Skip to main content
SpringerLink
Log in

Green pays off: the impact of corporate carbon strategies on corporate financial performance

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

Abstract

As climate change continues to be a pressing issue affecting businesses, firms are taking proactive measures by integrating carbon considerations into their overall strategic planning for environmental sustainability. Nonetheless, the question of whether it pays to be green remains inconclusively answered. Based on an analysis of the 200 largest public listed firms by market capitalisation in Malaysia, the findings indicated that most of the firms are still reactive in managing their carbon activities; however, corporate carbon strategy does, indeed, lead to better financial performance. The findings reaffirmed that going green pays off, particularly for firms with higher levels of foreign ownership. Interestingly, an inverse relationship was observed among firms with higher levels of government shareholdings. Additionally, the firms have been categorised into six different groups based on their scope and level of corporate carbon strategies, ranging from “wait-and-see” to “all-round explorer” classifications. Taken together, these findings enrich corporate carbon and sustainability literature and offer insights into theoretical and policy implications, along with suggestions for future research.

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

Access this article

Log in via an institution

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

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

Similar content being viewed by others

Data availability

The data that support the findings of this study are available from the corresponding author upon request.

References

  • Adeneye, Y. B., Jaaffar, A. H., Ooi, C. A., & Ooi, S. K. (2021). Nexus between carbon emissions, energy consumption, urbanization and economic growth in Asia: Evidence from Common Correlated Effects Mean Group Estimator (CCEMG). Frontiers in Energy Research, 8, 610577.

    Article  Google Scholar 

  • Adu, D. A., Flynn, A., & Grey, C. (2023). Carbon performance, financial performance and market value: The moderating effect of pay incentives. Business Strategy and the Environment, 32(4), 2111–2135.

    Article  Google Scholar 

  • Amran, A., Nejati, M., Ooi, S. K., & Darus, F. (2018). Exploring issues and challenges of green financing in Malaysia: Perspectives of financial institutions. In Sustainability and Social Responsibility of Accountability Reporting Systems: A Global Approach (pp. 255–266).

    Chapter  Google Scholar 

  • Amran, A., Ooi, S. K., Nejati, M., Zulkafli, A. H., & Lim, B. A. (2012). Relationship of firm attributes, ownership structure and business network on climate change efforts: Evidence from Malaysia. International Journal of Sustainable Development and World Ecology, 19(5), 406–414.

    Article  Google Scholar 

  • Bakar, A. B. S. A., Ghazali, N. A. B., & Ahmad, M. B. (2019). Sustainability reporting in Malaysia-The extent and quality. International Journal of Academic Research in Business and Social Sciences, 9(5), 816–835.

    Google Scholar 

  • Barnett, M. L., & Salomon, R. M. (2012). Does it pay to be really good? Addressing the shape of the relationship between social and financial performance. Strategic Management Journal, 33, 1304–1320.

    Article  Google Scholar 

  • Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120.

    Article  Google Scholar 

  • Begum, R. A., & Pereira, J. J. (2011). Corporate perceptions of climate change in Malaysia. African Journal of Business Management, 5(11), 4299–4305.

    Google Scholar 

  • Besio, C., & Pronzini, A. (2014). Morality, ethics, and values outside and inside organizations: An example of the discourse on climate change. Journal of Business Ethics, 119(3), 287–300.

    Article  Google Scholar 

  • Brammer, S., & Pavelin, S. (2008). Factors influencing the quality of corporate environmental disclosure. Business Strategy and the Environment, 17(2), 120–136.

    Article  Google Scholar 

  • Brouwers, R., Schoubben, F., & Van Hulle, C. (2018). The influence of carbon cost pass through on the link between carbon emission and corporate financial performance in the context of the European Union Emission Trading Scheme. Business Strategy and the Environment, 27(8), 1422–1436.

    Article  Google Scholar 

  • Busch, T., Bassen, A., Lewandowski, S., & Sump, F. (2022). Corporate carbon and financial performance revisited. Organization & Environment, 35(1), 154–171.

    Article  Google Scholar 

  • Busch, T., & Friede, G. (2018). The robustness of the corporate social and financial performance relation: A second-order meta-analysis. Corporate Social Responsibility and Environmental Management, 25(4), 583–608.

    Article  Google Scholar 

  • Busch, T., & Hoffmann, V. H. (2011). How hot is your bottom line? Linking carbon and financial performance. Business and Society, 50(2), 233–265.

    Article  Google Scholar 

  • Busch, T., & Lewandowski, S. (2018). Corporate carbon and financial performance a meta-analysis. Journal of Industrial Ecology, 22(4), 745–759.

    Article  Google Scholar 

  • Cadez, S., Czerny, A., & Letmathe, P. (2019). Stakeholder pressures and corporate climate change mitigation strategies. Business Strategy and the Environment, 28(1), 1–14.

    Article  Google Scholar 

  • Clarkson, P. M., Li, Y., Richardson, G. D., & Vasvari, F. P. (2011). Does it really pay to be green? Determinants and consequences of proactive environmental strategies. Journal of Accounting and Public Policy, 30(2), 122–144.

    Article  Google Scholar 

  • Dahlmann, F., Branicki, L., & Brammer, S. (2019). Managing carbon aspirations: The influence of corporate climate change targets on environmental performance. Journal of Business Ethics, 158(1), 1–24.

    Article  Google Scholar 

  • Damert, M., Paul, A., & Baumgartner, R. J. (2017). Exploring the determinants and long-term performance outcomes of corporate carbon strategies. Journal of Cleaner Production, 160, 123–138.

    Article  Google Scholar 

  • Datt, R. R., Luo, L., & Tang, Q. (2019). The impact of legitimacy threaton the choice of external carbon assurance: Evidence from the US. Accounting Research Journal, 32(2), 181–202.

    Article  Google Scholar 

  • Delmas, M. A., Nairn-Birch, N., & Lim, J. (2015). Dynamics of environmental and financial performance: The case of greenhouse gas emissions. Organization & Environment, 28(4), 374–393.

    Article  Google Scholar 

  • Endrikat, J., Guenther, E., & Hoppe, H. (2014). Making sense of conflicting empirical findings: A meta-analytic review of the relationship between corporate environmental and financial performance. European Management Journal, 32(5), 735–751.

    Article  Google Scholar 

  • Farza, K., Ftiti, Z., Hlioui, Z., Louhichi, W., & Omri, A. (2021). Does it pay to go green? The environmental innovation effect on corporate financial performance. Journal of Environmental Management, 300, 113695.

    Article  Google Scholar 

  • Gallego-Álvarez, I., Segura, L., & Martínez-Ferrero, J. (2015). Carbon emission reduction: The impact on the financial and operational performance of international companies. Journal of Cleaner Production, 103, 149–159.

    Article  Google Scholar 

  • Ganda, F. (2018). The effect of carbon performance on corporate financial performance in a growing economy. Social Responsibility Journal, 14(4), 895–916.

    Article  Google Scholar 

  • García-Sánchez, I. M., & Prado-Lorenzo, J. M. (2012). Greenhouse gas emission practices and financial performance. International Journal of Climate Change Strategies and Management, 4(3), 260–276.

    Article  Google Scholar 

  • Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2–24.

    Article  Google Scholar 

  • Haniffa, R. M., & Cooke, T. (2002). Culture, corporate governance and disclosure in Malaysian corporations. Abacus., 38(3), 317–349.

    Article  Google Scholar 

  • Hart, S. L. (1995). A natural-resource-based view of the firm. Academy of Management Review, 20(4), 986–1014.

    Article  Google Scholar 

  • Hawkins, E., Ortega, P., Suckling, E., Schurer, A., Hegerl, G., Jones, P., et al. (2017). Estimating changes in global temperature since the preindustrial period. Bulletin of the American Meteorological Society, 98(9), 1841–1856.

    Article  Google Scholar 

  • Hayes, A. F., & Krippendorff, K. (2007). Answering the call for a standard reliability measure for coding data. Communication Methods and Measures, 1(1), 77–89.

    Article  Google Scholar 

  • Horváthová, E. (2010). Does environmental performance affect financial performance? A meta-analysis. Ecological Economics, 70(1), 52–59.

    Article  Google Scholar 

  • Howard-Grenville, J., Buckle, S. J., Hockins, B. J., & George, G. (2014). Climate change and management. Academy of Management Journal, 57(3), 615–623.

    Article  Google Scholar 

  • IPCC. (2018). Global warming of 1.5°C: Summary for policymakers. Working Group I Technical Support Unit. Intergovernmental Panel on Climate Change.

    Google Scholar 

  • IPCC. (2023). Climate change 2023 synthesis report: Summary for policymakers. Intergovernmental Panel on Climate Change.

    Google Scholar 

  • Iwata, H., & Okada, K. (2011). How does environmental performance affect financial performance? Evidence from Japanese manufacturing firms. Ecological Economics, 70, 1691–1700.

    Article  Google Scholar 

  • Jeswani, H. K., Wehrmeyer, W., & Mulugetta, Y. (2008). How warm is the corporate response to climate change? Evidence from Pakistan and the UK. Business Strategy and the Environment, 17(1), 46–60.

    Article  Google Scholar 

  • Khan, S. A. R., Tabish, M., & Yu, Z. (2023). Investigating recycling decisions of internet recyclers: A step towards zero waste economy. Journal of Environmental Management, 340, 117968.

    Article  Google Scholar 

  • Khan, S. A. R., Tabish, M., & Zhang, Y. (2023). Embracement of industry 4.0 and sustainable supply chain practices under the shadow of practice-based view theory: Ensuring environmental sustainability in corporate sector. Journal of Cleaner Production, 398, 136609.

    Article  Google Scholar 

  • Khan, S. A. R., Yu, Z., Ridwan, I. L., Irshad, R., Ponce, P., & Tanveer, M. (2023). Energy efficiency, carbon neutrality and technological innovation: A strategic move towards green economy. Economic research-Ekonomska istraživanja, 36(2), 2140306.

    Article  Google Scholar 

  • Khojastehpour, M., & Johns, R. (2014). The effect of environmental CSR issues on corporate/brand reputation and corporate profitability. European Business Review, 26(4), 330–339.

    Article  Google Scholar 

  • Kolk, A., & Pinkse, J. (2005). Business responses to climate change: Identifying emergent strategies. California Management Review, 47(3), 6–20.

    Article  Google Scholar 

  • Krippendorff, K. (2019). Content analysis: An introduction to its methodology. Sage Publication Inc..

    Book  Google Scholar 

  • Lee, K. H., & Min, B. (2015). Green R&D for eco-innovation and its impact on carbon emissions and firm performance. Journal of Cleaner Production, 108, 534–542.

    Article  Google Scholar 

  • Lee, S. Y. (2012). Corporate carbon strategies in responding to climate change. Business Strategy and the Environment, 21(1), 33–48.

    Article  Google Scholar 

  • Lewandowski, S. (2017). Corporate carbon and financial performance: The role of emission reductions. Business Strategy and the Environment, 26(8), 1196–1211.

    Article  Google Scholar 

  • Liu, T., Zhang, Y., & Liang, D. (2019). Can ownership structure improve environmental performance in Chinese manufacturing firms? The moderating effect of financial performance. Journal of Cleaner Production, 225, 58–71.

    Article  Google Scholar 

  • Long, W., Li, S., Wu, H., & Song, X. (2020). Corporate social responsibility and financial performance: The roles of government intervention and market competition. Corporate Social Responsibility and Environmental Management, 27(2), 525–541.

    Article  Google Scholar 

  • Lόpéz-Pérez, M. E., Melero, I., & Sese, F. J. (2017). Management for sustainable development and its impact on firm value in the SME context: Does size matter? Business Strategy amd the Environment, 26, 985–999.

    Article  Google Scholar 

  • Manrique, S., & Martí-Ballester, C. P. (2017). Analyzing the effect of corporate environmental performance on corporate financial performance in developed and developing countries. Sustainability, 9(11), 1957.

    Article  Google Scholar 

  • Milne, M. J., & Hackston, D. (1996). Some determinants of social and environmental disclosures in New Zealand companies. Accounting, Auditing & Accountability Journal, 9(1), 77–108.

    Article  Google Scholar 

  • Naranjo Tuesta, Y., Crespo Soler, C., & Ripoll Feliu, V. (2020). The influence of carbon management on the financial performance of European companies. Sustainability, 12(12), 4951.

    Article  Google Scholar 

  • Ooi, S. K., & Amran, A. (2018). Enabling climate change reporting in Malaysia. World Review of Entrepreneurship, Management and Sustainable Development, 14(4), 507–527.

    Article  Google Scholar 

  • Ooi, S. K., Amran, A., Yeap, J. A., & Jaaffar, A. H. (2019). Governing climate change: The impact of board attributes on climate change disclosure. International Journal of Environment And Sustainable Development, 18(3), 270–288.

    Article  Google Scholar 

  • Ooi, S. K., Goh, S., Yeap, J. A. L., & Loo, K. S. (2018). Linking corporate climate change and financial performance: Evidence from Malaysia. Global Business and Management Research: An International Journal, 10(1), 231–247.

    Google Scholar 

  • Reza, M. S., & Ruhi, S. (2015). Study of multivariate data clustering based on k-means and independent component analysis. American Journal of Theoretical and Applied Statistics, 4(5), 317–321.

    Article  Google Scholar 

  • Rokhmawati, A., Gunardi, A., & Rossi, M. (2017). How powerful is your customers’ reaction to carbon performance? Linking carbon and firm financial performance. International Journal of Energy Economics and Policy, 7(6), 85–95.

    Google Scholar 

  • Seles, B. M. R. P., de Sousa Jabbour, A. B. L., Jabbour, C. J. C., de Camargo Fiorini, P., Mohd-Yusoff, Y., & Thomé, A. M. T. (2018). Business opportunities and challenges as the two sides of the climate change: Corporate responses and potential implications for big data management towards a low carbon society. Journal of Cleaner Production, 189, 763–774.

    Article  Google Scholar 

  • Tang, K. H. D. (2019). Climate change in Malaysia: Trends, contributors, impacts, mitigation and adaptations. Science of the Total Environment, 650, 1858–1871.

    Article  Google Scholar 

  • Trinks, A., Mulder, M., & Scholtens, B. (2020). An efficiency perspective on carbon emissions and financial performance. Ecological Economics, 175, 106632.

    Article  Google Scholar 

  • UN Environment. (2019). Global Environment Outlook – GEO-6: Healthy Planet, Healthy People. Cambridge University Press. https://doi.org/10.1017/9781108627146

    Book  Google Scholar 

  • UNFCCC. (2009). Fact sheet: The need for mitigation. Retrieved from https://unfccc.int/files/press/backgrounders/application/pdf/press_factsh_mitigation.pdf

  • Weinhofer, G., & Hoffmann, V. H. (2010). Mitigating climate change–How do corporate strategies differ? Business Strategy and the Environment, 19(2), 77–89.

    Article  Google Scholar 

  • Yeap, J. A. L., Ooi, S. K., Yapp, E. H. T., & Ramesh, N. (2022). Preloved is reloved: Investigating predispositions of second-hand clothing purchase on C2C platforms. The Service Industries Journal. https://doi.org/10.1080/02642069.2022.2127689

Download references

Author information

Authors and Affiliations

  1. Graduate School of Business, Universiti Sains Malaysia, 11800, Penang, Malaysia

    Say Keat Ooi & Seow Li Wong

  2. Faculty of Hospitality, Tourism & Wellness, Universiti Malaysia Kelantan, 16100, Kota Bharu, Malaysia

    Yusuf Babatunde Adeneye

Authors
  1. Say Keat Ooi
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Seow Li Wong
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Yusuf Babatunde Adeneye
    View author publications

    You can also search for this author in PubMed Google Scholar

Contributions

All authors contributed to the study conception and design. Material preparation, data collection, and analysis were performed by Say Keat Ooi, Seow Li Wong, and Yusuf Babatunde Adeneye. The first draft of the manuscript was written by Say Keat Ooi and Seow Li Wong, and all authors commented on previous versions of the manuscript. All authors read and approved the final manuscript.

Corresponding author

Correspondence to Say Keat Ooi.

Ethics declarations

Ethics approval

Not applicable. This research did not involve any human participants and/or animals. The analysis was based on content analysis of published corporate reports.

Competing interests

The authors declare no competing interests.

Additional information

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Appendix

Appendix

Table 5 Assessment scales for carbon management activities
Full size table

Rights and permissions

Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Ooi, S.K., Wong, S.L. & Adeneye, Y.B. Green pays off: the impact of corporate carbon strategies on corporate financial performance. Asian J Bus Ethics (2024). https://doi.org/10.1007/s13520-024-00196-7

Download citation

  • Received:

  • Accepted:

  • Published:

  • DOI: https://doi.org/10.1007/s13520-024-00196-7

Keywords

Search

Navigation