholders in relation to reforms in governance structures and the advancement of environmentally sustainable innovation.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2025 The Author(s). Business Strategy and the Environment published by ERP Environment and John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits use, distribution and reproduction in any medium, provided the original work is properly cited. |
Keywords: | agency theory; climate risk governance; environmental innovation; resource-based view; sustainability |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Management School (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 19 May 2025 13:54 |
Last Modified: | 19 May 2025 13:54 |
Status: | Published online |
Publisher: | Wiley |
Refereed: | Yes |
Identification Number: | 10.1002/bse.4352 |
Sustainable Development Goals: | |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:226810 |