Organization capital and carbon performance

This study examines the impact of organization capital on carbon performance. Utilizing a sample of 3,817 firm-year observations of US publicly listed companies over the period from 2002 to 2019, I find that firms with higher organization capital are associated with lower carbon emission, signifying that high-organization capital firms are better-placed to utilize inimitable resources and competencies which in turn lead to improve firms’ carbon performance. In addition, I find that the magnitude of the negative relation between organization capital and carbon emission is more pronounced for firms with stronger corporate governance structures and lower financing constraints. Additionally, this relationship is more evident for firms operating in carbon sensitive industries and regions with an established ETS (Emissions Trading Scheme). This result survives after applying a range of robustness tests, including alternative specifications of carbon performance and organization capital, and the main finding is not driven by endogeneity concerns resulting from omitted variable bias, selection bias and reverse causality. To provide additional insights, I partition total carbon emissions into segments of direct and indirect emissions and find that high-organization capital firms tend to reduce both direct and indirect carbon emissions. Taken together, my analysis suggests that organization capital has considerable implications for corporate carbon performance.