Corporate environmental and financial performance: a multivariate approach

Abstract

Purpose: The aim of this paper is to evaluate the significance of the link between corporate environmental and financial performance in order to show managers how an adequate management of environmental factors could contribute to the financial success of the firm. Design/methodology/approach: The paper analyses the environmental and financial performance of a sample of 230 European companies. Under the stakeholder approach, the commitment to environmental performance is analysed and linked with the firms' financial improvement. The paper proposes a partial least squares model (PLS) for measuring corporate environmental and financial performance that seems to be the first time which has been applied in the field. Findings: The results support the idea that enterprises which obtained higher rates of environmental performance show better financial performance levels in the future. Research limitations/implications: The lack of a long series of environmental performance data for organisations is an obstacle for a broader analysis. This research shows the usefulness of the multivariate modelling for analysing the environmental and financial performance of businesses. Practical implications: In practice, this research may show managers the need of taking into account the environmental management factors when configuring the strategic policy of the firm and how environmental management can impact to the financial success of the firms. Originality/value: The use of PLS modelling for measuring environmental and financial performance theoretical concepts and considering a sample of European companies for the empirical analysis.