Environmental Performance, Environmental Risk and Risk Management

Environmental performance, environmental risk and risk management are of contemporary interest, but to date there is limited evidence on their relationships. This paper is the first to provide detailed insights by adopting a content analysis approach and disaggregating firm-level environmental risk into types related to regulations, operations and nature. For a sample of US firms in polluting sectors, descriptive findings show that the level of risk and the likelihood of active risk management differ in the type considered. Environmental performance, risk and the likelihood of risk management all differ across firms and industries. Multiple regressions reveal a negative association between environmental performance and environmental risk, the extent of which depends on the type of risk. Results hold when controlling for active risk management, which is not found to contribute significantly to environmental performance. Our findings have implications for public policy and suggest that linkages to environmental risk and risk management are worth exploring in more differential ways and beyond industry-level assessments in environmental studies. Copyright (c) 2012 John Wiley & Sons, Ltd and ERP Environment.