The relationship between emissions reduction and financial performance: Are Portuguese companies in a sustainable development path?

Abstract

AbstractCompanies are increasingly adopting strategies that simultaneously reduce their negative impact on the environment and minimize the extraction of natural and energy resources, used as inputs in their production process. The concern for the sustainable development of countries and regions and environmental sustainability of companies is increasingly present. Nevertheless, does it make up for the increased costs to protect the environment? The objective of this study is to evaluate how the environmental performance (EP) and the financial performance (FP) of companies are related, applying to the specific case of Portuguese companies during the 2008–2016 period. The relationship between pollution and FP reveals to be positive. Still, firms regard EP as additional costs, and these efforts do not seem to be strong enough to lead to a better FP. Both munificence and resource slack are included and reveal to have positive effects over FP and in the EP–FP relationship.Highlights Pollution and financial performance relationship is positive (negative EP‐FP link). Environmental performance are additional costs; firms favor financial performance. Munificence and slack have positive effects over financial performance. Munificent environments provide an opportunity for environmental investments. Scarce slack resources: less willingness to undertake social‐responsible actions.