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Does It Pay To Be Green? An Empirical Examination Of The Relationship Between Emission Reduction And Firm Performance

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  • Stuart L. Hart
  • Gautam Ahuja

Abstract

Evidence can be marshalled to support either the view that pollution abatement is a cost burden on firms and is detrimental to competitiveness, or that reducing emissions increases efficiency and saves money, giving firms a cost advantage. In an effort to resolve this seeming paradox, the relationship between emissions reduction and firm performance is examined empirically for a sample of S&P 500 firms using data drawn from the Investor Responsibility Research Center's Corporate Environmental Profile and Compustat. The results indicate that efforts to prevent pollution and reduce emissions drop to the ‘bottom line’ within one to two years of initiation and that those firms with the highest emission levels stand the most to gain.

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  • Stuart L. Hart & Gautam Ahuja, 1996. "Does It Pay To Be Green? An Empirical Examination Of The Relationship Between Emission Reduction And Firm Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 5(1), pages 30-37, March.
    • Handle: RePEc:bla:bstrat:v:5:y:1996:i:1:p:30-37
    DOI: 10.1002/(SICI)1099-0836(199603)5:13.0.CO;2-Q
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    References listed on IDEAS

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    1. Bonifant, Benjamin C. & Arnold, Matthew B. & Long, Frederick J., 1995. "Gaining competitive advantage through environmental investments," Business Horizons, Elsevier, vol. 38(4), pages 37-47.
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    3. Birger Wernerfelt, 1984. "A resource‐based view of the firm," Strategic Management Journal, Wiley Blackwell, vol. 5(2), pages 171-180, April.
    4. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and the Sustainability of Competitive Advantage: Reply," Management Science, INFORMS, vol. 35(12), pages 1514-1514, December.
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