Prudence risk culture: does it influence effective environmental sustainability strategies?

Organisations face mounting pressure to embrace environmental sustainability, yet their strategies often prove ineffective. This shortfall arises from a prevalence of superficial and symbolic initiatives, underscoring the critical need for academic research into the key factors that drive the development of truly effective environmental sustainability strategies.

To address this need, this paper examines how a risk culture rooted in prudent values and practices — one that emphasises the common good and proactive action — can drive impactful sustainability initiatives. We test the theory that a prudent risk culture enhances environmental performance by analysing survey responses from 2111 United Kingdom-based participants with Structural Equation Modelling (SEM) and Artificial Neural Network (ANN) models.

Our findings reveal that organisations prioritising ethical behaviour and positive impact ("goodness-seeking") exhibit stronger environmental strategies, as shown by, for example, stronger environmental strategic capabilities, leadership commitment, and product/service innovation. Moreover, within a prudent risk culture, proactive and flexible risk management proves significantly more important in predicting effective environmental sustainability strategies than standard risk identification and assessment approaches.

This suggests that organisations striving for deeply embedded sustainability must not only embrace "goodness-seeking" but also cultivate proactive and flexible risk management practices. We discuss the practical applications of these findings for organisations.

The paper’s key contribution is that it advances the risk management and sustainability theory by introducing a new framework for identifying the mechanisms through which prudence risk culture can influence effective environmental sustainability strategy.