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Impact of green innovation on environmental performance and financial performance

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Abstract

In today’s world, businesses and organizations should behave appropriately for the environment in order to make a contribution to welfare benefits while also gaining business opportunities and economic development. Green practice’s adoption could assist businesses to start saving mineral wealth, and power, avoid environmental damage and even result in the long development of businesses. This study examined the correlation between external environmental factors and green product innovation, as well as the impact of green product innovation on the environmental and financial performance of 400 manufacturing SMEs in Vietnam's primary industrial units. Customer pressure, government pressure, government support, and market changes all had a beneficial effect on green product innovation, according to the findings. Furthermore, this study found a strong positive relationship between green product innovation and environmental and financial performance. Based on the research findings of this research, SME administrators can effectively adapt their business strategies to attain greater financial results and a comparative position in the market while utilizing green initiatives to grow their businesses and preserve the natural environment in a sustainable manner.

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Authors and Affiliations

  1. Ho Chi Minh City Open University, 97 Vo Van Tan Street, District 3, Ho Chi Minh City, 700901, Vietnam

    Nguyen Minh Ha

  2. Faculty of Economics and Public Management, Ho Chi Minh City Open University, Ho Chi Minh City, Vietnam

    Nguyen Minh Ha

  3. Finance, Economic and Management Research Group (FEMRG), Ho Chi Minh City Open University, Ho Chi Minh City, Vietnam

    Nguyen Minh Ha

  4. Research Centre in Business, Economics, and Resources (CBER), Ho Chi Minh City Open University, Ho Chi Minh City, Vietnam

    Nguyen Minh Ha

  5. The Graduate School, Ho Chi Minh City Open University, Ho Chi Minh City, Vietnam

    Pham Anh Nguyen & Nguyen Vinh Luan

  6. Duc Hoa District People’s Committee, Hậu Nghĩa, Duc Hoa, Long An, Vietnam

    Nguyen Minh Tam

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  1. Nguyen Minh Ha
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Appendix A: measurement items

Appendix A: measurement items

Items

Indicator variable

I. Environmental factors

1. Customer pressure (AKH)

AKH1

Customers require enterprises to improve environmental activities

AKH2

Customers focus on environmental protection

AKH3

Customers require environmentally friendly products from businesses

AKH4

Customers are willing to pay more for green products

AKH5

Customers request detailed information on environmental protection of businesses

AKH6

Customers will stop supporting if businesses do not produce green products

AKH7

Customers prefer businesses with strong environmental responsibility

AKH8

Customers pressure companies to comply with societal requirements

AKH9

Customers place pressure on businesses to adhere to environmental regulations

AKH10

Customers often pay attention to the environmental protection behavior of businesses

AKH11

Customers request to organize periodic reviews in the implementation of environmental policies of businesses

2. Government pressure

ACP1

The government establishes environmental laws to limit industrial practices that have an adverse impact on the natural environment

ACP2

Industry associations require businesses to comply with environmental regulations

ACP3

Businesses will be fined if they violate environmental regulations

ACP4

Government sets standards for wastewater

ACP5

Government sets emission standards

ACP6

Government sets solid waste standards

ACP7

The government sets the standard for production technology

ACP8

Businesses encounter pressure from government environmental legislation

ACP9

Businesses encounter pressure from local government monitoring of environmental activities

ACP10

Businesses feel pressure from environmental groups (supported by the Government)

ACP11

Government requires businesses to sign commitments on environmental protection

3. Government support

HCP1

Businesses are financially supported by the Government for the application of green innovation

HCP2

Businesses receive technical support from the Government when applying green innovation

HCP3

The government supports businesses to train green skills for employees

HCP4

The government regularly organizes seminars on environmental regulations for businesses

HCP5

The Government guides the process of implementing environmental protection for businesses

HCP6

Government policy reform creates favorable conditions for green innovation activities of businesses

HCP7

The Government promulgates an environmental strategy to create conditions for businesses to implement green innovation

HCP8

The government forecasts the trend of environmental problems for businesses to implement green innovation

HCP9

Many initiatives have been launched by the Government to increase the attractiveness of green innovation for businesses

HCP10

Government incentives on tax rates for businesses that protect the environment well

4. Market change

DTT1

Predicting consumer preferences is very challenging

DTT2

Predicting competitor behavior is challenging

DTT3

Progress in the quality of green products develops rapidly

DTT4

Customers' preferences for products change frequently

DTT5

The sales volume of enterprises cannot be predicted in advance

DTT6

Progress on green products by competitors is unpredictable

DTT7

The advancement of green manufacturing technology by competitors is unpredictable

DTT8

Customers' expectations about the level of environmental protection of enterprises are unpredictable

II. Green innovation

DSP1

Businesses prioritize the use of less polluting materials

DSP2

Businesses prioritize the use of materials that consume fewer resources and energy

DSP3

Businesses use the least amount of raw materials to create products

DSP4

Businesses will consider the product's recycling before proceeding with production

DSP5

Businesses will consider the reuse of products before proceeding with production

DSP6

Businesses will consider the decomposition of products before proceeding with production

DSP7

Businesses are often the first to bring green products to the market

DSP8

Businesses improve environmentally friendly packaging for products

DSP9

Businesses use recyclable/reusable packaging

III Environmental performance

SMT1

Green innovation reduces emissions

SMT2

Green innovation reduces waste water

SMT3

Green innovation reduces solid waste

SMT4

Green innovation reduces consumption of hazardous/toxic materials

SMT5

Green innovation reduces the frequency of enterprises causing environmental pollution

SMT6

Green innovation lowers costs

SMT7

Green innovation reduces product production time

SMT8

Green innovation creates sustainable value of enterprises

SMT9

Green innovation strengthens relationships with business partners/customers

SMT10

Green innovation reduces pollution control costs

SMT11

Green innovation helps businesses comply with environmental regulations

SMT12

Customers support businesses whose goods are produced in compliance with environmental standards

SMT13

Partners accept to cooperate with enterprises when products are manufactured in accordance with environmental standards

SMT14

Employees increase loyalty when businesses operate in accordance with environmental standards

SMT15

Employees increase productivity when businesses operate in accordance with environmental standards

SMT16

Businesses can expand business opportunities

IV Financial performance

HQC1

Businesses reduce the cost of buying input materials

HQC2

Businesses reduce costs for energy consumption

HQC3

Businesses reduce waste treatment costs

HQC4

Businesses increase profits significantly

HQC5

Businesses reduce fines for environmental issues

HQC6

Businesses increase market share in the market

HQC7

The price of the product increases

HQC8

Businesses increase profit on assets

HQC9

Businesses grow return on equity

HQC10

Businesses increase sales revenue

HQC11

The financial value of the business is increased

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Ha, N.M., Nguyen, P.A., Luan, N.V. et al. Impact of green innovation on environmental performance and financial performance. Environ Dev Sustain (2023). https://doi.org/10.1007/s10668-023-03328-4

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