Proactive versus reactive environmental management and profitability of Indian firms: The moderating effects of environmental cost-efficiency and environmental liability

Abstract

Research on the impact of environmental management practices (EMPs) on financial performance of firms to date has ignored the moderating role played by environmental cost-efficiency (ECE) and environmental liability. Despite the increasing interest in examining the environmental stance in the corporate world, there is lack of evidence on the reactive and proactive environmental management of Indian business entities and their impact on their profitability. This paper explores the EMPs of firms listed on S&P BSE GreenEx and CarbonEx. Content analysis is used to collect data on EMPs and pilot study is conducted in five experimental rounds to test the reliability of the coded categories by three coders, two academicians holding expertise in environmental sciences and the author. Coded categories are used as independent variables. Moderating variables viz. ECE and environmental liability are found to be intensifying the statistically significant negative effect of proactive and reactive EMPs on firm profitability. Findings clearly refute the ‘win-win’ hypothesis.

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