Environmental Management Practices on Financial Performance: With special reference to the Rubber Industry in Sri Lanka

Abstract

This study investigates the relationship between environmental managementpractices (EMPs) on financial performance (FP) using the data from thirtyrubber manufacturing organizations by building panel models for the sampleduring the period of 2012-2016. The study has considered the three differentEMPs of energy reduction (amount of furnace oil use per day), waste (amount ofwaste water generates), and recycle (amount of recycle raw material) incapturing the effect of EMPs on FP. In addition, to elucidate how financialperformance is dealing with EMPs, the study used Return on Assets (ROA) as adeterminant of financial performance. It is more difficult to identify the generalrelationship between EMPs and FP of firms due to its heterogeneity during thegrowth of firms.’ The estimation results suggested that the recycling of wastematerial had significant negative driving forces on FP. However, waste watertreatment and furnace oil consumption had no significant impact on FP.Therefore, it is critical to investigate the relationship between FP and EMPswhich is yet to be resolved in order to build up a scope for companies toimplement better environmental practices in the organizations.KeywordsEnvironmental management practices; Financial performances; rubber industry