An investigation of the long-run relationship between pollution performance and economic performance: The case of pulp and paper firms

Abstract

Studies in environmental economics have tended to examine the impact of pollution performance on economic performance from a macro perspective. Management and accounting studies have focused on the short run. No real consensus has emerged from these studies taken as a whole as to the relationship between pollution performance and economic performance. In this study the economic impact of pollution performance is examined from a micro long-run perspective. Pollution is measured at the plant level and economic performance is measured both using the company as a whole and using just the segment specifically affected by pollution abatement. The analysis is done for both a 6-year and a 9-year time horizon. The association between three measures of pollution performance and five measures of economic performance for the company as a whole is tested using the Spearman rank correlation coefficients. To test the association between the pulp and paper segment and the three measures of pollution, two measures of economic performance were correlated with the pollution measures. The results indicate that the firms were not negatively impacted economically by abating water pollution in their pulp and paper mills. These results do not support the expectation that there would be a negative impact on the economic performance from pollution abatement activities of the firms. These findings are consistent with the finding of earlier studies. Furthermore, it may have policy implications when the US considers future environmental legislation.