Do Eco-labels Pay Off? Causal Evidence from Japanese Firms

Shigeharu Okajima, Hiroko Okajima, Naohiro Shirao and Kenji Takeuchi
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Shigeharu Okajima: Kobe University, Graduate School of International Cooperation Studies, 2-1 Rokkodai-cho, Nada-ku, Kobe 657- 8501.
Hiroko Okajima: Nagoya University, Nagoya University Graduate School of Economics, Furocho, Chikusa Ward, Nagoya City Aichi 464-8601.
Naohiro Shirao: Osaka University of Economics, 2-2-8 Osumi HigashiYodogawa-ku Osaka-shi, 533-8533.
Kenji Takeuchi: Kyoto University, Graduate School of Global Environmental Studies, Yoshida-honmachi Kyoto,606-8501.

RIEEM Discussion Paper Series from Research Institute for Environmental Economics and Management, Waseda University

Abstract: Eco-labels are widely promoted as information-based environmental instruments that generate “win–win†outc omes by improving both environmental quality and firm profitability. However, credible causal evidence on t heir financial effects remains limited. Using panel data on Japanese firms from 2012 to 2016, this study ex amines whether Type I (third-party certified) and Type II (self-declared) eco-labels improve firm financial pe rformance. To address selection bias, we apply inverse probability weighting with firm and year fixed effect s and stabilize weights through trimming and capping procedures. We further examine heterogeneity between B2C and B2B firms based on differences in consumer visibility. The results show that Type I labels have no significant financial effects across all specifications. Type II labels exhibit modest positive effects for B2 C firms under trimmed weights, but these effects disappear when extreme weights are capped, indicating li mited robustness. Overall, we find no consistent financial benefits from eco-label adoption, challenging the b usiness-case narrative and suggesting that eco-label policies should be justified primarily by environmental ef fectiveness rather than expected profitability gains.

Keywords: Eco-labels; Environmental labeling; Firm performance; Causal inference; Inverse probability weighting (search for similar items in EconPapers)
JEL-codes: M14 Q50 Q58 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2026-01
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