Journal of Business Ethics (2010) 95:487506 DOI 10.

1007/s10551-010-0435-z

Springer 2010

Corporate Transparency and Green Management

Antonino Vaccaro Dalia Patino Echeverri

ABSTRACT. How can firms support their customers collaborative, social responsibility initiatives and especially pro-environmental, firmcustomer collaborations? Does corporate transparency affect customers willingness to undertake pro-environmental collaborative programs? This study addresses these questions in relation to the US residential electricity market. It focuses on the impact of customers perceptions of the utilitys degree of transparency and on the willingness to engage in proenvironmental behavior (PEB) related to electricity consumption. The responses of 1257 interviewees from US households to questions related to their electricity suppliers are analyzed through structural equation models (SEMs) using latent variables. Results show that customers perceptions of an electricity utilitys transparency affect their willingness to collaborate in environmental programs, and that the degree of perceived transparency of the utility is related to customers environmental awareness. KEY WORDS: pro-active environmental management, corporate transparency, pro-environmental behavior (PEB), New Environmental Paradigm (NEP)

Introduction How can rms support their customers in collaborative, social responsibility initiatives particularly rm customer collaborative pro-environmental behavior (PEB)? And does corporate transparency affect customers willingness to cooperate in collaborative proenvironmental programs? These are questions that have vexed scholars in business ethics (e.g., AragonCorrea and Rubio, 2007; Berry and Rondinelli, 1998; Buysse and Verbeke, 2003), information ethics (e.g., Turilli and Floridi, 2009); and public policy (e.g., Fung et al., 2007), in the long-standing discussion on corporate sustainability (see e.g., Enderle and Tavis, 1998; Payne and Raiborn, 2001; Van

Marrewijk, 2003) and pro-active environmental management (Aragon-Correa and Rubio, 2007; Berry and Rondinelli, 1998; Buysse and Verbeke, 2003). But, although some theoretical perspectives (e.g., Elia, 2009; Turilli and Floridi, 2009) are available, and a few case studies (e.g., Vaccaro and Madsen, 2009b) have been conducted, there is a dearth of empirical work on the impact of corporate transparency on customers performance and their PEB in particular (Clark et al., 2003). This study explores the impact of customers perceptions of an electricity utilitys transparency on their willingness to engage in PEB (Clark et al., 2003). The results of 1257 interviews with US households to obtain information on their electricity suppliers are analyzed through a structural equation model (SEM) with latent variables. Consistent with the literature on organizational transparency (see, e.g., Bansal and Kistruck, 2006; Eggert and Helm, 2003; Ramkumar and Petkova, 2007; Santana and Wood, 2009; Stoll, 2005), in this article, environmental transparency or perceived environmental transparency is understood as peoples perceptions of the willingness of their utility to make public, information on activities that have an impact on the environment and on stakeholders (Fung et al., 2007; Ramkumar and Petkova, 2007; Vaccaro and Madsen, 2009a). We refer to environmental awareness as the degree of individuals concern for environmental issues (see, e.g., Dunlap et al., 2000; Peterson, 2000), and to PEB as activities aimed at reducing the impact of human activities on the environment (see, e.g., Bollino, 2009; Clark et al., 2003). This study extends existing work in at least four ways. First, it shows that customers willingness to adopt PEB is affected by the perception of the electricity utilitys environmental transparency. This result is important because it resolves a major

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Antonino Vaccaro and Dalia Patino Echeverri Literature review and hypotheses Since the mid-1980s, rmcustomer collaboration on corporate sustainability programs and reducing the environmental impacts of the products and services consumed has been the subject of research in several elds (see, e.g., Aragon-Correa and Rubio, 2007; Berry and Rondinelli, 1998; Buysse and Verbeke, 2003; Hartman et al., 1999). For example, the design of demand-side management programs is of interest to managers and policy makers in relation to companies providing services such as gas, water, transportation, telecommunications, and electricity (Guy and Marvin, 1996). While extensive research has been conducted on the determinants of rms disclosure of environmental information, less attention has been paid to the social implications, and impact on customers behavior in particular (Aerts et al., 2008). This contrasts with the increased interest in rm transparency (see, e.g., Bansal and Kistruck, 2006; Basu and Palazzo, 2008; Hebb, 2006; Hess, 2007, 2008; Palazzo and Richter, 2005; Waddock, 2004). Empirical studies (see, e.g., Fung et al., 2007; Santana and Wood, 2009) and theoretical work (see, e.g., Turilli and Floridi, 2009; Viso, 2009) pointed out the transformative power of corporate and organizational transparency. Several of the studies conducted within the Transparency Policy Project based at the Kennedy School of Government at Harvard University show that transparency policies spur corporate self-regulation (see, e.g., Fung et al., 2003, 2007; Weil et al., 2006). Transparency has played an important role in supporting industry level modications related to improving the environment. For example, the Toxic Release Inventory (TRI) program established under the 1986 Emergency Planning and Community Right-to-Know Act (EPCRA), as a response to the Bhopal disaster produced an unexpected reduction in the amounts of toxic chemicals released into the environment by industry (Fung et al., 2007). It has been noted that the potential of transparency to inuence environmental behavior is not limited to rms; it also affects rmstakeholder relationships (Bansal and Kistruck, 2006; Fung et al., 2007; Tapscott and Ticoll, 2003). However, the impact of rms disclosure of environmental information on consumers and stakeholders behavior is

controversy about the effectiveness of corporate information disclosure on customers behavior; in particular it demonstrates that transparency can contribute to rms corporate sustainability (Enderle and Tavis, 1998; Van Marrewijk, 2003), proactive environmental management (Aragon-Correa and Rubio, 2007; Berry and Rondinelli, 1998; Buysse and Verbeke, 2003), and environmental marketing (Fraj-Andres et al., 2009). Second, this article shows that the higher the customers environmental awareness, the lower will be his/her perceptions of the public utilitys openness in terms of the information available on the environmental impact of its activities. In other words, ceteris paribus, a customers perception of a utilitys environmental transparency is inversely related to the environmental awareness of that customer. This result extends research that focuses on customers informational requests but neglects the importance of environmental information and, in particular, customers current perceptions of the environmental information made available by rms, which is a critical variable in consumers decisionmaking processes (Teas, 1993). Third, this study conrms empirical work that identies environmental awareness as a reliable predictor of individual PEB. Previous studies have analyzed this issue based on very narrow geographical samples (see, e.g., Clark et al., 2003; Slimak and Dietz, 2006); this study provides results for a sample of the entire US population (as discussed below). Finally, this article has some implications for managers and policy makers interested in exploiting corporate disclosure as a tool to improve rm stakeholder collaborative environmental programs and as a complementary practice in support to environmental marketing. This article is organized as follows: The section below provides a brief review of the literature on PEB and transparency, and proposes two hypotheses on the relationships between environmental awareness, PEB, and perceived transparency. The third section describes the methodology used to collect the data for the empirical analysis; the fourth section presents the results of the SEM used to test the hypotheses. The last three sections, respectively, provide a discussion, some perspectives for further research based on this study, and the conclusions.

Corporate Transparency and Green Management controversial in the literature (Bansal and Kistruck, 2006). Some studies argue that the disclosure of information by a company can be problematic and may have only a limited impact on consumers behavior. Information disclosed by a rm can fuel criticism (Hess, 2008). Consumers may use the information received to put pressure on the rm in terms of its socially responsible programs (see, e.g., Ashforth and Gibbs, 1990; Bansal and Kistruck, 2006; Hendry, 2006; Milne and Patten, 2002): Indeed, the more that information on social responsibility programs in preparation is made available to customers, the more modications they will be enabled to request (Bansal and Kistruck, 2006; Seel et al., 2000). Such reactions from stakeholders can affect rmcustomer collaborative programs, since they may become the basis for new areas of conict. In other words, pursuing the ideal of corporate transparency may become selfdefeating in that the disclosure of more information to the public can reduce stakeholders willingness to collaborate, which, in turn, will reduce the effectiveness of future social responsibility initiatives (Bansal and Kistruck, 2006; Seel et al., 2000). However, there is another strand in the literature that suggests that information disclosure has a positive impact on rmcustomer relationships and customers willingness to undertake PEB. This body of work, which is based on analyses of individual rms or multi-case studies, proposes two main arguments to support this thesis. First, customers expect detailed information about how their money or personal effort is leveraged through the provision of social responsibility initiatives, such as pro-environmental programs (Reynolds and Yuthas, 2008; Tapscott and Ticoll, 2003). In this view, information disclosure is seen as the minimum requirement: If an organization requests additional effort from customers or increases its charges as a part of a socially responsible or environmental project, those same customers will expect detailed information about the initiative as a form of accountability (Handeld et al., 1997; Hood and Heald, 2006; Tapscott and Ticoll, 2003). The importance of such accountability is evidenced by the increased attention to green labeling and environmental certications related to products and business practices (Felleman, 1997; Fraj-Andres et al., 2009).

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Second, transparency has been highlighted as necessary to encourage new, environmentally friendly policy actions because it increases public understanding of these kinds of corporate initiatives (e.g., Christman and Taylor, 2002; Ramkumar and Petkova, 2007; Reed and Reed, 2009; Sugiyama and Michaelowa, 2000). Customers expect detailed information on new collaborative environmental actions; they want to understand the main features of new initiatives and their expected positive impact on the environment (Hartmann and Ibanez, 2007; Ramkumar and Petkova, 2007; Wustenhagen and Bilharz, 2006). However, this latter group of studies is based on consumers requests for greater corporate transparency in the future, and does not take account of the impact of consumers current perceptions on their behavior. In other words, there is a need for empirical evidence on the impact of customers current perceptions of corporate transparency on their willingness to engage in PEB. We would highlight here the longitudinal case study by Vaccaro and Madsen (2009b), which shows that higher levels of corporate transparency increase stakeholders understanding of the value of a rms socially responsible activities, such as environmental programs, and reduce the negative reactions identied in other studies (see, Ashforth and Gibbs, 1990; Bansal and Kistruck, 2006; Milne and Patten, 2002). Our rst hypothesis focuses on this controversy. We expect that higher levels of perceived environmental transparency will increase customers willingness to engage in PEB because more information will support a deeper understanding of rms green initiatives and will guarantee greater accountability on the part of the rm. Thus, our rst hypothesis is:
H1:

Ceteris paribus, the higher the degree of perceived environmental transparency adopted by a company, the higher the willingness of its customers to engage in collaborative PEB.

Companies are concerned about how to satisfy increasingly demanding and environmentally aware consumers who, research shows, do care about the environmental policies adopted by their suppliers (Berry and Rondinelli, 1998; Christman and Taylor, 2002; Fung et al., 2007; Hartman et al., 1999). Firms have responded by paying attention to their customers expectations and awareness and designing

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Antonino Vaccaro and Dalia Patino Echeverri relationship emerges (see, e.g., Pagano, 2004; Tapscott and Ticoll, 2003). But, informational expectations are always associated with individual awareness about a specic issue (Eggert and Helm, 2003; Tapscott and Ticoll, 2003; Vaccaro and Madsen, 2009a). Thus, higher awareness may lead to lower perceived transparency. The literature did not explore this inverse relationship in rmcustomer interactions in the context of environmental information. We would expect that, ceteris paribus, more environmentally aware customers will perceive a company as being less transparent since they will have higher informational expectations about the degree of environmental transparency the rm should adopt. We believe that more reliable indications on this issue would be very helpful since companies currently are struggling to improve the level of perception of their transparency (Tapscott and Ticoll, 2003; Viso, 2009). In particular, transparency concerning environmental information is considered a hot topic on the agendas of managers and policy makers (see, e.g., Reynolds and Yuthas, 2008). But, as already stated, although there are a lot of claims concerning the importance of this issue, there are a few empirical studies that test the antecedents to perceptions of corporate environmental transparency. Thus, our second hypothesis is:
H2:

communication and marketing strategies that include environmental information (see, e.g., Bansal and Kistruck, 2006; Hartmann and Ibanez, 2007; Nakarado, 1996; Vandermerwe and Oliff, 1990; Wustenhagen and Bilharz, 2006). For example, in the energy sector, providing more information and addressing misconceptions about energy technologies are considered important to encourage support for renewable energy (Menges et al., 2005; Reiner et al., 2006). Indeed, customers expect environmental information and reward those companies they perceive to be more transparent (Bansal and Kistruck, 2006). We should point out that stakeholders, and especially customers, present signicant differences in terms of their information expectations (Alvarez Gil et al., 2001; Gilmore and Pine, 2007; Reynolds and Yuthas, 2008). For example, some environment activist groups were dissatised with the completeness of the data provided by ISO 14000 certication and requested more environmental information from some rms, even though general opinion in the practitioner community was that this certication was fairly complete and transparent (see, e.g., Aragon-Correa and Rubio, 2007). More generally, the literature suggests that information expectations and demands concerning environmental issues are related to individual levels of environmental awareness: More environmentally aware individuals generally demand more information from product and service providers (Vandermerwe and Oliff, 1990; Ramkumar and Petkova, 2007; Fraj-Andres et al., 2009). Indeed, the rst and most important need that distinguishes environmentally aware customers from others is the search for information (Ottman, 1993). We suppose that individuals expectations about environmental information disclosure, which are driven by individual environmental awareness, will affect the degree of rms perceived transparency. We are interested in analyzing perceived transparency because it is a critical variable affecting customers decision making (Eggert and Helm, 2003; Pagano, 2004; Viso, 2009). The marketing literature shows that there is an inverse relationship between individuals expectations and their nal evaluation (see, e.g., Teas, 1993). In this context the literature on corporate transparency provides some theoretical discussion (see, e.g., Elia, 2009; Vaccaro and Madsen, 2009a) and analyses of specic situations where this inverse

Ceteris paribus, the higher the environmental awareness of the customer, the lower will be his/her perception of rm transparency.

Methods The empirical context of this article is the US residential electricity market. Data were gathered via phone interviews with a representative sample of the US population. The electricity sector was chosen for several reasons. First, there is awareness in the industry that its domestic customers are becoming increasingly demanding and environmentally conscious. Studies show that customers do care about the environmental policies adopted by their electricity utilities (Berry and Rondinelli, 1998; Christman and Taylor, 2002; Hartman et al., 1999) and the companies have begun to respond to their customers environmental expectations through the design of appropriate communication and marketing

Corporate Transparency and Green Management strategies (Hartmann and Ibanez, 2007; Nakarado, 1996; Wustenhagen and Bilharz, 2006). This empirical setting, therefore, is suited to an investigation of the effects of corporate environmental transparency. Second, the US residential electricity sector is one of the largest and most comprehensive sectors in the US: practically everyone buys electric power. Consequently, the results of this article provide a reliable measure of the impact of perceived environmental transparency in the US domestic market, at least in the electricity sector. (More information on sample representativeness is provided below.) Third, while there has been erce debate over the impact of corporate environmental disclosure on customer behavior, few empirical studies have been conducted on this aspect. The 18 items used to measure the three latent variables relating to the hypotheses tested in this study are listed in Table I. All the items are scored on a seven-point Likert scale. In this article, we measure customers environmental awareness based on the New Environmental Paradigm (NEP) (Dunlap and Van Liere, 1978; Dunlap et al., 2000). We chose this measure because it has been used extensively in the literature on environmental economics and sustainability: According to Dunlap et al., 2000 NEP is the measure of environmental awareness used in more than 200 studies published in peer-reviewed journals. Following Dunlap et al. (2000), we asked people to rank their opinions on 11 statements related to environmental issues (reported in Table I). Some of these statements (e.g., the 1st and 3rd) are environmentally supportive, i.e., emphasize the importance of environmental issues, others (e.g., the 2nd and 5th) are environmentally skeptical, i.e., test whether the respondent is doubtful about the real relevance of environmental problems. This combination of environmentally supportive and skeptical statements helps to minimize social desirability effects and provides a better measure of the real environmental awareness of respondents (Dunlap and Van Liere, 1978; Dunlap et al., 2000). [At the end of the data gathering exercise, following the previous literature (see, e.g., Dunlap et al., 2000; Peterson, 2000) we reversed along the scale 17 the values of those questions mentioning environmental skepticism in order to obtain a measure consistent with environmental awareness.]

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Perceived transparency was measured using four items adapted from previous empirical work (see, e.g., Eggert and Helm, 2003; Vaccaro and Madsen, 2009a). We asked interviewees to rank their agreement on four questions. The rst was about the clarity of information on the practices employed by electric utilities to reduce emissions; the second asked whether the electric utility provided the information necessary to understand the environmental impact of electricity generation; the third concerned information on environmental issues associated with the generation of electricity; and the fourth explored the completeness and clarity of information concerning the environmental policies and practices of electric utilities. Willingness to engage in PEB related to electricity consumption was measured by three items, used in previous empirical studies of the electricity sector (e.g., Bollino, 2009; Clark et al., 2003). We would point out that PEB is a rather wide concept, which can include several different activities such as waste recycling, reduction of consumption of goods and services, possibility to pay higher prices for environmentally friendly products and services, modications to personal and professional habits, etc. (see, e.g., Aragon-Correa and Rubio, 2007; Bollino, 2009; Clark et al., 2003). However, since the empirical context of this study is the electricity sector, we focused on the willingness to undertake PEB activities related to electricity consumption. Following previous studies (see, e.g., Bollino, 2009; Clark et al., 2003), respondents were asked to indicate their availability to undertake three collaborative activities in relation to their electricity supplier: First, whenever possible, to choose a generator that was environmentally responsible; second, be willing to pay more for green electricity; third, be willing to collaborate in new programs focused on reducing electricity consumption in order to reduce the environmental impact. (Willingness was measured on a 17 Likert scale where 1 is I denitely would not and 7 is I denitely would do it.) In order to increase the reliability of these three measures, interviewers told interviewees to consider the possibility that following the interview, they might be contacted by their electricity utility to collaborate on a new green program. Table I presents the observed measures of each latent variable, the respective references to the literature, and the results of the mean estimations,

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TABLE I

Latent variables, observed measures, previous studies that used these measures, and reliability indexes Mean 3.5 1.8 Eggert and Helm (2003) and Vaccaro and Madsen (2009a) Cronbachs a = 0.93 SD References Reliability indexes

Latent variable

Items (observed measures)

Perceived transparency

4.0

1.8

4.16

1.79

4.2

1.8

Antonino Vaccaro and Dalia Patino Echeverri

Willingness to engage in PEB 6.0 1.54

PEB as discussed by Clark et al. (2003) and Bollino (2009)

Cronbachs a = 0.70

5.25

2.0

IT1: [Name of electric company] explains clearly how it controls the emissions caused by its electricity production that could harm the environment IT2: Overall, [name of electric company] provides the information needed to understand the environmental impact of electricity generation IT3: [Name of electric company] provides relevant information regarding environmental issues associated with the generation of electricity IT4: The environmental policies and practices of [name of electric company] are provided to customers in a clear and complete way In collaboration with my utility: WI1: If possible, I would choose an electricity supplier that is environmentally responsible WI2: I would pay more for electricity whose production does not pollute the environment WI3: Overall, I would do whatever is possible in collaboration with my utility to reduce the impact of my electricity consumption on the environment 5.97 1.41

TABLE I continued Mean 4.48 1.9 Cronbachs a = 0.78 SD References Reliability indexes

Latent variable

Items (observed measures)

Adherence to NEP 4.46 1.9

Developed by Dunlap and Van Liere (1978) and used in more than 100 empirical studies. Other references include Bechtel et al. (1999) Dunlap et al. (2000) and Clark et al. (2003)

5.61 5.58 3.45 1.8 1.8

1.7

3.41

2.0

4.79

1.9

3.74 5.41 3.69 1.9 1.7

Corporate Transparency and Green Management

2.3

EA1: We are approaching the limit to the number of people the earth can support EA2: Human ingenuity will ensure that we do NOT make the earth uninhabitable EA3: Humans are severely abusing the environment EA4: Plants and animals have as much right as humans to exist EA5: The balance of nature is strong enough to cope with the impacts of modern industrial nations EA6: The so-called ecological crisis facing humankind has been greatly exaggerated EA7: The earth is like a spaceship with very limited room and resources EA8: Humans were meant to rule over the rest of nature EA9: The balance of nature is very delicate and easily upset EA10: Humans will eventually learn enough about how nature works to be able to control it EA11: If things continue on their present course, we will soon experience a major ecological catastrophe 5.10 1.9

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Antonino Vaccaro and Dalia Patino Echeverri likelihood (ML) estimations and, since the means of the measures of PEB were above 5 (but the standard deviation was always superior to 1.4), we also used generalized least square (GLS) estimates of the structural (regression) coefcients. The two estimation procedures do not present signicant differences. In both cases the results show that the relationships between latent variables are all signicant and in the expected direction. The results of the ML estimations are presented in Tables IIa, IIb, IIc, IId, and III and the GLS estimates are contained in Appendix A. All item loading factors are signicant (P-value less than or equal to 0.001). None of the hypotheses tested can be rejected. The results for H1 show that higher perceived transparency positively affects an individuals willingness to engage in PEB related to electricity consumption (loading coefcient = 0.0.05, P-value = 0.03). The results for H2 indicate that individuals with high levels of concern over environmental issues perceive their electric utility as less transparent (loading coefcient = -0.209, p < 0.001). Moreover, as expected, higher environmental awareness is associated with higher willingness to engage in PEB related to electricity consumption (loading coefcient = -0.662, p < 0.001) (Figure 1). The nal model presented follows the model parsimony principle (Kline, 1998) and, in addition to the three latent variables, includes the only sociodemographic variable that was found to be statistically signicant, i.e., political afliation. Indeed, consistent with the previous literature (see, e.g.,

standard deviations, and Cronbachs a reliability index for the sample of 1257 respondents. All estimated values t the requirements necessary for a test analysis with an SEM with latent variables. More detailed information concerning the procedures adopted for sampling, questionnaire development, and administration, and the ex-post tests for construct validity are presented in Appendix B. It should be mentioned that, given the longitudinal and geographically distributed nature of our study, it was not possible to analyze the mediating role of informational expectations in the relationship between environmental awareness and perceived transparency. Previous empirical studies have pointed out that it is extremely difcult to operationalize a reliable quantitative measure for customers informational expectations although it is possible to develop reliable measures for perceived transparency (see, e.g., Eggert and Helm, 2003). Peoples informational expectations are a multidimensional and complex variable, which cannot really be measured by a questionnaire-based study; instead it would require qualitative longitudinal analyses based on interviews and direct observations (see, e.g., Paiva Dias and Moreira, 2008; Vaccaro and Madsen, 2009b).

Results The hypotheses were tested with an SEM with latent variables (Bollen, 1989). We performed maximum

TABLE IIA Results of the structural model (regression weights) Outcomes Predictor Hypothesis Expected Standard Critical ratio sign estimate + 0.05 -0.209 2.151 -4.610 SE p

Willingness Perceived transparency to engage in PEB Perceived Environmental awareness transparency (measured as adherence to NEP) Willingness Environmental awareness to engage in PEB (measured as adherence to NEP) Willingness Political afliation to engage in PEB ***p < 0.001.

H1 H2

0.028 0.03 0.045 ***

Control hypothesis +

0.662

11.963

0.055 ***

Control variable

-0.03

-2.020

0.14

0.041

Corporate Transparency and Green Management

TABLE IIB Results of the structural model (regression weights): loading weights of the latent variables Item EA1 EA2 EA3 EA4 EA5 EA6 EA7 EA8 EA9 EA10 EA11 WI1 WI2 WI3 IT1 IT2 IT3 IT4 ***p < 0.001. TABLE IIC Baseline comparisons: goodness-of-t indexes Model Default model Saturated model Independence model NFI Delta1 IFI Delta2 TLI rho2 CFI 0.92 1.000 0.000 0.94 1.000 0.000 0.91 0.000 0.943 1.000 0.000 TABLE IID Latent variable NEP NEP NEP NEP NEP NEP NEP NEP NEP NEP NEP Willingness to engage in PEB Willingness to engage in PEB Willingness to engage in PEB Perceived transparency Perceived transparency Perceived transparency Perceived transparency Standard estimate 1.000 0.31 0.94 0.86 0.73 1.00 0.86 0.80 0.19 0.88 1.20 1.000 0.70 0.71 1.000 1.00 1.45 1.34 Critical ratio SE

495

5.707 16.690 14.641 13.002 15.477 14.299 11.820 3.587 16.169 18.635 12.697 11.891 35.086 8.897 8.852

0.054 0.057 0.059 0.056 0.065 0.060 0.068 0.053 0.055 0.065 0.055 0.060 0.031 0.163 0.151

*** *** *** *** *** *** *** *** *** *** *** *** *** *** ***

Root mean square error of approximation (RMSEA) Model Default model Independence model RMSEA LO 90 HI 90 PCLOSE 0.027 0.093 0.025 0.029 0.091 0.095 1.000 0.000

Zelezny et al., 2000), we discovered that once NEP is accounted for, the impact of socio-demographic variables such as age, gender, and income disappears. By the same token, we originally controlled for variations among different rms. Since this control was not statistically signicant, it is excluded from the model presented here. Although the opposite signs of the loading factors associated with H2 and the relationship between NEP and PEB avoid any suspicion of a potential impact of endogeneity between adherence to NEP and PEB on the loading factor associated with H1, we conducted an additional analysis to shed light on this issue. We selected three different subsamples based on the items measuring adherence to NEP,

Default model is good: RMSEA <0.05. Lower value of 90% CI is close to 0, upper value is less than 0.8. PCLOSE >0.05 so we cannot reject the hypothesis that the model is a close-tting model.

i.e., people that ranked less than 2 on average, people that ranked 4 on average, and people that ranked more than 6. We conducted SEM regressions, with perceived transparency as the only predictor of PEB in each subsample. All three regressions show that perceived transparency positively affects PEB. Moreover, we tested the representativeness of our sample by comparing the statistics on gender, age, income, geographical location, education, and race in our sample, with those for the US population. We found our sample to be representative and homogeneously distributed.

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Antonino Vaccaro and Dalia Patino Echeverri

TABLE III Results of the measurement model (v2 = 102, df = 33)

Latent variable Perceived transparency

Item IT1 IT2 IT3 IT4 WI1 WI2 WI3 EA1 EA2 EA3 EA4 EA5 EA6 EA7 EA8 EA9 EA10 EA11

Estimate 1.000 0.860 1.038 0.976 1.000 0.704 0.532 1.000 0.268 0.932 0.843 0.994 0.842 0.746 0.860 0.099 1.197 0.711

Standard error

Critical ratio

0.026 0.054 0.052 0.072 0.070 0.052 0.056 0.057 0.064 0.059 0.065 0.054 0.050 0.064 0.055

33.540 19.205 18.641 9.731 7.596 5.135 16.735 14.710 15.586 14.301 11.422 16.062 1.971 18.675 12.894

*** *** *** *** *** *** *** *** *** *** *** *** 0.049 *** ***

Willingness to engage in PEB

Environmental awareness (measured as adherence to NEP)

***p < 0.001.

Environmental Awareness
(Adhesion to NEP)

.662 *** .-209***

exploratory factor analysis, and there were no general factors to account for the majority of the covariance among measures. This indicates that common method variance is not likely to be a major problem in this study.
Willingness to engage in PEB

Perceived Transparency

.05**

Discussion
Figure 1. Model and results of the SEM regressions.

We evaluated the nonresponse bias (Armstrong and Overton, 1977) by testing for differences in the responses of early respondents (i.e., those who immediately agreed to participate in the survey) compared to late respondents (i.e., those who had to be contacted two or more times before agreeing to participate). A t-test showed no statistically signicant differences between early and late respondents, which suggests that the survey instrument does not suffer from a nonresponse bias. We also checked for any bias attributable to common method variance (Podsakoff and Organ, 1986; Podsakoff et al., 2003) using Harmans singlefactor test. No single factors emerged from the

This study contributes to the literature on corporate transparency (see, e.g., Hebb, 2006; Hess, 2007, 2008), proactive environmental management (see, e.g., Berry and Rondinelli, 1998; Peng and Lin, 2008), and especially those studies that analyze corporate transparency issues in the context of corporate sustainability and environmental management (see, e.g., Aragon-Correa and Rubio, 2007; Bansal and Kistruck, 2006; Fraj-Andres et al., 2009). The rst contribution of this study concerns the role played by rms environmental transparency on consumers behavior. Existing work, mainly based on theoretical discussions or case studies, offers different perspectives on the effects of rms information disclosure policies. Some studies argue that

Corporate Transparency and Green Management greater informational transparency has a limited impact on customers willingness to undertake new environmental programs because, instead of it engendering greater willingness to comply with new green initiatives, consumers tend to use the information they receive to put pressure on the rm (Bansal and Kistruck, 2006; Hendry, 2006). Other studies point to the positive impact of transparency on green, collaborative rmcustomer programs since information disclosure is considered necessary to guarantee corporate social accountability and, in turn, to get customers trust (see, e.g., Reynolds and Yuthas, 2008; Tapscott and Ticoll, 2003). Our research conrms the results of this second group of studies. On the strength of an extensive quantitative analysis, our study provides strong empirical evidence of the existence of a nomological relationship between the degree of corporate transparency and customers willingness to adopt new environmental behavior. In particular, our research shows that perceived environmental transparency matters in customerrm relationships: Customers willingness to undertake pro-environmental actions in collaboration with a rm is affected by their perception of the rms environmental transparency. The higher the perceived transparency, the higher the customers willingness to contribute to a collaborative pro-environmental action. Our study also conrms some previous research that identies the signicant impact of political beliefs on PEB (see, e.g., Robert, 1996; Zelezny et al., 2000). In particular, our results show that republicans are more likely than liberals to adhere to new environmental programs. As a consequence, transparency actions will be more effective among those customers whose political leanings are democrat, and less successful with customers with republican tendencies. However, the loading factor for perceived transparency is slightly superior to political afliation. As a consequence, higher degrees of perceived transparency always drive an improvement in PEB attitudes. It is worth mentioning at this point that this result should be interpreted with caution since some recent research (see, e.g., Esty and Winston, 2009) argues that the US is experiencing progressive modication in citizens environmental attitudes, and there is a slow but progressive convergence in the environmental attitudes of republicans and democrats.

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This study also informs the literature on one of the antecedents to customer perceptions of environmental corporate transparency, i.e., environmental awareness. Previous studies point to the need to improve understanding of customers perceptions of green management issues (see, e.g., Aragon-Correa and Rubio, 2007; Fraj-Andres et al., 2009; Hart and Sharma, 2004). Our study shows that individual perceptions of the degree of rm environmental transparency are inversely related to the customers environmental awareness: The higher an individuals environmental awareness, the lower are his/her perceptions of the rms environmental transparency. Our research also conrms previous empirical work that identies environmental awareness as a reliable predictor of individual PEB. Our research complements these studies which focus on limited geographical areas (see, e.g., Clark et al., 2003), and extends studies that explore the existence of other factors affecting customers PEB (e.g., Christman and Taylor, 2002). From a normative perspective, the results of this study also provide three important insights for managers and policy makers interested in proactive environmental management (Aragon-Correa and Rubio, 2007; Berry and Rondinelli, 1998; Fraj Andres et al., 2009). First, we show that new rm customer collaborative environmental initiatives should be supported by greater transparency to address customers informational expectations. Indeed, higher perceived transparency increases customers PEB attitudes. Note also that a minimal increase in customers PEB attitudes can dramatically affect the success of a new green program. The number of a public utilitys household customers is in the millions, and the immediate involvement of a few thousands can make a new green initiative nancially sustainable (Esty and Winston, 2009). In this sense, transparency can play an important role in helping public utilities, along a short interval of time, to increase customers willingness to undertake PEB. Indeed, raising customers environmental awareness, the other relevant driver of PEB, is not an easy task and generally requires medium- to long-term investment supported by the national educational system (Robert, 1996). This study suggests also that particular attention should be paid to the information expectations of

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Antonino Vaccaro and Dalia Patino Echeverri refer to single cases and to specic markets, such as real estate (Vaccaro and Madsen, 2009a) and chemicals (Fung et al., 2007). Further research should explore the dynamics of corporate environmental transparency through the development of longitudinal (quantitative and qualitative) studies and explore the eventual existence of vicious loops where higher degrees of corporate transparency are associated with continuously increasing requests for information from consumers. Second, the empirical setting of this study is one country, the US: It should be extended to include other geographical locations. In particular, further research should develop similar surveys with multicountry empirical settings in order to understand the role played by transparency in relation to different sociocultural environments. Third, the empirical setting is focused on a specic sector, i.e., the US residential electricity sector. Research on other industries would be useful to improve our understanding of the role of perceived transparency in other markets. For example, we would expect transparency to play an equally important role in sectors, such as health and education, while there may be other sectors where it is less relevant. Fourth, this study focuses only on environmental information. Further research could widen the focus to include consumers perceptions of the completeness of information on other topics (e.g., employees working conditions, social and economic impacts, ownership, etc.), which would enable insights into the dimensionality of corporate transparency as a variable that affects consumers willingness to collaborate with the companies supplying them with goods and services. Fifth, this article analyzed the impact of external transparency on customers behavior, and future research could explore the impact of transparency on rms internal relationships such as manageremployee relations or intergroup interactions. And transparency, as a feature of responsible leadership, is a topic that deserves particular attention. Finally, micro-level analysis could explore the role played by transparency in the relationship between corporations and government institutions. This topic has been explored for the not-for-prot sector: Studies show that highly transparent nongovernmental organizations develop more trusting and

the more environmentally aware customers because they will have a greater willingness to comply with new environmental collaborative initiatives. Thus, addressing their information needs is paramount when launching new environmental programs. This study also demonstrates that disclosure of environmental information has the potential to become an important complement to environmental marketing, a practice that is receiving ever increasing attention from practitioners as a means of differen tiation and new product development (Fraj-Andres et al., 2009). In particular, higher degrees of environmental transparency can reinforce the credibility and the consequent impact of environmental marketing initiatives underpinning rms legitimacy (Milne and Patten, 2002). For example, companies can use corporate websites, and other internet-based tools to provide detailed information about current pro-environmental activities, to complement traditional, environmentally focused advertising.

Further research Some of the limitations of this study point to avenues for further research. First, this study provides a cross-sectional analysis of the impact of corporate transparency: Future research should explore the medium- and long-term impacts of rms information disclosure policies on customers informational expectations and behavior. For example, it could be argued that higher degrees of environmental transparency would improve customers environmental awareness and, in turn, increase their information expectations. According to this perspective, rms might become trapped in a vicious circle where consumers will always request more environmental information. Previous studies show that improving customers environmental attitudes is a long process that requires an integrated approach in which government and education institutions play fundamental roles. The literature includes cases where the degree of organizational transparency is stable and considered by consumers to be fair and appropriate (see, e.g., Fung et al., 2007; Vaccaro and Madsen, 2009a), which points to the fact that there is a level of corporate transparency that makes all customers, even the most demanding, satised with the amount of information disclosed. However, these studies

Corporate Transparency and Green Management effective collaborative relationships with government institutions (see, e.g., Vaccaro and Madsen, 2009b).

499

Conclusion Transparency is the word of our time (Schwartz, 2007), so proclaimed the New York Times in 2007. In contrast to the current use of this term for corporate rhetoric and propaganda, this study shows the real potential of transparency for social change and, in particular, for supporting customerrm pro-environmental collaborative actions. Corporate transparency is a new and important challenge for managers and policy makers interested in supporting a sustainable business future. Appendix A This appendix provides the results of the estimation of the model with GLS, which are presented in Tables IVaIVc, and the results of the estimation of the model with GLS and with four control variables, which are presented in Tables VaVc.

Appendix B This appendix provides detailed information on the procedures used for sampling, questionnaire development, and administration.

Questionnaire development Based on studies related to the development of public surveys and questionnaires (e.g., Churchill, 1979; Fowler, 2002; Oppenheim, 1966; Peterson, 2000; Schuman and Presser, 1981), we identied three main tasks: (1) specication of the theoretical domain and variables; (2) generation of items; and (3) purication and pretesting of items. The rst task was accomplished by reviewing the environmental studies, public policy, and business and environmental ethics literatures. We identify three main variables relevant to our research objective, i.e., transparency, awareness of environmental issues, and willingness to undertake actions in sup-

port of the environment. Based on the literature review, we developed consistent denitions of these variables and screened for research that employed reliable empirical measures. The generation of items involves adapting the items used in previous research and creating additional reliable measures. Old (adapted) and new items were constructed following Petersons (2000, p. 50)criteria for effective questions, i.e., that they should be brief, relevant, unambiguous, specic, and objective. For example, during this phase we noted that, compared to the 11-item scale in Dunlap et al. (2000), the 15-item scale used for the measurement of adherence to NEP by Dunlap and Van Liere (1978) was redundant. Thus, and based on information acquired in the course of consultation with experts on questionnaire development, interviews, and pretesting, we chose the 11-item scale. Particular attention was paid to the semantics of each item (Fowler, 2002; Oppenheim, 1966) in order to guarantee clarity and to avoid the emergence of factors that might create bias. We took account of the main causes of common method variance, i.e., common rater effect, item characteristic effect, item context effect, and measurement context effect (Podsakoff and Organ, 1986; Podsakoff et al., 2003). For example, by explaining at the beginning of each interview that the survey was designed to contribute to a study on public perceptions of utilities and the environment, and not to make judgments about individuals and/or institutions, we avoided social desirability effects (Oppenheim, 1966) an important component of common rater effect (Podsakoff et al., 2003). When requested, interviewers explained that the questionnaire responses would not be linked to respondents identities and that no personal identication variables were being requested. We conrmed that the data would be treated in strict condence, in accordance with the ethical norms of our academic institutions. We were particularly careful to avoid social desirability effects in the answers to questions about attitudes to PEB, by following the indications in studies that adopted this latent variable (see, e.g., Clark et al., 2003). Before posing the questions on PEB, we asked that interviewees respond bearing in mind that it was quite possible that their electric utility might contact them immediately following the interview in order to propose a new pro-environmental program.

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Antonino Vaccaro and Dalia Patino Echeverri tions referred to demographic information. The three items measuring PEB followed an inquiry about the intention to engage in specic actions to reduce electricity consumption and associated air pollution. These questions referred to replacing regular light bulbs with more efcient ones (even if they cost a few dollars more), buying more energyefcient appliances, lowering thermostats in winter time, running the air conditioning for less time, and paying more for electricity whose method of production was less polluting to the environment.

Item purication and pretesting involved six subtasks. First, we asked two psychologists with expertise in survey research methods to review the questionnaire. They analyzed the overall organization of the text, the introduction, the wording of questions, and the scales used. Based on their advice, we made some modications to the order of the questions, and the wording of the introduction and several questions, and to the scales. Second, the questionnaires were administered to a pilot sample of 20 people, in oneto-one meetings, coordinated by two of the authors. Interviewees were asked to respond to all of the questions read out to them. We asked interviewees for their comments on the clarity of the questions and the overall organization of the questionnaire. These comments made either during or at the end of the interview provided us with very useful information and enabled us to simplify the semantics and organization of our questions. Third, the questionnaire was reviewed by three more psychologists, who were asked to comment on content, semantics, and organization. Fourth, the questionnaire was pretested on a sample of 50 individuals in a series of telephone interviews, which were managed by a university research center that is a leader in conducting national surveys in the US, and was responsible for the nal full survey. Fifth, we met with the 29 professional interviewers involved in the pretesting, for nal suggestions about how to reshape questions and organize phone interviews. The nal draft version of the questionnaire was revised by the three psychologists involved in the third stage review of the document. Table I presents the latent variables, their denition, the related measures, and references to previous work using these measures. The questionnaire consisted of a maximum of 79 questions (some questions were skipped based on a previous answer(s)) and the survey took about 1520 min to administer. The rst part of the questionnaire gathered data related to NEP; the second part asked respondents to evaluate various aspects of their electricity utility, including quantity and quality of information received, competence in dealing with environmental issues, and responsiveness to customer needs, and included questions about perceived transparency and trust. The third part of the questionnaire analyzed individual consumption behavior and willingness to engage in PEB related to electricity consumption. The nal ques-

Sample and questionnaire administration The interviews were conducted between midJanuary and mid-March 2008 by a team of 29 professional interviewers based at a university research center. Data sampling was based on the multistage random-digit dialing approach (Fowler, 2002). Sample telephone numbers were dialed up to 10 times at different times of the day, on different days of the week, but with a bias to evenings and weekends. The response rate was 39.7% based on 1257 completed interviews, 115 partial interviews, and 1791 refusals. People were contacted on their home phone numbers and informed that their household was one of 1200 across the country being invited to participate in an important survey about utilities and the environment. Interviewers stressed the importance of gathering the opinions of the US population (following Oppenheim, 1966) and, if asked, explained that the questionnaire responses were not linked to respondents identities since no personal information was involved. Only individuals aged 18, and responsible for paying (opening, reading, and paying) the household electricity bill, were asked to respond.

Construct validity We carried out several analyses to check the validity and reliability of our operational measures and response scales (Tanriverdi, 2005, 2006). The nal selection of items was based on the results of exploratory and conrmatory factor analyses. The conrmatory factor analysis (described in Table III) shows

Corporate Transparency and Green Management that the loading factors of each of the latent variables on its related observable measures are strong and signicant (p < 0.001 for all except one item) supporting the validity of the latent constructs (Tanriverdi, 2005). Although the item EA9 presented a low loading factor on the corresponding variable, we kept it in our

501

analysis in order to guarantee the comparability of our study with the extensive literature on PEB which uses the scale proposed by Dunlap et al. (2000). As a robustness check we performed all regressions without items EA9 and EA2, which showed lower loadings in the conrmatory factor analysis. Results

TABLE IVA Estimation of the nal model with GLS Outcomes Predictor Hypothesis Expected sign + + Standard estimate 0.046 -0.242 0.491 Critical ratio SE p

Willingness to engage in PEB Perceived transparency Willingness to engage in PEB ***p < 0.001.

Perceived transparency NEP NEP

H1 H2 Control variable

1.956 -5.605 11.639

0.023 0.043 0.042

0.049 *** ***

TABLE IVB Loadings, standard error and critical ratio for the items of the three latent variables Latent variable Perceived transparency Item IT1 IT2 IT3 IT4 WI1 WI2 WI3 EA1 EA2 EA3 EA4 EA5 EA6 EA7 EA8 EA9 EA10 EA11 Estimate 1.000 1.165 1.094 0.971 1.000 1.167 1.318 1.000 0.288 0.953 0.888 0.767 1.022 0.913 0.856 0.149 0.890 1.227 SE Critical ratio (v2/df) p

0.032 0.033 0.033 0.082 0.099 0.058 0.061 0.063 0.067 0.075 0.063 0.074 0.058 0.059 0.070

36.758 33.497 29.030 14.205 13.294 4.972 15.611 14.121 11.423 13.690 14.609 11.499 2.581 15.056 17.442

*** *** *** *** *** *** *** *** *** *** *** *** 0.010 *** ***

Willingness to engage in PEB

New Environmental Paradigm (NEP)

***p < 0.001.

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TABLE IVC Baseline comparisons and RMSEA

Model Default model Saturated model Independence model Model Default model Independence model

NFI Delta1 0.926 1.000 0.000 RMSEA 0.047 0.086

RFI rho1 0.903 0.000 LO 90 0.043 0.083

IFI Delta2 0.911 1.000 0.000 HI 90 0.052 0.090

TLI rho2 0.902 0.000

CFI 0.963 1.000 0.000 PCLOSE 0.816 0.000

Default model is good: RMSEA <0.05. Lower value of 90% CI is close to 0, upper value is less than 0.8. PCLOSE >0.05 so we cannot reject the hypothesis that the model is a close-tting model.

TABLE VA Estimation of the model with GLS with four control variables: education, political afliation, sex and age Outcomes Predictor Hypothesis Standard estimate 0.052 -0.175 0.451 -0.062 -0.03 0.024 -0.031 Critical ratio SE p

Willingness to engage in Perceived transparency Willingness to engage in Willingness to engage in Willingness to engage in Willingness to engage in Willingness to engage in

PEB PEB PEB PEB PEB PEB

Perceived transparency NEP NEP Sex Political afliation Education Age

H1 H2 Control Control Control Control Control

variable variable variable variable variable

2.109 -4.279 10.865 -1.309 -2.026 1.019 -1.360

0.025 0.041 0.041 0.047 0.017 0.024 0.023

0.035 *** *** 0.190 0.043 0.308 0.174

TABLE VB Loadings, standard error, and critical ratio for the items of the three latent variables Latent variable Perceived transparency Item IT1 IT2 IT3 IT4 WI1 WI2 WI3 EA1 EA2 EA3 Estimate 1.000 1.184 1.107 0.969 1.000 1.191 1.350 1.000 0.233 0.929 SE Critical ratio (v2/df) p

0.034 0.035 0.036 0.088 0.106 0.059 0.062

34.459 31.431 27.122 13.467 12.737 3.970 15.088

*** *** *** *** *** *** ***

Willingness to engage in PEB

New Environmental Paradigm (NEP)

Corporate Transparency and Green Management

TABLE VB continued Latent variable Item EA4 EA5 EA6 EA7 EA8 EA9 EA10 EA11 ***p < 0.001. TABLE VC Baseline comparisons and RMSEA Model Default model Saturated model Independence model Model Default model Independence model NFI Delta1 0.596 1.000 0.000 RMSEA 0.046 0.073 RFI rho1 0.523 0.000 LO 90 0.042 0.070 IFI Delta2 0.670 1.000 0.000 HI 90 0.049 0.076 TLI rho2 0.602 0.000 Estimate 0.798 0.684 0.921 0.926 0.718 0.102 0.879 1.151 SE 0.061 0.065 0.072 0.065 0.071 0.058 0.060 0.069 Critical ratio (v2/df) 13.075 10.578 12.843 14.345 10.148 1.756 14.586 16.805 p

503

*** *** *** *** *** 0.079 *** ***

CFI 0.663 1.000 0.000 PCLOSE 0.971 0.000

conrm those presented in Tables IIa, IIb, IIc, and IId and Appendix A. The goodness-of-t and parsimony tests for the default model i.e., Normed-Fit Index (NFI), incremental t index (IFI), Tucker Lewis Index (TLI), Comparative-Fit Index (CFI), and the Root Mean Square Error of Approximation (RMSEA) are satisfactory when compared to the thresholds suggested in the literature (see, e.g., Bollen, 1989; Dunlap et al., 2000; Nunnally, 1978), supporting the reliability and consistency of the measures adopted for the study (Tanriverdi, 2006). The Cronbachs a (presented in Table I), calculated on the measures of each latent variable, supports the reliability of our scales. More detailed information on the procedures used for the construction of measures of adherence to NEP and their validity can be found in Dunlap et al. (2000, pp. 428432).

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Antonino Vaccaro and Dalia Patino Echeverri

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Antonino Vaccaro Catholic University of Portugal, FCEE, Lisbon, Portugal E-mail: vaccaro@lisboa.ucp.pt Dalia Patino Echeverri Duke University, Durham, NC, U.S.A.