Environmental protection and financial performance: an empirical analysis in Wales

Abstract

PurposeThis paper analyses the relationship between environmental protection and mid‐term financial performance, focusing on when and why this relationship is positive. In particular, the paper disaggregates environmental protection, differentiating between environmental management practices, environmental proactivity and environmental performance of the organization.Design/methodology/approachIt uses a cross‐section survey of 2,122 Welsh companies to gather information on environmental practices and the FAME database to collect data on accounting based financial performance. The paper uses regression analysis on a combined sample of 186 Welsh companies to evaluate the effect on performance of different types of environmental protection.FindingsOn the whole, the results show a positive effect of environmental protection on mid‐term financial performance. Financial performance has a positive and significant correlation with environmental proactivity and with environmental performance, while it has a no significant relation with environmental management.Originality/valueThe paper presents a disaggregated analysis of environmental protection in relationship with financial performance. The paper differentiates between environmental management practices, environmental proactivity and environmental performance of the organization in their relationship with financial performance.