Green cost calculus for corporate environmental responsibility

Purpose - The purpose of this study is to show that corporations may resort to legal compliance instead of acting voluntarily towards abatement of environmental damages as a strategy for improving their reputation. Design/methodology/approach - Based on the natural philosophy and postulate of business, theoretical models have been developed to justify the purpose of this paper. Financial impacts of Indian revenue law on environmental damage prevention by the polluting firms have been gauged mathematically. Findings - Corporate environmental responsibilities have seemed to be more reputation-led than innovation-led or efficiency-led. Reputation-led environmental responsibilities can have ways to bypass innovations and some firms can simply comply with regulations at the society’s cost (may be to a sizeable extent). If penalty is imposed on companies in the form of taxation for damaging the environment, then companies get chances to pass the financial burden to the shareholders in the form of lower dividend pay-outs. Unless the capital market supports corporate green initiatives, there may be destruction of shareholder wealth. Research limitations/implications - Extensive empirical analysis have not been conducted as the paper concentrates on developing theoretical understanding of the models of “green cost”. Practical implications - The exploration and outcomes of this paper can offer several directions to the government, business and social activists in articulating green economic policy for the benefits of all. Social implications - The civil society will understand better what the corporate environmental responsibility really means for them. Originality/value - This paper has made a modest endeavour to develop theoretical models of both “green cost internalisation” and “green cost externalisation”. It has paved the path for further deliberations and research.