Environmental Management Practices on Financial Performance: With special reference to the Rubber Industry in Sri Lanka

Abstract

This study investigates the relationship between environmental management practices (EMPs) on financial performance (FP) using the data from thirty rubber manufacturing organizations by building panel models for the sample during the period of 2012-2016. The study has considered the three different EMPs of energy reduction (amount of furnace oil use per day), waste (amount of waste water generates), and recycle (amount of recycle raw material) in capturing the effect of EMPs on FP. In addition, to elucidate how financial performance is dealing with EMPs, the study used Return on Assets (ROA) as a determinant of financial performance. It is more difficult to identify the general relationship between EMPs and FP of firms due to its heterogeneity during the growth of firms.’ The estimation results suggested that the recycling of waste material had significant negative driving forces on FP. However, waste water treatment and furnace oil consumption had no significant impact on FP. Therefore, it is critical to investigate the relationship between FP and EMPs which is yet to be resolved in order to build up a scope for companies to implement better environmental practices in the organizations.