Green practices and financial performance: A global outlook

Abstract

Companies around the world adopt green practices with the aim to reduce their environmental impacts and improve their financial performance. The present study theorizes about and empirically examines the impacts of corporate green practices on financial performance. Indexes of pollution prevention, green supply management, green product development and ISO 14001 adoption are obtained for each firm in a panel of 3490 publicly-traded companies from 58 countries over 13 years. Results show that internal green practices (pollution prevention and green supply chain management) are the major environmental drivers of financial performance, while external green practices (green product development) play a secondary role in determining financial performance. The adoption of ISO 14001 appears to have a negative impact on financial performance. This study provides empirical support for policy-makers promoting environmental practices that may lead to sustainable economic growth.