Does environmental performance help firms to be more resilient against environmental controversies? International evidence

[Controversies, reputation, and firm value 3/4]

Do strong environmental credentials help firms bounce back faster from controversies?

Sylvain Marsat, Guillaume Pijourlet, and Muhammad Ullah ask whether prior environmental performance builds resilience in their paper "Does environmental performance help firms to be more resilient against environmental controversies? International evidence".

Resilience is proxied by the time a firm's share price needs to return to its pre-controversy level, prior environmental performance by the environmental pillar score, and the link is estimated with survival models.

They track 233 environmental controversies hitting listed firms in 16 countries between 2010 and 2016, using Thomson Reuters ASSET4 data. Their main conclusions include:

• The median firm recovers its pre-controversy share price within five trading days, but dispersion is wide: the slowest quarter of events need more than 13 trading days to close the gap.
• Prior environmental performance strongly predicts resilience: across the full span of the environmental score, the estimated recovery rate is roughly five times higher, all else being equal.
• The result is robust across observation windows from 10 to 30 trading days and across alternative survival specifications, although it fades in the very short five-day window.
• Country-level environmental performance, proxied by the Environmental Performance Index, shows no significant effect once firm-level scores are controlled.
• Environmental policies build skills, cross-department coordination, and innovation capabilities that make organisations more agile when a complex shock hits.
• Stakeholders treat a controversy at an eco-friendly firm with strong reputation as an anomaly rather than as revealed behaviour, and their support speeds up the market's forgiveness.

This article shows prior environmental performance is a resilience indicator, not only an impact one, and that resilience is built inside the firm, not merely granted by jurisdiction.

When a controversy breaks, the environmental track record helps sort a temporary drawdown from a lasting repricing, which matters for engagement timing and controversy-driven exclusion strategies.

The paper also adds empirical weight to the natural resource-based view of the firm: environmental capabilities behave like strategic resources with measurable option value under stress.

The sample ends in 2016 and counts 233 events and ignores controversy severity and materiality, a gap the authors themselves flag as the natural next step.