Eco-Regulatory Compliance and Sustainability Performance: Unveiling the Mediating Role of Corporate Green Culture
Keywords:
Eco-regulatory Compliance, Corporate Green Culture, Sustainability Performance, Institutional Theory, Islamic Banking, PLS-SEMAbstract
Environmental concerns and tougher regulations have compelled financial organizations to incorporate sustainability into their strategy and business operations. The idea of environmental governance is becoming more popular, but few studies have been undertaken on the organizational mechanism by which eco-regulatory compliance leads to sustainability performance, especially for Islamic banking. In light of the above, the current study aims to investigate the direct effect of eco-regulatory compliance on sustainability performance and the mediating effect of corporate green culture in this regard, based on the Institutional Theory. Data from a cross-sectional survey were gathered using a standardized questionnaire from 346 top- and middle-level managers working in full-fledged Islamic banks in Pakistan. The proposed relationships were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 4. The findings reveal that the impact of corporate green culture on sustainability performance is significant and positive, and it partially mediates the relationship between eco-regulatory compliance and sustainability performance, suggesting that when the regulation is adhered to, the cultural values of the organization are influenced by its green culture. These findings add to the Institutional Theory, as they indicate that corporate green culture serves as an organizational mechanism that enables external regulatory pressures to be transformed into sustainability performance.
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