Exploring the Link between Environmental Practices and Financial Performance: an Empirical Study

Abstract

Ongoing environmental deterioration has led governments and other institutions to pay closer attention to pollution problems as pollutant emissions can significantly influence and constrain economic growth. Most countries on the American continent use the ISO 14001 standard and the number of new certifications grows year by year. This work empirically explores the influence of ISO 14001 based environmental management systems upon the financial performance of Colombian companies, 133 ISO 14001 certified and 5,036 non-certified firms. A panel data analysis over three years was the data analysis method. This work studied the financial performance of the companies implementing EMS compared to those that did not in one of the most important Latin American economies (Colombia). It was found that a positive relationship exists between the ISO standard and financial performance measured through the companies’ Return on Assets (ROA).