In the article, Michał Dzieliński and Lu Liu and their coauthors (Hossein Asgharian at Lund University and Zahra Hashemzadeh at Saxo Bank) investigate the propagation of corporate environmental performance among competitors as well as from customers to suppliers and vice versa. Importantly, they focus on an objective measure of environmental performance, carbon intensity, defined as a company’s CO2-equivalent emissions in tons divided by its revenue in USD million.

Lu Liu and Michał Dzieliński

They find significant propagation of carbon intensity among competitors and provide further evidence motivating that this effect is causal. Why exactly should companies be affected by their competitors’ environmental performance? In further analysis, the authors show that competitor propagation stems from both competitive pressure and technological spillover. Importantly, they find that propagation is strong when the firm’s own environmental performance is poor initially and when the competitor improves its environmental performance, alleviating concerns that improvements in performance are concentrated among firms that are already green. The overall conclusion is that network effects among competing firms are a significant force shaping environmental performance, and a force mostly for good.

The article’s findings could be useful in guiding governments, activists and other stakeholders to engage with the right companies in order to maximize the effect on the entire network of competitors. For company executives themselves, knowing that any improvements they make at their own firm will have positive knock-on effects on other firms, will hopefully provide much-needed inspiration to take the lead on environmental performance.

Read the article "Green links: corporate networks and environmental performance"