Operational Competitiveness and the Relationship between Corporate Environmental and Financial Performance

Senali Amarasuriya, Gerard Burke () and Ta Kang Hsu
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Senali Amarasuriya: Department of Management, Middle Tennessee State University, Murfreesboro, TN 37132, USA
Gerard Burke: Department of Logistics and Supply Chain Management, Parker College of Business, Georgia Southern University, Statesboro, GA 30460, USA
Ta Kang Hsu: Department of Logistics and Supply Chain Management, Parker College of Business, Georgia Southern University, Statesboro, GA 30460, USA

JRFM, 2024, vol. 17, issue 8, 1-17

Abstract: With increasing pressures on big businesses to expand performance objectives beyond financial metrics and to include social and environmental objectives, business organizations experience rising tension in balancing these various objectives. Oftentimes, subjective narratives can weigh in on the relative importance of competing objectives. This subjectivity is a contributing factor to findings of inconsistent and mixed results for the financial impact of an organization’s environmental performance in the prior literature. Our research effort seeks to provide a positivist perspective on the relationship between environmental performance and financial performance of companies. Also, given the importance of efficient operations for corporate success, we examine the influence of operational productivity on the environmental and financial performance relationship. Using a global dataset compiled from reputable sources, including 1738 unique firms spanning between the years 2011 and 2020, we find statistically significant results that indicate that lower carbon emissions are associated with higher profitability when a firm has competitively high operational productivity. Companies with operational productivity that is competitively low do not perform well financially when carbon emissions are low. Thus, our study fills a research gap in this domain by relying exclusively on a broad set of purely objective data and illuminating the importance of operational efficiency on the relationship between the environmental performance and financial performance of firms.

Keywords: triple bottom line; operational productivity; stochastic frontier analysis; regression (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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