1. Introduction
The rapid development of industries in recent years has created problems of environmental degradation. To understand and quantify the relation between industrial development and environmental deterioration, many researchers have developed different theoretical frameworks and models including studies concerning organizational culture (OC) and environmental performance. However, it is important to substantiate these frameworks with empirical evidence [
1]. Previous researchers have emphasized the organizational culture (OC) and its significance to many aspects related to a firm’s performance in terms of job satisfaction, productivity, employee turnover, adoption of environmental activity management [
2,
3], or effect on performance measurement systems [
4]. However, there has been less emphasis on the importance of organizational culture in developing a firm’s environmental performance. Current literature on OC and sustainability has largely been based on case studies rather than on empirical data. This study, however, intends to fill the existing gap by adopting an approach with a quantitative framework based on resource-based view (RBV) theory to address the importance of OC regarding environmental performance.
These days, firms are facing environmental regulations because of their activities creating serious environmental issues. Many firms are forced to manage and reduce their ecological footprint to enhance their environmental performance. In this sense, there is little research on the antecedents of environmental performance of companies [
5,
6,
7]. The above-mentioned studies confirm that increasing market share, improving the corporate reputation, leveraging production costs and competitive pressure can result in environmental strategy. They also are mostly grounded on the institutional and internationalization theories to explain the factors urging firms to increase their environmental performance. In this regard, one area of weakness in the literature is the lack of research connecting organizational culture to environmental performance: in other words, organizational phenomena (e.g., norms and values) not explicitly considered by environmental management researchers [
8,
9]. Moreover, there is limited theoretical explanation using OC as an internal leading factor of environmental performance.
The theories developed hitherto, as mentioned above, have their focus more at the macro level. However, for greater micro-level understanding, research must be grounded on theories that mostly center on individual internal firm factors and their contribution to the companies’ objectives. Furthermore, the previous studies mostly have established their results by combining different levels of analysis in their empirical research. These studies have not provided sound results in terms of empirical research because their findings do not include micro firm-level analyses and research. Therefore, there is a need to study at the firm level using the company and employee norms and values relating to green practices. It is important for companies to consider the internal micro-level factors that guarantee the firms’ enhanced environmental performance. As such, OC role must be more empirically tested [
10,
11]. Existing research confirms that, based on the RBV, OC helps to organize resources in achieving firms’ environmental management goals. Despite growing research interest in the importance of environmental performance that brings efficiency, however, the understanding of the relationship between OC and environmental performance is still very limited.
OC plays a fundamental part in the shift towards sustainability and environmental practices. Implementation of sustainable practices needs proper embedding of OC [
12]. Based on this viewpoint, followers of resource-based view (RBV) theory, OC strategically provides an appropriate source of competitive advantage [
13,
14,
15] and lead to the environmental performance of the firm. Extending this notion, RBV theory predicts it as a resource-bundle—valuable, rare and inimitable—that can be deployed through organizational capabilities [
16,
17]. From the perspective of RBV theory, an organizational culture that supports the environmental performance is not a common in the market and if the environmental aspect is added to the culture, therefore it can be a source of competitive advantage.
Pakistan’s economy mostly depends on agriculture. However, recently, manufacturing and services have also emerged as major contributing sectors in the GDP. The manufacturing sector constitutes 13.3 percent of Pakistan’s GDP and 14.2 percent of its total employed labor force [
18]. With increasing industrial and agricultural events, energy demands, expansion of the population in cities, traffic concentration and population growth, degradation of all segments of the environment (air, water and land) is increasing at an alarming rate and remains a grave concern. The unsound management of chemicals, specifically in the manufacturing sector, has further compounded environmental issues [
19]. The manufacturing sector in Pakistan generates significant environmental pollution that is reducing the quality of life. Such pollution includes a significant amount of fine and ultrafine particulate matter [
20]. However, in the absence of environmental practices, manufacturing activities will create a significant amount of waste, exploit natural resources and overconsume energy. This calls for the development of OC that addresses the environmental issues in the manufacturing industry.
3. Hypothesis Development
The importance of environmental practices in the company’s culture demonstrates environmental values exist throughout the organization, which [
37] defines as an element of business and environmental excellence. While focusing on the environmental strategy it is necessary, the strategy needs to be embedded into the firm’s culture and daily practices [
38]. Focusing on OC that supports the environmental practices will help manufacturing industry to improve the performance and gain the competitive advantage. Improved industrial environmental performance is essential for manufacturing industry to be competitive in export markets like the EU in which business customers demand high environmental compliance from their suppliers and often require certification to international standards, such as ISO 14001. Pakistan is behind its competitors in export markets with respect to environmental management.
Researchers have regarded inattention to OC as the prime reason for the implementation failure of organizational change programs [
39]. Many have argued that despite changes in technology and systems, the fundamental cultures of organizations remain the same [
40]. However, the cultural values of an organization supporting environmental practices help firms to develop the culture that supports such practices. A proactive approach would help firms to support environmental practices and to apply newly developed OC. Firms that fail to develop sustainable values in culture may perform poorly. Therefore, proactivity helps organizations to translate an environmental strategy into an action. This needs a high degree of employee involvement, adaptability, consistency and a clear mission to guide the behavior of employees. Firms that have environmental supportive culture are better placed to perform well and to apply environmental OC values, thereby leading to an increased environmental performance. In summary, based on RBV theory, the current study used the sustainability approach [
41] to test the relationship between OC and environmental performance in the manufacturing industry of Pakistan as an important factor in the success of efforts to reduce the company’s environmental impact, which has been under-researched to date.
Figure 1 explains the relations tested in current study. The remaining part of this section explains the hypotheses development.
3.1. Involvement and Environmental Performance
Denison et al. [
24] found that high involvement of employees creates a sense of ownership and responsibility. This sense of ownership grows a greater commitment to the organization. The greater commitment increases firm productivity. Employee involvement practices not only enhance efficiency but also help to maintain the flow of sustainable practices for the firm. The high involvement of employees also provides useful ideas regarding the environmental strategy’s routine tasks and activities. Thus, it leads to the environmental performance of firm [
42,
43,
44]. As a result, the following research hypothesis is advanced
Hypothesis 1 (H1). Involvement positively influences the environmental performance.
3.2. Adaptability and Environmental Performance
In today’s dynamic world, every firm is trying to cope with the frame of inconsistencies but it rapidly changes itself before the change will affect it. Adaptability is, thus, an important cultural variable. Schein [
45,
46] proposed that culture addresses two fundamental issues confronting firms: “the need to adapt to external changes and the need to provide internal integration. To promote adaptability, the norms that define OC need to promote flexibility, risk-taking and experimentation within the firm.” Several studies have shown that OC with the characteristics of environmental values can enhance a firm’s innovation and adaptation in that context [
47]. Adaptability as a cultural value helps organizational members to promote their environmental-related responsibility capability, especially in a changing environment. It is argued that organizational adaptability is likely to impact the sustainability of a firm in the context of the manufacturing industry. In the socialization mode, the sharing of ideas among colleagues may increase when a firm welcomes new ideas regarding environmental performance and tries new approaches to sustainability. As a result, we develop the following hypothesis:
Hypothesis 2 (H2). Adaptability positively influences the environmental performance.
3.3. Consistency and Environmental Performance
According to Saffold [
48], organizational effectiveness may be related to consistent and well-integrated internal governance systems. If the governance system reflects the environmental strategy, it creates a very well-established control system. Therefore, organizational consistency is measured as an important tool that can manage strength and internal integration through escalating environmental values, beliefs and assumptions [
24]. The extant literature also found that organizational long-term sustainability is based on the achievement of organizational goals that require tangible and intangible resources that reflect sustainable practices. In addition, the consistency is a basis for a strong culture in which a firm builds an EMCS-based governance system on consensual support [
49,
50]. Based on these arguments, we advance this hypothesis:
Hypothesis 3 (H3). Consistency positively influences the environmental performance.
3.4. Mission and Environmental Performance
Another important aspect of the firm for sustainability is a mission. To align firm employees with the core idea about the environmental strategy and shared principles, the firm’s mission can be an influential document that creates balance between the components of a formal system of corporations. It helps to drive the activities of firm employees and can be used to direct, evaluate and monitor their performance. (Bryson [
51], p. 11) indicated that “mission statements, if not integrated into a rational practice or set of practices along with mental activities, strategic activities, tacit knowledge and emotions are ‘things’ or ‘artifacts’ that do not necessarily produce positive results.” Hence, this argument categorically endorsed our conviction to suggest a hypothesis that the firm mission has a statistically significant impact on the environmental performance of the firm. Because firms design their mission statements in line with employees’ mental activities and this interconnectivity leads them to produce environmental, social and economic performance [
9]. Therefore, this lead to following hypothesis:
Hypothesis 4 (H4). Mission positively influences the environmental performance.
6. Discussion
Several studies have confirmed the relationship between OC and firm performance, the present study extends this knowledge to determine the effect of four traits of OC on environmental performance. The most interesting finding was that out of four traits of OC, three showed significant positive association with the environmental performance. One unanticipated finding was that the impact of involvement on environmental performance which is contrary to the findings of Hanna et al. [
70]. This research argues that employee involvement is vital environmental related activities; however, the relationship between involvement and environmental performance is not significant. The possible explanation could be the less involvement of employees in environmental related decisions. In order explain it further, Hofstede [
71,
72] explained the phenomenon of Pakistani national culture. Pakistan scores 55 on the power distance list, which demonstrates that management may not involve the lower level employees in environmental related decisions that lead to the insignificant result of involvement and environmental performance Overall, these findings may support one of the basic questions of many researchers: That the OC has an important influence on environmental performance. Empirically, this study is the first one to provide evidence for the impact of OC on environmental performance covering a large sample size of the firm from manufacturing industry of Pakistan.
However, adaptability supports firms to develop norms and beliefs that support environmental performance. Likewise, adaptability helps firms to change norms and beliefs that support environmentally friendly practices and translate firm performance. Adaptability proved to be a significant factor especially for developing countries, specifically in Pakistan. It explains the changes in the business environment would push the industry to adopt the environmental strategies. This would only be possible when firms are willing to adapt and avoid the uncertainty. Therefore, it can be concluded that employee adaptability representing the flexible values of OC is effective and strengthens the performance of a firm. The firm’s mission can influence the formal corporate settings. It helps the firm to guide, direct, evaluate and monitor the activities of the employees. The results of the third and fourth hypotheses revealed that stable values of OC also relate to the environmental performance. This concept has been used previously in the research, however, in environmental accounting, this study empirically proved this phenomenon. Results affirm that consistency trait helps people to alter their behavior for better environmental practices. Moreover, it defines that strong environmental strategy can be the main control within the firm. The consistency helps the firm to adopt the environmental values, which may become the effective control system in terms of rules, procedures and regulations. The mission offers a path for employees regarding environmental strategy. The results further show that sharing the mission and vision of environmental strategy among the staff has a significant impact on its implementations and is an important OC factor for the better environmental practices. The clear vision gives employees a path to follow and understand the OC in a better way.
The positive relationship between OC and environmental performance implies that there is a strong and consistent set of beliefs with ethical codes that guide staff’s behavior for environmental strategy in the manufacturing industry. The empirical evidence suggested that the internally consistent culture facilitates the structure of environmental practices, if the leadership of the firm support and encourage environmental practices and transfer the firm path into sustainability. Accordingly, goals, values and norms allow employees to access the key information and data regarding the environmental strategy, which is mandatory in the structured environmental control system. Therefore, the findings of current study infer that the ‘guiding principle’ or ‘code of conduct’ in the shape of core values also helps management in environmental strategy implementation by providing a clear direction for sustainability as a core strategy of the firm.
The coordination and integration of environmental strategy in Pakistani industry is very important phenomenon. The current study shows that coordinated tasks and activities do not only have an impact on the performance but it also activates workplace socialization in which people can easily record unorganized decisions into better environmental ideas. This would lead to better information, bridges between the old and traditional way of doing business into new and enhanced environmental friendly production process. The information which is easily accessible and culture that supports the environmental strategy not only encourages coordination and integration within all functional departments of the firm but it also improves the interaction and coordination within the firm.
Based on the RBV, organizational culture is hard to imitate; resources can hinder or foster the effect of other resources on the goals and objectives of companies. This integrated model can explain the relationships of predictors and environmental performance. Also, Denison’s model of OC including involvement, adaptability, consistency and mission was used in this study. The results of this study confirm past research in the area of organizational green practices, which have mostly used the RBV as their main theoretical basis [
73,
74,
75], and, with a contribution to theory, this study integrates RBV as a more comprehensive model that explains the relationship between all the studied variables of this research with a company’s perceived environmental performance. Moreover, this integrated model using the RBV approach can explain the role of OC on the relationships proposed in the research framework. RBV states that the organizational related resource (i.e., organizational culture) has the potential to foster or hinder the accomplishment of specific programs to achieve the goals and objectives [
41].
This research highlights on a quantitative analysis of the proposed model of Denison’s OC for implementation of environmental management system using SEM. The PLS approach is an appropriate method for testing multi-path model. Methodologically it reduces the risk of common method bias by the implementation of Harman’s single factor as suggested by Podsakoff et al. [
76]. The study therefore also offers contributions to the literature on the use of PLS in studies of manufacturing industries of Pakistan.
7. Conclusions
This study makes three contributions. First, it demonstrates how companies align OC to develop an environmental culture that supports the environmental performance. Based on resource-based view theory, this study provides evidence that OC can be a distinct advantage, as literature suggested that for environmental practices it is essential to have a support from OC [
13]. The importance of environmental practices in the company’s culture demonstrates environmental values exist throughout the organization, which Štok, Markič, & Bertoncelj [
37] defines as an element of business and environmental excellence. While focusing on the environmental strategy it is necessary, the strategy needs to be embedded into the firm’s culture and daily practices [
38]. The results indicated that when environmental issues are considered in OC, an environmental strategy is developed. Although these results seem to be intuitive, other studies have indicated that environmental strategies and external reporting are not always linked with firm changes that reflect such a strategy for example, [
77], impact environmental strategies, demonstrating the importance of culture with regard to environmental performance. The result of current study suggests that OC may indeed have an impact on environmental performance.
Moreover, this research tested empirically the RBV idea of the role of OC to increase or decrease the effectiveness of an environmental strategy. Additionally, it has practical implications for practitioners in how to use their OC to improve their environmental performance.