Environmental Awareness and the Role of the Governance Model in Green Productive Choices: The Case of Worker Cooperatives

Abstract The 2030 Agenda for Sustainable Development and the achievement of the Sustainable Development Goals (SDGs) pose new challenges for economic systems, with firms playing a key role in driving environmentally sustainable outcomes. This paper examines whether, in the absence of public incentives, individual environmental awareness influences firms’ production choices. In particular, we analyse whether the governance structure of worker cooperatives is more effective than that of investor-owned firms in promoting environmentally sustainable production strategies. To this end, we develop a theoretical model in which the utility functions of workers and firm owners incorporate environmental quality, distinguishing between local and global dimensions of environmental awareness. The model shows that, when environmental quality enters individual utility, worker cooperatives are more likely to invest in reducing environmental damage than investor-owned firms, due to the alignment between decision-making power and exposure to environmental externalities. These results suggest that worker cooperatives represent an effective governance model for promoting sustainable production, particularly in contexts where external incentives are weak. By linking environmental preferences to production choices through democratic governance, cooperatives may generate significant positive effects on local communities, not only in environmental terms but also with respect to economic well-being and public health.