Impact of Corporate Governance on Firms’ Environmental Performance: Case Study of Environmental Sustainability-Based Business Scenarios

Abstract

Environmental performance is a key aspect of business for both shareholders and stakeholders. However, it is necessary to examine whether current practices in corporate governance protect the key interests of shareholders and environmental stakeholders. This study examines how corporate governance affects a company’s sustainability and environmental performance. The study takes a novel approach by dividing businesses into three categories based on various business scenarios for environmental sustainability and evaluating the effect of corporate governance on each scenario in businesses. According to the study, corporate governance is a relative phenomenon whose effectiveness depends on assumptions about how long a company can continue operating under its current environmental conditions. Empirical results show that corporate governance is only effective in business-as-usual environmentally sustainable or highly environmentally sustainable scenarios.