The devastating impact of the climate crisis has led many countries to promulgate regulations that hold businesses accountable for their environmental externalities. However, while these formal constraints compel businesses to fulfill their legal obligations, scholars argue that acting in a socially and environmentally responsible way requires more than mere compliance with the law. Accordingly, we provide novel evidence of how the concept of social justice, implicit in society as an informal construct, underpins firms’ ethical behavior, compelling them to accept their (...) social responsibilities by reducing their environmental violations, implementing procedures to prevent further infractions, and repairing the breach in social trust that their transgressions have caused by engaging in restorative acts. Based on unique environmental violation and remedial action data from 2007 to 2022 in China, we establish that social trust significantly lowers a firm’s propensity to commit further ecological abuses. We also determine that firms in high-trust regions are more likely to undertake remedial actions in the aftermath of an environmental breach. Moreover, cross-sectional analyses reveal that the relationship between social trust and environmental violations is more pronounced for firms that face greater reputational pressure from higher media reporting, analyst coverage, auditing by Big Four auditors, and institutional site visits. This study augments the literature on environmentalism and argues that social trust also shapes corporate ethical behavior in addition to regulatory pressures. (shrink)

The relationship between a chief executive officer’s childhood experience of family decline and his or her firm’s social responsibility rating was explored using data on more than 1000 Chinese listed firms. Such childhood experience is shown to predict better CSR ratings. This may be because adversity in childhood shifts the cognitive map through accommodation process, and further fosters cognitive processing ability and a long-term orientation. Career variety and education level are shown to moderate the imprinting effect by altering its strength. (...) Career variety weakens the relationship whereas education level strengthens it. (shrink)