Clean Production and Profitability: An Eco-Efficiency Analysis of Kenyan Manufacturing Firms
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Journal of Environment and Development
Abstract
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This study examines the linkage between the profitability of firms measured by return
on assets (ROA) and environmental performance measured by eco-efficiency and also
the impact of a good environmental management system (EMS) on profitability and
eco-efficiency of firms. These environmental management practices were captured by
the type of EMS a firm adopts that classified firms as either environmental leaders or
environmental laggards. To achieve this panel data regression model with ROA as the
dependent variable and eco-efficiency scores as the regressors was performed. The
results suggest that there is a potential gain in the profitability of the firm by improving
eco-efficiency in resource use. Furthermore, proactive firms are found to perform
better than reactive firms in terms of profitability and eco-efficiency but firms that
combine both proactive and reactive EMS perform even better, which shows the
benefit of adopting commitment-based approaches alongside the compliance-based
approaches to environmental management.
Keywords
eco-efficiency, environmental management systems, return on assets