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An Assessment of the Association Between Renewable Energy Utilization and Firm Financial Performance

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Abstract

Contemporary research highlights multiple societal and environmental benefits in addition to potential economic advantages associated with renewable energy (RE) utilization. As federal and state incentives for investments in RE technologies become more prevalent, RE sources represent increasingly viable alternatives to established fossil fuel energy. RE utilization is recognized as a key component of “green” product innovation that helps firms reduce the environmental impact of production processes and diminish their ecological footprints and energy consumption. Yet, despite consistent evidence that corporate sustainability initiatives are favorably associated with firm performance, the limited research that examines associations between RE initiatives and firm performance yields mixed results and an explicit link has yet to be established. Drawing on the natural resource-based view of the firm, we examine the association between RE utilization and firm financial performance over time. Annual ROI, Tobin’s Q, and operating margin for large U.S. firms identified as exceptional users of RE in the EPA’s Fortune 500 Top Green Power Partners list are compared with their respective industry medians over a 7-year period (2007–2013) and post hoc bootstrapping and sensitivity analyses are performed to further validate the study findings. Our research advances current knowledge about the influence of RE utilization by demonstrating that top RE user firms consistently generated superior financial performance compared to their industry competitors. As such, the study findings lend credence to the existence of a business case that complements the societal and environmental benefits of RE utilization.

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Authors and Affiliations

  1. Department of Marketing, College of Business Administration, Georgia Southern University, P.O. Box 8154, Statesboro, GA, 30460, USA

    Hyunju Shin

  2. Department of Marketing, Culverhouse College of Commerce and Business Administration, University of Alabama, P.O. Box 870225, Tuscaloosa, AL, 35487-0225, USA

    Alexander E. Ellinger

  3. HHN Consulting, LLC, 236 The Highlands, Tuscaloosa, AL, 35404, USA

    Helenka Hopkins Nolan

  4. Pricewaterhouse Coopers, LLC, 500, Woodward Ave, Detroit, MI, 48226, USA

    Tyler D. DeCoster

  5. Department of Educational Leadership, College of Education, Sam Houston State University, P.O. Box 2119, Huntsville, TX, 77341-2119, USA

    Forrest Lane

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  1. Hyunju Shin
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  2. Alexander E. Ellinger
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  3. Helenka Hopkins Nolan
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  4. Tyler D. DeCoster
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  5. Forrest Lane
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Correspondence to Hyunju Shin.

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Shin, H., Ellinger, A.E., Nolan, H.H. et al. An Assessment of the Association Between Renewable Energy Utilization and Firm Financial Performance. J Bus Ethics 151, 1121–1138 (2018). https://doi.org/10.1007/s10551-016-3249-9

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