The relationship between good environmental practices and financial performance: Evidence from Italian waste management companies

Abstract

This article analyzes waste management companies. Considering the scenario outlined by the EU’s Circular Economy Strategy, also focused on the more efficient use of waste, the article aims to analyze the relationship between companies’ financial performance and good environmental practices related to separate waste collection, which is important for environmental protection and constitutes a fundamental precondition for the reuse, recycling and recovery of waste. To attain the article’s objective, an empirical analysis of 45 Italian companies over the four-year period 2012–2015 was performed using return on assets to evaluate financial performance, and utilizing separate waste collection rates and collection per capita as proxies for good environmental practices. The results show the existence of a very high general connection and a slight positive linear correlation, which means that if one variable grows, the other one also increases, even if the proportion may vary. In other words, for the analyzed companies, the research findings seem to exclude the possibility that the financial results may deteriorate as a consequence of improved environmental practice in the form of separate waste collection.