IDEAS home Printed from https://ideas.repec.org/a/eee/jebusi/v120y2022ics0148619522000133.html
   My bibliography  Save this article

Customer environmental concerns and profit margin: Evidence from manufacturing firms

Author

Listed:
  • Zhang, Dengjun
  • Xie, Yifan

Abstract

This study evaluates the impact of customer environmental concerns on manufacturing firms’ profit margin. Eco-conscious customers may have a high demand for green products and are willing to pay a price premium for those products. The green effect is subject to the degree of greenness in production processes. In addition, environmental investments reduce the negative impact of production processes on the natural environment, alleviating customers’ environmental concerns. However, environmental investments increase product costs, which may subsequently offset economic benefits from eco-conscious customers. As such, we test the impact of customer environmental concerns on profit margin by controlling for the greenness levels (represented by energy consumption) and environmental investments (represented by energy efficiency measures). Based on a sample of 5390 manufacturing firms in 25 Central and Eastern European and Central Asian countries, our empirical results indicate a positive impact of customer environmental concerns on profit margins for low energy-intensity firms and a negative impact for high energy-intensity firms. In addition, high energy-intensity firms with energy efficiency measures are more negatively affected by customer environmental concerns than those with energy efficiency measures.

Suggested Citation

  • Zhang, Dengjun & Xie, Yifan, 2022. "Customer environmental concerns and profit margin: Evidence from manufacturing firms," Journal of Economics and Business, Elsevier, vol. 120(C).
    • Handle: RePEc:eee:jebusi:v:120:y:2022:i:c:s0148619522000133
    DOI: 10.1016/j.jeconbus.2022.106057
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0148619522000133
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jeconbus.2022.106057?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. D’Orazio, Paola & Valente, Marco, 2019. "The role of finance in environmental innovation diffusion: An evolutionary modeling approach," Journal of Economic Behavior & Organization, Elsevier, vol. 162(C), pages 417-439.
    2. James Hilger & Eric Hallstein & Andrew W. Stevens & Sofia B. Villas-Boas, 2019. "Measuring Willingness to Pay for Environmental Attributes in Seafood," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(1), pages 307-332, May.
    3. Lijun Tang & Victor Gekara, 2020. "The Importance of Customer Expectations: An Analysis of CSR in Container Shipping," Journal of Business Ethics, Springer, vol. 165(3), pages 383-393, September.
    4. Jianglong Li & Boqiang Lin, 2016. "Green Economy Performance and Green Productivity Growth in China’s Cities: Measures and Policy Implication," Sustainability, MDPI, vol. 8(9), pages 1-21, September.
    5. Saitone, Tina L. & Sexton, Richard J. & Sumner, Daniel A., 2015. "What Happens When Food Marketers Require Restrictive Farming Practices?," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 5, September.
    6. Misani, Nicola & Pogutz, Stefano, 2015. "Unraveling the effects of environmental outcomes and processes on financial performance: A non-linear approach," Ecological Economics, Elsevier, vol. 109(C), pages 150-160.
    7. Takashi Hatakeda & Katsuhiko Kokubu & Takehisa Kajiwara & Kimitaka Nishitani, 2012. "Factors Influencing Corporate Environmental Protection Activities for Greenhouse Gas Emission Reductions: The Relationship Between Environmental and Financial Performance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 53(4), pages 455-481, December.
    8. Shihu Zhong & Jie Chen, 2019. "How Environmental Beliefs Affect Consumer Willingness to Pay for the Greenness Premium of Low-Carbon Agricultural Products in China: Theoretical Model and Survey-based Evidence," Sustainability, MDPI, vol. 11(3), pages 1-20, January.
    9. Nouira, Imen & Frein, Yannick & Hadj-Alouane, Atidel B., 2014. "Optimization of manufacturing systems under environmental considerations for a greenness-dependent demand," International Journal of Production Economics, Elsevier, vol. 150(C), pages 188-198.
    10. Michal Carrington & Andreas Chatzidakis & Helen Goworek & Deirdre Shaw, 2021. "Correction to: Consumption Ethics: A Review and Analysis of Future Directions for Interdisciplinary Research," Journal of Business Ethics, Springer, vol. 168(2), pages 239-239, January.
    11. Naveed Ahmed & Cai Li & Asadullah Khan & Sikandar Ali Qalati & Shumaila Naz & Faisal Rana, 2021. "Purchase intention toward organic food among young consumers using theory of planned behavior: role of environmental concerns and environmental awareness," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 64(5), pages 796-822, April.
    12. Denise Baden & Swarna Prasad, 2016. "Applying Behavioural Theory to the Challenge of Sustainable Development: Using Hairdressers as Diffusers of More Sustainable Hair-Care Practices," Journal of Business Ethics, Springer, vol. 133(2), pages 335-349, January.
    13. Liu, Zugang (Leo) & Anderson, Trisha D. & Cruz, Jose M., 2012. "Consumer environmental awareness and competition in two-stage supply chains," European Journal of Operational Research, Elsevier, vol. 218(3), pages 602-613.
    14. Dengjun Zhang, 2022. "Capacity utilization under credit constraints: A firm‐level study of Latin American manufacturing," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1367-1386, January.
    15. Zhu, Qinghua & Sarkis, Joseph & Lai, Kee-hung, 2008. "Green supply chain management implications for "closing the loop"," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 44(1), pages 1-18, January.
    16. Michal Carrington & Andreas Chatzidakis & Helen Goworek & Deirdre Shaw, 2021. "Consumption Ethics: A Review and Analysis of Future Directions for Interdisciplinary Research," Journal of Business Ethics, Springer, vol. 168(2), pages 215-238, January.
    17. Silvia Ferrari & Francisco Cribari-Neto, 2004. "Beta Regression for Modelling Rates and Proportions," Journal of Applied Statistics, Taylor & Francis Journals, vol. 31(7), pages 799-815.
    18. David Gadenne & Jessica Kennedy & Catherine McKeiver, 2009. "An Empirical Study of Environmental Awareness and Practices in SMEs," Journal of Business Ethics, Springer, vol. 84(1), pages 45-63, January.
    19. Taiwen Feng & Dan Wang, 2016. "The Influence of Environmental Management Systems on Financial Performance: A Moderated-Mediation Analysis," Journal of Business Ethics, Springer, vol. 135(2), pages 265-278, May.
    20. Michal Carrington & Benjamin Neville & Gregory Whitwell, 2010. "Why Ethical Consumers Don’t Walk Their Talk: Towards a Framework for Understanding the Gap Between the Ethical Purchase Intentions and Actual Buying Behaviour of Ethically Minded Consumers," Journal of Business Ethics, Springer, vol. 97(1), pages 139-158, November.
    21. Bostian, Moriah & Färe, Rolf & Grosskopf, Shawna & Lundgren, Tommy, 2016. "Environmental investment and firm performance: A network approach," Energy Economics, Elsevier, vol. 57(C), pages 243-255.
    22. Chen, Yun-Shan & Chiu, She-Chih & Lin, Suming & Wu, Kuan-Hsun, 2019. "Corporate social responsibility and income smoothing: Supply chain perspectives," Journal of Business Research, Elsevier, vol. 97(C), pages 76-93.
    23. My Hanh Doan & Remmer Sassen, 2020. "The relationship between environmental performance and environmental disclosure: A meta‐analysis," Journal of Industrial Ecology, Yale University, vol. 24(5), pages 1140-1157, October.
    24. Uttam Shankar Pawaskar & Rakesh D Raut & Bhaskar B Gardas, 2018. "Assessment of Consumer Behavior Towards Environmental Responsibility: A Structural Equations Modeling Approach," Business Strategy and the Environment, Wiley Blackwell, vol. 27(4), pages 560-571, May.
    25. Cribari-Neto, Francisco & Zeileis, Achim, 2010. "Beta Regression in R," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 34(i02).
    26. Nirosha Hewa Wellalage & Stuart Locke & Helen Samujh, 2019. "Corruption, Gender and Credit Constraints: Evidence from South Asian SMEs," Journal of Business Ethics, Springer, vol. 159(1), pages 267-280, September.
    27. Gong, Mengfeng & Gao, Yuan & Koh, Lenny & Sutcliffe, Charles & Cullen, John, 2019. "The role of customer awareness in promoting firm sustainability and sustainable supply chain management," International Journal of Production Economics, Elsevier, vol. 217(C), pages 88-96.
    28. DeCanio, Stephen J, 1998. "The efficiency paradox: bureaucratic and organizational barriers to profitable energy-saving investments," Energy Policy, Elsevier, vol. 26(5), pages 441-454, April.
    29. Yang, Huixiao & Luo, Jianwen & Wang, Haijun, 2017. "The role of revenue sharing and first-mover advantage in emission abatement with carbon tax and consumer environmental awareness," International Journal of Production Economics, Elsevier, vol. 193(C), pages 691-702.
    30. Mengying Feng & Wantao Yu & Xingyu Wang & Chee Yew Wong & Maozeng Xu & Zhi Xiao, 2018. "Green supply chain management and financial performance: The mediating roles of operational and environmental performance," Business Strategy and the Environment, Wiley Blackwell, vol. 27(7), pages 811-824, November.
    31. Kimitaka Nishitani, 2011. "An Empirical Analysis of the Effects on Firms’ Economic Performance of Implementing Environmental Management Systems," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 48(4), pages 569-586, April.
    32. Hu Mengze & Li Wei, 2015. "A Comparative Study on Environment Credit Risk Management of Commercial Banks in the Asia‐Pacific Region," Business Strategy and the Environment, Wiley Blackwell, vol. 24(3), pages 159-174, March.
    33. Roheim, Cathy A. & Zhang, Dengjun, 2018. "Sustainability certification and product substitutability: Evidence from the seafood market," Food Policy, Elsevier, vol. 79(C), pages 92-100.
    34. Yu, Yugang & Han, Xiaoya & Hu, Guiping, 2016. "Optimal production for manufacturers considering consumer environmental awareness and green subsidies," International Journal of Production Economics, Elsevier, vol. 182(C), pages 397-408.
    35. Ajamieh, Aseel & Benitez, Jose & Braojos, Jessica & Gelhard, Carsten, 2016. "IT infrastructure and competitive aggressiveness in explaining and predicting performance," Journal of Business Research, Elsevier, vol. 69(10), pages 4667-4674.
    36. Carlos Aller, Maria Jesus Herrerias, and Javier Ordóñez, 2018. "The Effect of Financial Development on Energy Intensity in China," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
    37. Ozusaglam, Serdal & Kesidou, Effie & Wong, Chee Yew, 2018. "Performance effects of complementarity between environmental management systems and environmental technologies," International Journal of Production Economics, Elsevier, vol. 197(C), pages 112-122.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Massimiliano Cerciello & Francesco Busato & Simone Taddeo, 2023. "The effect of sustainable business practices on profitability. Accounting for strategic disclosure," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(2), pages 802-819, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Han, Xiaoya & Khouja, Moutaz & Liu, Xin, 2023. "A dynamic model considering consumer green awareness and environmental subsidy," International Journal of Production Economics, Elsevier, vol. 260(C).
    2. Tan, Teck Ming & Makkonen, Hannu & Kaur, Puneet & Salo, Jari, 2022. "How do ethical consumers utilize sharing economy platforms as part of their sustainable resale behavior? The role of consumers’ green consumption values," Technological Forecasting and Social Change, Elsevier, vol. 176(C).
    3. Wong, Christina W.Y. & Wong, Chee Yew & Boon-itt, Sakun, 2020. "Environmental management systems, practices and outcomes: Differences in resource allocation between small and large firms," International Journal of Production Economics, Elsevier, vol. 228(C).
    4. Yang Tong & Yina Li, 2018. "External Intervention or Internal Coordination? Incentives to Promote Sustainable Development through Green Supply Chains," Sustainability, MDPI, vol. 10(8), pages 1-20, August.
    5. Zhen Li & Hongming Zhu & Qingfeng Meng & Changzhi Wu & Jianguo Du, 2019. "Manufacturers’ Green Decision Evolution Based on Multi-Agent Modeling," Complexity, Hindawi, vol. 2019, pages 1-14, April.
    6. Yang, Huixiao & Luo, Jianwen & Wang, Haijun, 2017. "The role of revenue sharing and first-mover advantage in emission abatement with carbon tax and consumer environmental awareness," International Journal of Production Economics, Elsevier, vol. 193(C), pages 691-702.
    7. Linghong Zhang & Bowen Xue & Xiyu Liu, 2018. "Carbon Emission Reduction with Regard to Retailer’s Fairness Concern and Subsidies," Sustainability, MDPI, vol. 10(4), pages 1-28, April.
    8. Paulus, Anne & Hagemann, Nina & Baaken, Marieke C. & Roilo, Stephanie & Alarcón-Segura, Viviana & Cord, Anna F. & Beckmann, Michael, 2022. "Landscape context and farm characteristics are key to farmers' adoption of agri-environmental schemes," Land Use Policy, Elsevier, vol. 121(C).
    9. Stefan Lewandowski, 2017. "Corporate Carbon and Financial Performance: The Role of Emission Reductions," Business Strategy and the Environment, Wiley Blackwell, vol. 26(8), pages 1196-1211, December.
    10. Ameztegui, Aitor & Coll, Lluís & Messier, Christian, 2015. "Modelling the effect of climate-induced changes in recruitment and juvenile growth on mixed-forest dynamics: The case of montane–subalpine Pyrenean ecotones," Ecological Modelling, Elsevier, vol. 313(C), pages 84-93.
    11. Juanjuan Qin & Liguo Ren & Liangjie Xia, 2017. "Carbon Emission Reduction and Pricing Strategies of Supply Chain under Various Demand Forecasting Scenarios," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(01), pages 1-27, February.
    12. Zhiwei Yan & Xuerong Peng & Seoki Lee & Leibao Zhang, 2023. "How do multiple cognitions shape corporate proactive environmental strategies? The joint effects of environmental awareness and entrepreneurial orientation," Asian Business & Management, Palgrave Macmillan, vol. 22(4), pages 1592-1617, September.
    13. Grün, Bettina & Kosmidis, Ioannis & Zeileis, Achim, 2012. "Extended Beta Regression in R: Shaken, Stirred, Mixed, and Partitioned," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 48(i11).
    14. Yi Zheng & Huchang Liao & Xue Yang, 2016. "Stochastic Pricing and Order Model with Transportation Mode Selection for Low-Carbon Retailers," Sustainability, MDPI, vol. 8(1), pages 1-19, January.
    15. Li, Jin & Hu, Zening & Shi, Victor & Wang, Qian, 2021. "Manufacturer's encroachment strategy with substitutable green products," International Journal of Production Economics, Elsevier, vol. 235(C).
    16. Zhaofu Hong & Hao Wang & Yeming Gong, 2019. "Green product design considering functional-product reference," Post-Print hal-02312293, HAL.
    17. David Bendig & Andreas Wagner & Kevin Lau, 2023. "Does it pay to be science‐based green? The impact of science‐based emission‐reduction targets on corporate financial performance," Journal of Industrial Ecology, Yale University, vol. 27(1), pages 125-140, February.
    18. Jillian M Rung & Leonard H Epstein, 2020. "Translating episodic future thinking manipulations for clinical use: Development of a clinical control," PLOS ONE, Public Library of Science, vol. 15(8), pages 1-15, August.
    19. Buntaine, Mark T., 2011. "Does the Asian Development Bank Respond to Past Environmental Performance when Allocating Environmentally Risky Financing?," World Development, Elsevier, vol. 39(3), pages 336-350, March.
    20. Yukako Sado-Inamura & Kensuke Fukushi, 2018. "Considering Water Quality of Urban Rivers from the Perspectives of Unpleasant Odor," Sustainability, MDPI, vol. 10(3), pages 1-14, February.

    More about this item

    Keywords

    Customer environmental concerns; Environmental certification requirement; Financial performance; Energy consumption; Energy efficiency measures;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jebusi:v:120:y:2022:i:c:s0148619522000133. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-economics-and-business .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.