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What does targeting ecological sustainability mean for company financial performance?

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  • Taryn De Mendonca
  • Yan Zhou

Abstract

This study empirically examines the effects of companies' environmental orientation on their long‐run financial performance. It also examines the mediating roles of environmental legitimacy and environmental performance. We use PLS‐SEM among a sample of large U.S.‐based companies. The results show that an environmental orientation that targets ecological sustainability is directly and positively associated with the debt ratio and with long‐run market value but to a lesser degree than what is obtained by not targeting ecological sustainability. Targeting ecological sustainability has a greater positive impact on environmental legitimacy than not targeting ecological sustainability. Environmental legitimacy, but not environmental performance, mediates the link between environmental orientation and long‐run profitability and market value. These findings suggest that targeting ecological sustainability is important for improving environmental legitimacy, but companies are not proactive in improving environmental performance. This study offers insights to managers for improving financial performance by targeting ecological sustainability.

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  • Taryn De Mendonca & Yan Zhou, 2019. "What does targeting ecological sustainability mean for company financial performance?," Business Strategy and the Environment, Wiley Blackwell, vol. 28(8), pages 1583-1593, December.
    • Handle: RePEc:bla:bstrat:v:28:y:2019:i:8:p:1583-1593
    DOI: 10.1002/bse.2334
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    6. Nabeel Younus Ansari & Muhammad Farrukh & Ali Raza, 2021. "Green human resource management and employees pro‐environmental behaviours: Examining the underlying mechanism," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(1), pages 229-238, January.
    7. Mark G. Edwards, 2021. "The growth paradox, sustainable development, and business strategy," Business Strategy and the Environment, Wiley Blackwell, vol. 30(7), pages 3079-3094, November.
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