Is green and profitable sustainable? Assessing the trade-off between economic and environmental aspects

Abstract

Abstract Businesses are more and more confronted with demands to play an active role to reduce environmental burdens effectively and to help to achieve environmental sustainability. We question the suitability of the green business case and argue that corporate environmental strategies need to aim at the creation of environmental value alongside economic value rather than the creation of economic value through environmental management. Three shortcomings of the green business case limit its usefulness to develop suitable corporate sustainability strategies. We contrast the green business case with an opportunity cost based approach for assessing the environmental performance of firms. Our argument is then applied to an integrated analysis of the financial, carbon and VOC-performance of 16 major car manufacturers worldwide to illustrate how companies respond to the twofold scarcity of economic capital and natural resources as well as the role of proactive technology choices in this context. Our analysis shows how firms can go beyond the standard green business case that ultimately limits environmental strategies to increasing capital efficiency. We argue that by applying the well established notion of opportunity costs to the assessment of environmental resources besides economic capital, companies can identify strategies that create economic and environmental value and help to maximise the contribution to sustainability rather than to economic capital efficiency alone.