Organization & Environment

Extant theory in corporate sustainability highlights challenges in coordinating organizational action to “fit” the complex functioning of ecological systems. Our qualitative study shows how a certification organization in the U.S. wine industry developed and enacted a “bridging capacity,” through which it tailored program standards to cultivate members’ attention to ecological issues within and across spatial and temporal scales. Drawing on data covering a 25-year period, we uncover three mechanisms associated with this bridging capacity: sourcing, decoding, and converting. We develop a theoretical model showing how a bridging capacity enables a certification organization to develop standards that reflect and respond to the complexity of the ecological systems in which its members operate. While certification programs have been important for signaling a commitment to sustainability to stakeholders, our work adds that by developing a bridging capacity, such programs can add further value by supporting coordinated, system approaches to corporate sustainability.

Based on more than 7,000 shareholder proposals, this article argues that firms targeted by environmental, social, and governance (ESG)–related proposals subsequently improve their ESG performance. We reach the same conclusion in the climate change context. Surprisingly, we find no evidence that withdrawn proposals are more or less impactful than proposals that were omitted or those that were brought to a vote. This result suggests that the filing of the proposal itself has an agenda-setting effect. Yet, we find evidence that the more shareholder proposals a firm receives, the stronger the effect on ESG performance. By submitting proposals, shareholders signal what matters for them and this, in turn, may shape a firm’s strategy.

Environmental, social, and governance (ESG) ratings are central to sustainable investing and research but face criticism for inaccurately reflecting corporate sustainability performance. In response, new metrics have emerged that assess companies’ impacts on the Sustainable Development Goals (SDGs). This article compares four ESG ratings with two SDG scores, revealing no correlation between them. It then evaluates the alignment between these sustainability ratings and how investors and regulators assess corporate (un)sustainability. The findings show that SDG scores capture how these stakeholders judge companies’ negative and positive impacts on sustainable development, while ESG ratings do not. This implies that SDG scores have high, and ESG ratings low, construct validity for assessing corporate sustainability performance. These results underscore that concepts like ESG, corporate sustainability, and company impact can be used complementarily but not interchangeably. The practical implication is that sustainable investors should prioritize sustainable development impacts next to avoiding ESG risks.

Stakeholders often evaluate firms with strong reputations more favorably. However, a growing stream of research also suggests that a high reputation may lead to negative evaluations. We attempt to reconcile these contrasting viewpoints in the context of corporate environmental sustainability. Assuming that stakeholders use organizational reputation as their interpretive lens, we examine how the stock market evaluates firms with varying levels of environmental performance. Analyzing 667 public disclosures of greenhouse gas emissions by U.S. firms between 2015 and 2021, we find that firms with lower reputations receive more favorable stock market reactions when their environmental performance exceeds expectations, suggesting that low reputations can function as an asset. Conversely, the negative stock market reaction to firms’ environmental performance falling below expectations is mitigated for firms with higher reputations, indicating that high reputations serve as an asset in this context. We offer important insights, highlighting the organizational reputation’s role as an interpretive lens through which the stock market asymmetrically evaluates firms’ environmental performance.