Skip to main content
Log in

Beyond “Does it Pay to be Green?” A Meta-Analysis of Moderators of the CEP–CFP Relationship

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

Review of extant research on the corporate environmental performance (CEP) and corporate financial performance (CFP) link generally demonstrates a positive relationship. However, some arguments and empirical results have demonstrated otherwise. As a result, researchers have called for a contingency approach to this research stream, which moves beyond the basic question “does it pay to be green?” and instead asks “when does it pay to be green?” In answering this call, we provide a meta-analytic review of CEP–CFP literature in which we identify potential moderators to the CEP–CFP relationship including environmental performance type (e.g., reactive vs. proactive performance), firm characteristics (e.g., large vs. small firms), and methodological issues (e.g., self-report measures). By analyzing these contingencies, this study attempts to provide a basis on which to draw conclusions regarding some inconsistencies and debates in the CEP–CFP research. Some of the results of the moderator analysis suggest that small firms benefit from environmental performance as much or more than large firms, US firms seem to benefit more than international counterparts, and environmental performance seems to have the strongest influence on market-measures of financial performance.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

Marked References (*) are Included in Meta-Analysis

  • Ambec, S., & Lanoie, P. (2008). Does it pay to be green? A systematic overview. Academy of Management Perspectives, 22(4), 45–62.

    Article  Google Scholar 

  • Aragon-Correa, J. A. (1998). Strategic proactivity and firm approach to the natural environment. Academy of Management Journal, 41, 556–567.

    Article  Google Scholar 

  • *Baker, W., & Sinkula, J. (2005). Environmental marketing strategy and firm performance: Effects on new product performance and market share. Journal of the Academy of Marketing Science, 33(4), 461–475.

    Google Scholar 

  • *Bansel, P. (2005). Evolving sustainably: A longitudinal study of corporate sustainable development. Strategic management journal, 26, 197–218.

    Google Scholar 

  • *Bansel, P., & Clelland, I. (2004). Talking trash: Legitimacy, impression management, and unsystematic risk in the context of the natural environment. Academy of Management Journal, 47, 93–103.

    Google Scholar 

  • *Berrone, P., & Gomez-Mejia. (2009). Environmental performance and executive compensation: An integrated agency-institutional perspective. Academy of Management Journal, 52(1), 103–126.

  • *Berrone, P., Cruz, C., Gomez-Mejia, L. R., & Larraza-Kintana, M. (2010). Socioemotional wealth and corporate response to institutional pressures: Do family controlled firms pollute less? Administrative Science Quarterly, 54(2), 82–113.

    Google Scholar 

  • *Bragdon, J. H., & Marlin, J. A. T. (1972). Is pollution profitable? Risk Management, 19(4), 9–18.

    Google Scholar 

  • Bucholz, R. A. (1993). Principles of environmental management: The greening of business. Englewood Cliffs: Prentice-Hall.

    Google Scholar 

  • Buysse, K., & Verbeke, A. (2003). Proactive environmental strategies: A stakeholder management perspective. Strategic Management Journal, 24, 453–470.

    Article  Google Scholar 

  • Carroll, A. B. (1979). A three-dimensional conceptual model of corporate social performance. Academy of Management Review, 4, 497–505.

    Google Scholar 

  • Chen, M., & Hambrick, D. (1995). Speed, stealth and selective attack: How small firms differ from large firms in competitive behavior. Academy of Management Journal, 38(2), 453–482.

    Article  Google Scholar 

  • *Choi, J., & Wang, H. (2009). Stakeholder relations and the persistence of corporate financial performance. Strategic Management Journal, 30, 895–907.

    Google Scholar 

  • *Christmann, P. (2000). Effects of “best practices” of environmental management on cost competitiveness: The role of complementary assets. Academy of Management Journal, 43(4), 663–680.

    Google Scholar 

  • Clarkson, M. B. E. (1995). A stakeholder framework for analyzing and evaluating corporate social performance. Academy of Management Review, 20, 92–117.

    Google Scholar 

  • *Clarkson, P., Li, Y., & Richardson, G. (2004). The market valuation of environmental capital expenditures by pulp and paper companies. Accounting Review, 79, 329–353.

    Google Scholar 

  • *Clarkson, P., Li, Y., Richardson, G., & Vasvari, F. (2008). Revisiting the relation between environmental performance and environmental disclosure: An empirical analysis. Accounting, Organizations & Society, 33(4/5), 303–327.

    Google Scholar 

  • *Clemons, B. (2006). Economic incentives and small firms: Does it pay to be green? Journal of Business Research, 59, 492–500.

    Google Scholar 

  • *Coombs, J. E., & Gilley, K. M. (2005). Stakeholder management as a predictor of CEO compensation: Main effects and interactions with financial performance. Strategic Management Journal, 26, 827–840.

    Google Scholar 

  • *Cormier, D., & Gordon, I. M. (2001). An examination of social environmental reporting strategies. Accounting, Auditing, & Accountability Journal, 14: 587–616.

    Google Scholar 

  • D’Amboise, G., & Muldowney, M. (1988). Management theory for small business: Attempts and requirements. Academy of Management Review, 13, 226–240.

    Google Scholar 

  • Dean, T. J., Brown, R. L., & Bamford, C. E. (1998). Differences in large and small firms responses to environmental context: strategic implications from a comparative analysis of business formations. Strategic Management Journal, 19, 709–728.

    Article  Google Scholar 

  • *Dooley, R. S., & Lerner, L. D. (1994). Pollution, profits, and stakeholders: The constraining effect of economic performance on CEO concern with stakeholder expectations. Journal of Business Ethics, 13, 701–711.

    Google Scholar 

  • *Dowell, G., Hart, S., & Yeung, B. (2000). Do corporate global environmental standards create or destroy market value? Management Science, 46, 1059–1074.

    Google Scholar 

  • Eden, L., Levitas, E., & Martinez, R. J. (1997). The production, transfer and spillover of technology: Comparing large and small, multinationals as technology producers. Small Business Economics, 9, 53–66.

    Article  Google Scholar 

  • Engardio, P., Capell, K., Carey, J., & Hall, K. (2007). Beyond the green corporation. Jan: Business Week. 29.

    Google Scholar 

  • Etzion, D. (2007). Research on organizations and the natural environment, 1992-present: A review. Journal of Management, 33, 637–664.

    Article  Google Scholar 

  • Fiegenbaum, A., & Karnani, A. (1991). Output flexibility: A competitive advantage for small firms. Strategic Management Journal, 12, 101–114.

    Article  Google Scholar 

  • *Fogler, H. R., & Nutt, F. (1975). A note on social responsibility and stock valuation. Academy of Management Journal, 18(1), 155–160.

    Google Scholar 

  • *Freedman, M., & Jaggi, B. (1986). An analysis of the impact of corporate pollution disclosures included in annual financial statements on investors’ decisions. Advances in Public Interest Accounting, 1, 193–212.

  • Freedman, M., & Jaggi, B. (1994). Analysis of the association between pollution performance and input cost factors: The case of electric utility plants. Journal of Accounting and Public Policy, 13(1), 31–48.

    Article  Google Scholar 

  • Freeman, R., & Evan, W. (1990). Corporate governance: A stakeholder interpretation. Journal of Behavioral Economics, 19(4), 337.

    Article  Google Scholar 

  • Friedman, M. (1970, September). The social responsibility of business is to increase its profits. New York Times Magazine, 13, 33.

  • *Gilley, K. M., Worrell, D. L., & El-Jelly, A. (2000). Corporate environmental initiatives and anticipated firm performance: The differential effects of process-driven versus product-driven greening initiatives. Journal of Management, 26, 1199–1216.

    Google Scholar 

  • Greer, J., & Bruno, K. (1996). Greenwash: The reality behind corporate environmentalism. New York: Apex Press.

    Google Scholar 

  • Griffin, J., & Mahon, J. (1997). The corporate social performance and corporate financial performance debate. Business & Society, 36(1), 5.

    Article  Google Scholar 

  • Hart, S. L. (1995). A natural-resource-based view of the firm. Academy of Management Review, 20, 996–1014.

    Google Scholar 

  • Henriques, I., & Sadorsky, P. (1999). The relationship between environmental commitment and managerial perceptions of stakeholder importance. Academy of Management Journal, 42, 87–99.

    Article  Google Scholar 

  • Hoffman, A. J. (2001). From heresy to dogma: An institutional history of corporate environmentalism. Stanford: Stanford University Press.

    Google Scholar 

  • Howard, G. S. (1994). Why do people say nasty things about self-reports? Journal of Organizational Behavior, 15, 399–404.

    Article  Google Scholar 

  • Hunt, C. B., & Auster, E. R. (1990). Proactive environmental management: Avoiding the toxic trap. Sloan Management Review, 31(2), 7–18.

    Google Scholar 

  • Hunter, J. E., & Schmidt, F. L. (1990). Methods of meta-analysis: Correcting error and bias in research findings. Newbury Park: Sage.

    Google Scholar 

  • *Ingram, R. (1978). An investigation of the information content of (certain) social responsibility disclosures. Journal of Accounting Research, 16, 270–285.

    Google Scholar 

  • Jaffe, A. B., Peterson, S. R., Portney, P. R., & Stavins, R. N. (1995). Environmental regulation and the competitiveness of U.S. manufacturing: What does the evidence tell us? Journal of Economic Literature, 33(1), 132–163.

    Google Scholar 

  • *Johnson, R. A., & Greening, D. W. (1999). The effects of corporate governance and institutional ownership types on corporate social performance. Academy of Management Journal, 42, 564–576.

    Google Scholar 

  • *Judge, W., & Elenkov, D. (2005). Organizational capacity for change and environmental performance: an empirical assessment of Bulgarian firms. Journal of Business Research, 58(7), 893–901.

    Google Scholar 

  • *Judge, W. Q., & Douglas, T. J. (1998). Performance implications of incorporating environmental issues into the strategic planning process: an empirical assessment, Journal of Management Studies, 35, 241–62.

    Google Scholar 

  • *King, A., & Lenox, M. (2002). Exploring the locus of profitable pollution reduction. Management Science, 48, 289–299.

    Google Scholar 

  • *Klassen, R. D., & McLaughlin, C. P. 1996. The impact of environmental management on firm performance. Management Science, 42, 1199–1214.

    Google Scholar 

  • *Klassen, R. D., & Whybark, D. C. (1999). The impact of environmental technologies on manufacturing performance. Academy of Management Journal, 42(6), 599–615.

    Google Scholar 

  • *Konar, S., & Cohen, M. A. (2001). Does the market value environmental performance? The Review of Economics and Statistics, 83, 281–289.

    Google Scholar 

  • Lipsey, M. W., & Wilson, D. B. (2001). Practical meta-analysis. Applied social research methods series (Vol. 49). Thousand Oaks: Sage Publications.

    Google Scholar 

  • *Magness, V. (2006). Strategic posture, financial performance and environmental disclosure. Accounting, Auditing & Accountability Journal, 19, 540–563.

    Google Scholar 

  • *Majumdar, S. K., & Marcus, A. A. (2001). Rules versus discretion: The productivity consequences of flexible regulation. Academy of Management Journal, 44, 170–179.

    Google Scholar 

  • *Makni, R., Francoeur, C., & Bellavance, F. (2009). Causality between corporate social performance and financial performance: Evidence from Canadian firms. Journal of Business Ethics 89(3), 409–422.

    Google Scholar 

  • Marcus, A., & Geffen, D. (1998). The dialectics of competency acquisition: Pollution prevention in electric generation. Strategic Management Journal, 19(12), 1145.

    Article  Google Scholar 

  • *Marcus, A. A., & Goodman, R. S. (1986). Compliance and performance: Toward a contingency theory. Research in Corporate Social Performance and Policy, 8, 193–221.

    Google Scholar 

  • *Menguc, B., & Ozanne, L. (2005). Challenges of the green imperative: a natural resource-based approach to the environmental orientation–business performance relationship. Journal of Business Research, 58(4), 430–438.

    Google Scholar 

  • *Melnyk, S. A., Stroufe, R. P., & Calatone, R. (2003). Assessing the impact of environmental management systems on corporate and environmental performance. Journal of Operations Management, 21, 329–351.

    Google Scholar 

  • Nehrt, C. (1996). Timing and intensity effects of environmental investments. Strategic Management Journal, 17(7), 535–547.

    Article  Google Scholar 

  • *Nelling, E., & Webb, E. (2009). Corporate social responsibility and financial performance: A virtuous circle revisited. Review of Quantitative Finance and Accounting, 32(2), 197–209.

    Google Scholar 

  • Okada, K., & Sawai, M. (Eds.). (1999). Small firms, large concerns (p. 314). Oxford University Press: New York.

    Google Scholar 

  • Orlitzky, M., Schmidt, F., & Rynes, S. (2003). Corporate social and financial performance: A meta-analysis. Organization Studies, 24(3), 403–441.

    Article  Google Scholar 

  • Orwin, R. G. (1983). A fail-safe N for effect size in meta-analysis. Journal of Educational Statistics, 8, 157–159.

    Article  Google Scholar 

  • Pasquero, J. (1991). Supraorganizational collaboration: The Canadian environmental experiment. Journal of Applied Behavioral Science, 27(1), 38–64.

    Article  Google Scholar 

  • Porter, M., & Van der Linde, C. (1995). Toward a new conception of the environmental-competitiveness relationship. Journal of Economic Perspective, 9(4), 97–118.

    Article  Google Scholar 

  • Roome, N. (1992). Developing environmental management systems. Business Strategy and the Environment, 1, 11–24.

    Article  Google Scholar 

  • Rockness, Schlachter, J., & Rockness, H. O. (1986). Hazardous waste disposal, corporate disclosure, and financial performance in the chemical industry. Advances in Public Interest Accounting, 1, 167–191.

    Google Scholar 

  • *Russo, M. V., & Fouts, P. A. (1997). A resource-based perspective on corporate environmental performance and profitability. Academy of Management Journal, 40, 534–559.

    Google Scholar 

  • Schmitt, N. (1994). Method bias: The importance of theory and measurement. Journal of Organizational Behavior, 15, 393–398.

    Article  Google Scholar 

  • Schwarz, N. (1999). Self-reports. American Psychologist, 54, 93–105.

    Article  Google Scholar 

  • *Shane, P. B., & Spicer, B. H. (1983). Market response to environmental information produced outside the firm. The Accounting Review, 58, 521–538.

    Google Scholar 

  • Sharma, S. (2000). Managerial interpretations and organizational context as predictors of corporate choice of environmental strategy. Academy of Management Journal, 43, 681–697.

    Article  Google Scholar 

  • Sharma, S. (2001). Different strokes: Regulatory styles and environmental strategy in the North American oil and gas industry. Business Strategy and the Environment, 10, 344–364.

    Article  Google Scholar 

  • Sharma, S., & Starik, M. (Eds.). (2002). Research in corporate sustainability: The evolving theory and practice of organizations in the natural environment. Northampton: Edward Elgar Academic Publishing.

    Google Scholar 

  • Sharma, S., & Vredenburg, H. (1998). Proactive corporate environmental strategy and the development of competitively valuable organizational capabilities. Strategic Management Journal, 19, 729–753.

    Article  Google Scholar 

  • Shrivastava, P. (1995). The role of corporations in achieving ecological sustainability. Academy of Management Review, 20(4), 936–961.

    Google Scholar 

  • *Slater, D. J., & Dixon-Fowler, H. R. (2009). CEO international assignment experience and corporate social performance, Journal of Business Ethics, 89, 473–489.

    Google Scholar 

  • Spaeder, K. E. (2006, March). Think green: Entrepreneurs are turning environmental problems into opportunities. Entrepreneur Magazine. Retrieved January 3, 2008. http://www.entrepreneur.com/magazine/entrepreneur/2006/march/83592.html.

  • Spector, P. E. (1994). Using self-report questionnaires in OB research: A comment on the use of a controversial method. Journal of Organizational Behavior, 15, 385–392.

    Article  Google Scholar 

  • *Spicer, B. (1978). Investors, corporate social performance and information disclosure: An empirical study. Accounting Review, 53(1), 94–111.

    Google Scholar 

  • Starik, M., & Marcus, A. A. (2000). Introduction to the special research forum on the management of organizations in the natural environmental. Academy of Management Journal, 43(4), 539–546.

    Article  Google Scholar 

  • Storey, D. (1994). Understanding the small business sector. London: Routledge.

    Google Scholar 

  • Tozzi, J. (2008, October and 31) Why small manufacturers are going green. Business Week.

  • Trochim, W. (2001). The research methods knowledge base (2nd ed.). Cincinnati: Automatic Dog Publishing.

    Google Scholar 

  • *Turban, D., & Greening, D. (1997). Corporate social performance and organizational attractiveness to prospective employees. Academy of Management Journal, 40(3), 658–672.

    Google Scholar 

  • Ullman, A. A. (1985). Data in search of a theory: A critical examination of the relationships among social performance, social disclosure, and economic performance of U.S. firms. Academy of Management Review, 10, 540–557.

    Google Scholar 

  • Wagner, (2007). Integration of environmental management with other managerial functions of the firm. Long Range Planning, 40, 611–628.

    Article  Google Scholar 

  • Walley, N., & Whitehead, B. (1994). It’s not easy being green. Harvard Business Review, 72(3), 46–52.

    Google Scholar 

  • Wartick, S. L., & Cochran, P. L. (1985). The evolution of the corporate social performance model. Academy of Management Review, 10, 758–769.

    Google Scholar 

  • Welsh, J., & White, J. (1981). A small business is not a little big business. Harvard Business Review, 59(4), 18–27.

    Google Scholar 

  • Wilson, D. B., & Lipsey, M. W. (2001). Practical meta-analysis. Applied social research methods series, vol 49. Thousand Oaks: Sage Publications.

  • Woo, C. Y. Y., & Cooper, A. C. (1981). Strategies of effective low share businesses. Strategic Management Journal, 2, 301–318.

    Article  Google Scholar 

  • Yu, T. (2001). Toward a capabilities perspective of the small firm. International Journal of Management Reviews, 3(3), 185–197.

    Google Scholar 

  • *Yu, V., Ting, H. I., & Wu, Y. C. J. (2009). Assessing the greenness for European firms: A resource efficiency perspective. Management Decision, 47(7), 1065–1079.

    Google Scholar 

  • Zhu, Q., Sarkis, J., & Lai, K. (2007). Initiatives and outcomes of green supply chain management implementation by Chinese manufacturers. Journal of Environmental Management, 85, 179–189.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Heather R. Dixon-Fowler.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Dixon-Fowler, H.R., Slater, D.J., Johnson, J.L. et al. Beyond “Does it Pay to be Green?” A Meta-Analysis of Moderators of the CEP–CFP Relationship. J Bus Ethics 112, 353–366 (2013). https://doi.org/10.1007/s10551-012-1268-8

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-012-1268-8

Keywords

Navigation