Major overseas customers and corporate decoupling of environmental responsibility: Evidence from China

Abstract

In this study, we examine firms' decoupling of how they communicate about environmental responsibility and what they actually do in terms of environmental responsibility. We argue that this decoupling is driven by their trade relations with major overseas customers. Specifically, we propose that major overseas customers increase the likelihood of corporate environmental decoupling. We test our argument in a sample of Chinese industrial firms for the period 2007–2012. We find that the higher the proportion of sales to major overseas customers, the more likely supplier firms are to decouple environmental responsibility, that is, to obtain ISO 14001 environmental management system certification but not significantly reduce their pollution emissions. Heterogeneity analyses show that the impact of major overseas customers is more significant when these customers are larger, when the customers are located in Western developed countries, when the economic relationship between supplier firms and major overseas customers is more important to supplier firms, when supplier firms are more short‐sighted, and when supplier firms are in more competitive product markets. Our findings advance research on corporate environmental management and on corporate major customers by providing large‐scale empirical evidence of the drivers of the decoupling of corporate environmental responsibility and the impact of major customers on corporate environmental behavior.