Culture, ESG, and Real Environmental Performance: Evidence from China

Cultural theories offer divergent perspectives on how cultural tightness and collectivism affect corporate ESG performance. Using evidence from China, we find that firms in culturally tight and collectivist regions exhibit significantly stronger ESG outcomes. Firms relocating to tighter and more collectivist provinces experience improved ESG performance, while those relocating to looser and more individualist provinces experience lower ESG performance. These positive cultural effects are stronger in regions with higher educational attainment, with environmental protection investment serving as a mediating channel. Improved corporate ESG performance translates the positive effects of cultural tightness and collectivism into tangible environmental benefits. Specifically, a one-point increase in ESG, cultural tightness, and collectivism reduces pollutant discharges by 5.236, 0.342, and 0.251 kilograms per person, respectively. Our study contributes new insights to the debate on the cultural foundations of corporate sustainability by demonstrating that cultural tightness and collectivism can shape both corporate ESG performance and real environmental outcomes.