Corporate environmental responsibility, financial performance and environmental outcomes in India: a review

Abstract

Adopting green and sustainable production practices is crucial for addressing growing environmental challenges and achieving economic and social benefits in developing countries like India. However, such approaches often involve costs, necessitating a re-examination of the relationship between corporate environmental responsibility (CER) and corporate financial performance (CFP). The existing studies on CER in Indian firms and the associated environmental regulations lack establishing an empirical relationship between CER and CFP. Furthermore, the global literature similarly lacks a decisive consensus, often exhibiting indeterminate outcomes concerning the positive impact of CER on CFP. This study systematically reviews literature published from 2000 to 2024 to examine the influence of CER on the CFP of Indian firms, focusing on the following research questions: (i) What is the relationship between CER and CFP of Indian firms? (ii) Are Indian firms prioritizing CER likely to achieve better CFP? (iii) Which specific dimensions of CFP of Indian firms are influenced by CER? Three scholarly search engines were used to identify studies based on a well-formulated search string, with the SLR guided by PRISMA following document search, article screening, and data extraction processes. The results indicate a positive relationship between CER and CFP, with significant improvements in environmental outcomes. Returns on investment emerges as a common indicator of CFP, showing a significant positive impact from CER practices. While studies have used a wide range of CER indicators, the reduction and recycling of waste are found to play a prominent role in improving CFP. This finding has important policy implications for sustainable development and the environment, as the government of India encourages firms to adopt waste-to-wealth practices. Policymakers should particularly focus on small and medium-sized firms that are either reluctant to adopt environmental measures or fear reduced financial performance due to a lack of financial support.