Does it Really Pay to Be Green? An Empirical Study of Firm Environmental and Financial Performance

Journal of Industrial Ecology, Vol. 5, No. 1, pp. 105-116

Posted: 7 Oct 2010

See all articles by Andrew A. King

Andrew A. King

Questrom School of Business- Boston University

Michael Lenox

University of Virginia - Darden School of Business

Date Written: 2001

Abstract

Previous empirical work suggests that profitable firms tend to have high environmental performance, but questions persist about the nature of the relationship. Does stronger environmental performance really lead to better financial performance or is the observed relationship the outcome of some other underlying firm attribute? Does it pay to have clean running facilities or to have facilities in relatively clean industries? In other words, do the fixed attributes and strategic position of firms cause an apparent but false relationship between financial and environmental performance? To explore this issue, we analyze 606 U.S. manufacturing firms over the time period 1987 to 1996. While we find evidence of an association between lower pollution and higher financial valuation, we find that a firm's fixed characteristics and strategic position might cause or moderate this association. It suggests that "When does it pay to be green?" may be a more important question than "does it pay to be green?"

Keywords: beyond compliance, corporate strategy, environmental performance, Porter hypothesis

Suggested Citation

King, Andrew A. and Lenox, Michael, Does it Really Pay to Be Green? An Empirical Study of Firm Environmental and Financial Performance (2001). Journal of Industrial Ecology, Vol. 5, No. 1, pp. 105-116, Available at SSRN: https://ssrn.com/abstract=1687959

Andrew A. King

Questrom School of Business- Boston University ( email )

Boston, MA 02215
United States

Michael Lenox (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

HOME PAGE: http://faculty.darden.virginia.edu/LenoxM/index.htm

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