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Financial outcomes of environmental risk and opportunity for US companies
Author(s) -
Semenova Natalia,
Hassel Lars G.
Publication year - 2008
Publication title -
sustainable development
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.115
H-Index - 64
eISSN - 1099-1719
pISSN - 0968-0802
DOI - 10.1002/sd.365
Subject(s) - business , preparedness , risk management , value (mathematics) , environmental scanning , construct (python library) , finance , market risk , market value , financial risk , economics , environmental management system , programming language , ecology , management , machine learning , irrigation , computer science , biology
The study extends previous research on the relation between environmental and financial performance in two ways. First, we recognize that inherent environmental risk differs among industries. Increased levels of industry risk cause companies to have lower market values even if they are more profitable than companies in low risk industries. Second, we decompose the multi‐dimensional environmental opportunity construct into dimensions of preparedness and performance. As an extension of previous research on the economic value of environmental performance, we show that the reputational benefits of environmental preparedness mainly increase market value, while environmental performance also can bring operational benefits to financial performance. In high risk or polluting industries, environmental management is costly and reduces the operating performance of companies. Copyright © 2008 John Wiley & Sons, Ltd and ERP Environment.