3628 Explore the relationship between environmental management practices and company performance: Evidence from Swedish manufacturing industry

Lujie Chen , Department of Management and Engineering, Linköping University, Linköping, Sweden
Andreas Feldmann , Department of Management and Engineering, Linköping University, Linköping, Sweden
Ou Tang , Department of Management and Engineering, Linköping University, Linköping, Sweden
Full Papers
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  • Justification of the paper:

    Literature shows that operations management researchers are increasingly curious about the relationship between environmental management practices (EMPs) and firm performance. In industries, many firms on one hand try to include environmental issues into the strategy agenda due to stakeholders’ needs and competitive pressures. On the other, firms are facing the common conceptions that green management will increase costs and reduce the profits, which discourage green management efforts. Empirical research in this field is still limited. By analyzing US and non-US corporate reports, Montabon et al. (2007) investigate the link between EMPs and firm performance, and further conclude a positive and significant relationship between them. Nevertheless, it is still unknown if there are differences in different industries and different countries. We present research that contributes to the debate on EMPs will favor or hamper firm performance.

    Purpose:

     (1)Replicate Montabon et al.’s (2007) empirical evaluation of corporate reporting, EMPs and firm performance with Swedish manufacturing industry as a focus;

     (2)Compare the results against those reported in Montabon et al. (2007) and find the differences in voluntary environmental reporting based on country of origin;

     (3)Examine if there are specific mechanisms behind the significant relationships between EMPs and firm performance;

     (4)Stimulate more theoretical and empirical investigations on how environmental management might be modified and adapted in its application in the manufacturing industry.

    Theoretical framework:

    Recent literature indicates EMPs can lead companies to innovations which can further reduce costs or increase demands, and finally improve the company performance, mainly in terms of financial performance. One of our intent is to conduct a constructive replication of the Montabon et al.’s (2007) research with Swedish manufacturing industry as the task. We test the relationship between one set of independent variables including 20 EMPs and the dependent variables corresponding to firm performance. Innovation is measured by variables of product innovation and process innovation. Returns on investment and sales growth are used as variables to measure the impact on financial performance by EMPs. Data collection is achieved by content analysis of 39 corporate reports of Swedish manufacturing companies. These reports follow Global Reporting Initiative (GRI) and represent a standardized reporting approach for environmental, economic and social performance.

    Results:

    A growing number of companies publishing GRI reports indicate the increasing interesting in standardized and effective measures for environmental performance. Not all EMPs can contribute to firm performance. There is so far no clear answer to the questions which practices contribute to a positive impact on business performance, and with what kind of conditions. This study attempts to fill this research gap in literature.

    Conclusions:

    It represents the first comprehensive attempt to find whether or not EMPs favors firm performance in a Swedish manufacturing setting. From a managerial perspective, findings from this paper should further raise awareness of the environmental management. We encourage other researchers to do replication research in other industries and other countries.

    Reference:Montabon F, Sroufe R, Narasimhan R. An examination of corporate reporting, environmental management practices and firm performance. Journal of Operations Management. 2007;25(5):998-1014.