A Conceptual Analysis of the Relationship Between Environmental Strategy and Financial Performance

Abstract

The resource-based view (RBV) is emerging as the dominant paradigm for comprehending the interaction between strategic management and the natural environment. Based on the RBV perspective, effective environmental strategies require more resources and capabilities. Firms with more resources can build environmental capabilities more easily as it allows them to invest in technological leadership and gain a competitive advantage. In addition, companies that actively integrate the environment into their business strategies possess sustainable competitive advantages. This paper outlines the concept to investigate the correlation between environmental strategies and financial performance. From the RBV's perspective, environmental strategies are valuable, rare, difficult to imitate, and capable of enhancing firms’ competitive advantage and financial performance. Consequently, firms that adopt environmental policies are poised to elevate their image and reputation among stakeholders, customers, and shareholders, augmenting their competitive advantage and performance. This study's findings are expected to enhance the literature on corporate environmental strategies by offering additional information regarding the impact of applying such strategies on financial success. The findings of this study are also anticipated to encourage corporations to adopt environmentally friendly practices