Green Firms Research Articles

Green vs. brown: Climate risk showdown – who’s thriving, who’s diving?

Increasingly complex climate change poses unprecedented risks and challenges. We attempt to analyze the strategic responses of firms in dealing with climate risk and whether green firms outperform brown firms by exploring the relationship between climate risk and firms’ cash flow. To this end, this paper uses the high-dimensional fixed-effects model for empirical analysis based on panel data of Chinese listed firms from Q1 2010 to Q4 2022. We find that firms have the motivation to hold more cash in the face of climate risk, and that brown firms will be more proactive in cash flow management compared to green firms. In addition, there are significant industry and seasonal effects of climate risk on firms’ cash flow. Mechanism tests find that climate risk prompts firms to increase cash flow by forcing them to reduce financial leverage and erode operating costs, as well as by inducing increased media attention to the firm. Heterogeneity analysis shows that the positive effect of climate risk on cash flow is more significant among low digital transformation firms, high financial constraints firms, firms with low managerial myopia, and SOEs. An analysis of the economic consequences shows that climate risk leads firms to be more aggressive in capturing market share, increasing productivity and strengthening ESG performance. The above findings help to enlighten firms on how to manage their risk exposures and adjust their internal governance structures as a way to maintain stable operations in an environment of intensified uncertainty. In brief, this paper highlights the differentiated financial decisions that green and brown firms make in response to climate risk, providing empirical evidence and policy implications for advancing the green transformation of firms.

Toward sustainable smart agriculture in a developing country: An empirical analysis of green firms determinants

AbstractThe significance of green entrepreneurship in achieving socioeconomic and environmental goals has received widespread recognition in academic literature. However, despite this acknowledgment, the internal and external variables influencing the expansion and sustainability of green agricultural enterprises have not been thoroughly studied and explored in the literature. This research aims to test the theoretical Green Agriculture Support Framework (GASF), suggesting internal and external support elements that, when strategically aligned, foster the growth of green agriculture enterprises, particularly those leveraging technologies and tools associated with Agriculture 4.0. To this end, we utilized survey data collected from managers and employees of green enterprises located in Pakistan. The collected data was analyzed using the structural equation modeling (SEM) method, incorporating the partial least squares (PLS) approach through SmartPLS software. The findings imply that external variables (formal Institutions, Government Support, Culture) have significant impacts on the development of green enterprises and that internal factors (Technology, Talent Management) have somewhat limited impacts. Consequently, policymakers must concentrate on creating strategies and measures to enhance the external environment of an organization, that is, intensive government support, less rigid formal institutions and their policies, entrepreneurial culture, and overall improved economic condition of the country, and be cautious about the internal factors like rigid and outdated technology and talent management policies, that may hinder the development of such enterprises. As a result, using the organismic integration theory (OIT) theoretical lens, this research contributes to the literature by providing empirical evidence on the various internal and external factors that significantly affect the growth of innovative green agriculture enterprises. A thorough understanding of green determinants assists in identifying the areas that require attention of policymakers for the effective growth of the green agricultural sector in an economy, leading to valuable implications for green policies.

On fraud and certification of green production

AbstractWe present a novel model of fraud and certification in green production. We focus on settings where firms decide between a green or a standard version of a product together with an advertising strategy that can include fraud. In addition, green firms can choose to certify their production to guarantee the truthfulness of their claims. This results in four production‐advertising possibilities (standard, genuine green, fraudulent green, and certified green), by which we provide new insights about the prevalence of fraud and certification. We characterize the perfect Bayesian equilibrium of the resulting game for given green production costs, certification costs, and consumers' willingness to pay for standard production, and we perform comparative statics for the main parameters of the resulting game. We find that changes in certification and green production costs affect consumers' beliefs differently, whereby increases in certification and decreases in green production costs can broaden the likelihood of fraud. These novel results are robust to different market structures and question the general desirability of public subsidies for promoting green production without accompanying certification.

The Impact of Corporate Social Responsibility on Financial Performance: A Comparative Study of Green and Non-Green Firms

This research compares green and non-green companies to investigate how corporate social responsibility (CSR) affects financial performance (FP). Although the relationship between CSR and FP has been studied in the past, the findings have been contradictory, and the conclusions can’t be reached with certainty because there isn’t enough specific data on CSR. The main goals of this study are to examine the relationship between corporate social responsibility (CSR) and financial success, as well as the possible effects of increasing media attention on CSR initiatives on business outcomes. The study intends to address important concerns about the advantages and results of CSR participation while acknowledging the variety of stakeholders engaged in assessing the business value of organizations. The study looks at the kinds of CSR activities that provide positive CSR effects and assesses whether CSR initiatives add to or subtract from profit maximization objectives. The study advances our knowledge of how corporate social responsibility (CSR) affects financial performance, especially when it comes to green versus non-green businesses. Keywords: Corporate social responsibility, financial performance, comparative study, green firms, non-green firms, stakeholders

Traditional and environmentally friendly attributes in products of highly design-oriented firms: an exploratory study in the perception of Italian entrepreneurs

Purpose The aim of this study was to empirically examine how much traditional attributes and green attributes characterize products within design-oriented firms. Further, we explored how these attributes relate to the perceived level of innovation of the firms.Design/methodology/approach An exploratory research was carried out in 86 Italian manufacturing companies that are members of the Industrial Design Association. Using the questionnaire method, the entrepreneurs’ perceptions have been analyzed. Data have been treated with hierarchical cluster analysis.Findings The analysis shows that environmental sustainability is the least important attribute of a design product and four clusters of highly design-oriented firms differ by design-product attributes. Further, the least green firms are also the least innovative in terms of incremental and general innovation.Research limitations/implications The small size of the sample and the provenance of firms from a single country imply limited generalizability, and further research on the topic is recommended.Practical implications Design-driven innovation based on traditional design attributes provides many competitive advantages to firms. However, given the growing concern about environmental challenges, investing in green attributes in design products allows for remaining competitive and more effective in innovation.Originality/value This study, for the first time, reveals the heterogeneity among design-oriented firms, particularly regarding the presence and assortment of traditional design attributes, as well as the incorporation of environmentally friendly attributes in their products. Moreover, the study uncovers the relationship between varying levels of green attributes in the offerings and the perception of the firm’s innovativeness.

Assessing the volatility of green firms

Environmentally responsible (‘green’) firms have important asset pricing implications. Whilst green firms’ performance has been formally studied in terms of returns and pricing (Bolton and Kacperczyk, 2022; Pástor et al., 2022), far less is known about their volatility. We analyze the volatility of green and brown firms from 2012 to 2021, through the multiple lens of GARCH, machine learning, and historical volatility. The unconditional volatilities of brown and green firms are similar. The forecasting of volatility, however, differs sharply between green and brown firms: it is much harder to forecast green firms’ volatility.

The impact of blue and green lending on credit portfolios: a commercial banking perspective

The impact of blue and green lending on credit portfolios: a commercial banking perspective

How does CEO ethical leadership transform Saudi SMEs into green firms? A moderated mediation model

AbstractIn the aftermath of global warming, companies face huge pressure to minimize waste, reduce carbon emissions, and generally become more responsible in their operations. Against this backdrop, researchers argue that top management can significantly shape a firm's environmental performance (EP). This research aims to investigate the impact of CEO ethical leadership style on Saudi firms' EP in the presence of green human resource management (GHRM) practices as a mediator and stakeholder pressure as a moderator. We utilize the resource‐based view and stakeholder theory to develop hypotheses on these relationships. Multisourced data were collected from 272 small and medium‐sized manufacturing enterprises (SMEs) in Saudi Arabia. Our findings revealed that CEO ethical leadership positively influences firm EP via GHRM practices. The results also indicated that stakeholder pressure moderates the direct relationship between CEO ethical leadership and GHRM practices. Moreover, the stakeholder pressure moderates the indirect effect of CEO ethical leadership on firms' EP via GHRM. This study suggests that stakeholder pressure and GHRM practices are important mechanisms between CEO ethical leadership and firms' EP. Our research highlights essential theoretical and empirical contributions and provides insights for HR practitioners when and why SMEs engage in environment‐friendly practices.

The Role of Ecopreneurship in Bali’s Sustainable Tourism Development: Insights into Government Policy, Tourist Awareness and Preferences

There are numerous environmental issues in Bali, a popular tourist destination in Indonesia, including the problems of waste, critical land, beach abrasion, coral reef destruction and water contamination, all attributed to the rapid expansion of the tourism industry. Ecotourism is one of the solutions to address these concerns, and the initiatives taken involve ecopreneurship, the process of starting and running green firms that support sustainable tourism growth in Bali. The goal of ecopreneurship in the tourism industry is to create and run enterprises that have as minimum negative environmental impacts as possible, while maximising positive social and economic consequences. This is done through improvements on both public policies and tourist preferences, to promote a sustainable tourism development. A mixed method was used, combining SEM PLS, Path Methods, and qualitative research, with comprehensive interviews conducted among ecopreneurs, government agencies, tourists, and academics in Bali. Ecopreneurship variables, comprising environmentally friendly products and services, green technology innovation, environmental and natural resource management, local community involvement, environmental education and awareness, waste and emission management, collaboration and partnerships, measurement of environmental performance and sustainability, moderated by the government policy and tourist awareness and preference, were found to have a significant influence on sustainable tourism variables, namely, natural environment preservation, social welfare and culture, local economic empowerment, resource management and environmental impact reduction, local community participation and public consultation.

Does gender matter in financing SMEs in green industry?

This study explores gender differentiation in access to credit which penalizes Italian female-led green SMEs compared to male-led ones. We carry out a panel analysis with 184,425 observations, of which 5855 refer to green firms, observing how the percentage of women among directors and managers (PWDM) affects access to bank credit and its costs. Our results demonstrate that green SMEs show different levels of financial debt compared to non-green ones depending on the PWDM. Our paper contributes to the literature in three ways. First, we investigate whether women-led green SMEs show different demands for financial credit in terms of amounts borrowed and mix between long/short-term bank credit; second, whether this potentially different credit demand is associated with coherent or incoherent effects on the cost of credit; and third, whether the credit demand of women-led green SMEs depends on the PWDM in the company.

Green Firms, Environmental Hazards, and Investment

In this work, we analyze the relation between environmental risks and firms’ investments, and whether this relationship is different for green firms. We merge balance sheet and patenting activity data on Italian firms in manufacturing sectors during the period 2010–2019 with information on environmental risk at the municipality level. We show that investments in capital assets are smaller on average for firms operating in municipalities with higher levels of environmental risk, particularly when the risk is hydrogeological or seismic in nature. This negative impact is significantly lower if firms operate in green sectors. This finding was reinforced after the ratification of the Paris Agreement and the consequent increased awareness of firms, investors, and policymakers about the importance of environmental risks and the ongoing ecological transition process.

A review on ESG investing: Investors’ expectations, beliefs and perceptions

AbstractThis study examines the recent literature on the expectations, beliefs and perceptions of investors who incorporate Environmental, Social, Governance (ESG) considerations in investment decisions with the aim to generate superior performance or make a societal impact. Through the lens of equilibrium models of agents with heterogeneous tastes for ESG investments, green assets are expected to generate lower returns in the long run compared to their non‐ESG counterparts. However, in the short run, ESG investments can outperform non‐ESG investments through various channels. Empirically, results for the relative performance to ESG investment are mixed. We find strong empirical evidence in the literature that investors have a preference for ESG and that their actions can generate positive social impact through engagement. The shift towards more sustainable policies in firms is motivated by the increased market values and the lower cost of capital of green firms driven by investors’ choices.

Unveiling green synergies: sustainable performance through human resource management, CSR, and corporate image under a mediated moderation framework.

In the twenty-first century, the surge in natural resource consumption and climate change has necessitated stringent measures to ensure ecological integrity and corporate sustainability. Organizations are increasingly adopting green practices, including green human resource management (HRM), green corporate social responsibility (CSR), and the promotion of green firms' image. These strategies are central to fostering sustainable performance and responsible environmental stewardship. These constructs have also elevated consumers' satisfaction and trust in firms' ecological practices. This study employs a quantitative research approach and utilizes convenient sampling methods to explore the ecosystem within the hospitality sector of China. A survey was conducted among middle- and senior-level managers working in top 3-, 4-, and 5-star hotels. The study results demonstrate that green notions are the key to a corporate's sustainable performance. The study reveals that firms' eco-friendly motive ensures the greening of the hotel industry due to their eco-friendly motive. Therefore, companies should be responsible for the environment. They should ensure the implementation of green sustainable practices toward achieving corporate performance.

How does Leadership Transform Saudi SMEs Into Green Firms? The Role of Ethical Leadership, Green HRM

How does Leadership Transform Saudi SMEs Into Green Firms? The Role of Ethical Leadership, Green HRM

Geographies of green industries: The interplay of firms, technologies, and the environment

The emergence of green industries has been considered from multiple social science perspectives. Economic geographers view green industries as unevenly distributed firms forging green development paths. Sustainability transitions scholars view green industries as niche sectors struggling to mainstream green technologies in existing socio-technical systems. Political ecologists view green industries as metabolic actors whose development shapes and is shaped by the environment. Conceptualizing green industries as the interplay of green firms, socio-technical systems and the environment, this article proposes an integrative framework that synthesizes the three aforementioned perspectives for a research agenda of the geographies of green industries.

Antecedents and performance implications of stakeholder understanding in green product innovation

When developing green product innovations, firms are often confronted with a complex system of interdependent stakeholders and their interests. This study focuses on the holistic understanding of stakeholder interests and introduces the organizational capability of stakeholder understanding, defined as the degree to which a firm understands its stakeholder system. In particular, this study empirically examined the antecedents and consequences of stakeholder understanding in a green product innovation context. Through a two-stage survey approach, data were collected from 181 innovation professionals working in United States based manufacturing firms. Using hierarchical regression analysis, hypotheses about antecedents and consequences of stakeholder understanding are tested. Results show that stakeholder understanding is higher in firms with high innovation orientation, and lower in environments with high complexity. Results also show that stakeholder understanding has positive effects on three types of firm performance: green performance, market performance, and firm innovativeness. In addition, results of piecewise linear regression reveal that only for firms that exceed the median level of green orientation there is a positive relationship between green orientation and stakeholder understanding. The study's implications are that stakeholder understanding is a relevant capability for firms that aim to develop better and greener product innovations. To obtain stakeholder understanding, firms should strive for innovation and excel in green orientation, because only for truly green firms, green orientation helps to develop stakeholder understanding.

Cash flow investment, external funding and the energy transition: Evidence from large US energy firms

We examine the relationship between cash flow and investment in the US energy sector from 1988 to 2020. Our analysis incorporates firms’ financial constraints and the type of energy production in which they are engaged, distinguishing between brown and green generation. Our findings reveal a positive relationship between investment and cash flow for green energy firms, which behave similarly to constrained energy firms. While traditional brown energy firms tend to use higher cash flow to increase dividend payments and repurchase equity, green and constrained firms use it to repay debt and to fund investment. Our results suggest that policies aimed at strengthening the linkages between financial intermediaries and green firms could unlock cash flow resources for investment and innovation, facilitating the scaling up of operations during the energy transition. To ensure the sustainability of the transition, it is critical to reduce the reliance of green energy firms on internally generated cash flow, which is subject to volatility and cyclical macroeconomic conditions.

Optimal eco-label choice strategy for environmentally responsible corporations considering government regulations

Eco-labels are an essential market instrument for communicating environmental information about products to consumers. This study aims to identify how government regulations affect the optimal determination of labeling choices in a competitive market. Our findings suggest that an industry-set eco-label is optimal in terms of economic benefits for firms that produce green products. However, a self-set eco-label can be a viable option if the credibility of the self-set label is high enough to be comparable to the industry-set label. For social benefits, the government-set eco-label is superior to both industry-set and self-set labels, but it does not benefit the profits of firms or the industry. Consequently, firms will not actively choose government eco-labels without considering other mandatory measures. Our results also suggest that eco-label credibility and subsidies can improve both economic and social benefits for firms. In addition, an increase in consumer preference is beneficial to social benefits, but not to economic benefits for firms. Furthermore, environmental taxes can improve economic benefits for green firms, but excessive taxes may harm industry performance and social welfare. The findings of this study offer valuable insights for stakeholders in making eco-label decisions. Additionally, by integrating government regulations and voluntary market tools, the study provides important policy implications for enhancing the effectiveness of eco-labels.

Green human resource management and job pursuit intention: mediating role of corporate social responsibility and organizational reputation

This study aimed to evaluate whether green human resource management practice encourages prospective candidates to join environmentally responsible enterprises through organizational reputation and corporate social responsibility. The sample was gathered from 402 students from various universities in Bangladesh using a pre-structured questionnaire. The link between the latent components has been explained by analyzing the obtained data using the Partial Least Squares Method (PLSM) of Structural equation Modeling (SEM). The findings indicated that green human resources management has a positive relationship with job pursuit intention and organizational reputation and that corporate social responsibility plays a significant mediating role in this relationship. Students studying in universities in Bangladesh reported having higher job pursuit intentions towards organizations that practice environmental responsibility. The results also show that green human resource management is a source for luring graduated students to pursue careers in green firms and will enable practitioners to combine green human resource management with their conventional human resource practices to employ qualified applicants. The results provide valuable insights into the nature of green human resource management and how the top management is committed to green initiatives in an emerging economy like Bangladesh. Also, the results will help the top management understand how to use green human resource management projects to create corporate social responsibility initiatives and an excellent corporate reputation and attract highly qualified, socially responsible employees to improve environmental performance in organizations. The national policymakers may also get input in designing a green human resource management policy for the economy. Bangladesh is a climate-vulnerable country with a minimal practice of green human resource management in the economy, so the empirical findings of this study will attract researchers, academicians, and practitioners of human resource management to carry out further research in the economy of this area. Finally, this study contributes to the body of knowledge in the still-emerging subject of green human resource management by empirically showing worthy outcomes.

The preferential treatment of green bonds

We study the preferential treatment of green bonds in the central bank collateral framework as a climate policy instrument within a DSGE model with climate and financial frictions. In the model, green and carbon-emitting conventional firms issue defaultable corporate bonds to banks that use them as collateral, subject to haircuts determined by the central bank. A haircut reduction induces firms to increase bond issuance, investment, leverage, and default risk. Collateral policy solves a trade-off between increasing collateral supply, adverse effects on firm risk-taking, and subsidizing green investment. Optimal collateral policy is characterized by a haircut gap of 20 percentage points, which increases the green investment share and reduces emissions. However, welfare gains fall well short of what can be achieved with optimal carbon taxes. Moreover, due to elevated risk-taking of green firms, preferential treatment is a qualitatively imperfect substitute of Pigouvian taxation on emissions: if and only if the optimal emission tax can not be implemented, optimal collateral policy features a preferential treatment of green bonds.