Drivers of corporate environmental policy at country, sector, and firm levels

This study provides a holistic approach to the potential drivers of corporate environmental policy. Institutional and/or stakeholder theories are used to explain any influence on this type of policy in situations with different characteristics. Specifically, the analysis considers country-, industry-, and firm-level determinants of an international sample of listed companies. Exploratory factor analysis was first applied to the variables at the country level because their underlying interrelationships were unknown. Using ordered probit models clustered at the firm level, we found that some environmental characteristics of a country and some macro-level variables considered together affect corporate environmental policy, along with pressure from industry peers. Moreover, we observed that companies with better policies for stakeholders, greater board independence, and greater gender diversity tended to develop better environmental policies. This study offers insight into fostering environmental responsibility through policy incentives and effective corporate governance structures.