The effect of firms’ environmentally sustainable practices on economic performance

Abstract

Companies are pressured by stakeholders to protect the environment while improving their economic performance. This study aims to further explore the impact of environmentally sustainable practices (ESP) on firm performance (FP), by considering the effects of green employee integration (GEI), environmental sustainability (ES), and employee environmental orientation (EEO). To test the set of hypotheses defined for this article, a closed-ended questionnaire survey was conducted with employees working in the manufacturing sector in China. Data from 325 employees were analysed using SmartPLS 4 software. The results demonstrate that environmentally sustainable practices (ESP) have a direct and significant influence on GEI, ES, and FP. In addition, GEI has a significant direct impact on ES and FP, and ES has a direct impact on FP. This research also demonstrated the partial mediation of GEI and ES and the moderation of EEO on the ESP–FP relationship. This research advances the scope of the ability, motivation, and opportunity theory and the social identity theory. Results suggest that managers should adopt, implement, and promote green practices, as this leads to involving employees in activities that can lessen adverse impacts on society and improve firm’s economic performance, including in terms of reputation and profits.