Environmental and Resource Economics

, Volume 50, Issue 2, pp 227–242

Corporate Environmental Management and Environmental Efficiency

Article

DOI: 10.1007/s10640-011-9469-7

Cite this article as:
Khanna, M. & Kumar, S. Environ Resource Econ (2011) 50: 227. doi:10.1007/s10640-011-9469-7

Abstract

This paper examines the potential of environmental management systems (EMSs) to provide opportunities for reducing toxic releases cost-effectively and increasing environmental efficiency of a sample of S&P 500 firms. We use directional distance function to estimate firm-specific environmental efficiency. A truncated regression model with bootstraping is then estimated to analyze the determinants of the environmental efficiency of firms. The analysis shows that the comprehensiveness of an EMS, pressures to reduce toxic releases cost-effectively, innovativeness of firms and the threat of costly regulations in the future lead firms to become more environmental efficient. Regression results indicate that increasing the comprehensiveness of EMS by adopting one additional practice benefits the average firm by approximately US$ 35.5 million by increasing its environmental efficiency by 0.3%.

Keywords

Environmental management systemsEnvironmental efficiencyDirectional distance functionToxic releases

Copyright information

© Springer Science+Business Media B.V. 2011

Authors and Affiliations

  1. 1.Department of Agricultural and Consumer EconomicsUniversity of Illinois at Urbana-ChampaignUrbanaUSA
  2. 2.Department of Business Economics South CampusUniversity of Delhi, Benito Juarez MargNew DelhiIndia