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Environmental sustainability and financial performance of SMEs

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  • Jolanda Hessels
  • Nasser Bouman
  • Sjoerd Vijfvinkel

Abstract

This paper focuses on the relationship between environmental sustainability and the financial performance of SMEs in terms of profit development and revenue development. The analysis uses a unique dataset of 337 Dutch and Chinese firms. The results suggest a significant positive association between environmental sustainability and firm performance. It appears, however, that different indicators of environmental sustainability display a distinct relationship with the two performance measures. When firms have a policy on the re-usage of materials they perform significantly better in terms of profit development and when firms have a policy on the reduction of pollution they perform significantly better in terms of revenue development. Furthermore, we also find that firms that communicate to their employees about their sustainability efforts perform better in terms of profit development. Finally, weak support is found for a moderating effect of communication to employees on the positive relationship between sustainability and profit development.

Suggested Citation

  • Jolanda Hessels & Nasser Bouman & Sjoerd Vijfvinkel, 2011. "Environmental sustainability and financial performance of SMEs," Scales Research Reports H201101, EIM Business and Policy Research.
    • Handle: RePEc:eim:papers:h201101
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    File URL: http://www.entrepreneurship-sme.eu/pdf-ez/H201101.pdf
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    1. World Commission on Environment and Development,, 1987. "Our Common Future," OUP Catalogue, Oxford University Press, number 9780192820808.
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    Cited by:

    1. Fiaz Ahmad Sulehri & Saba Sharif, 2022. "The Impact of Firm Sustainability on Firm Growth: Evidence from USA," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 8(2), pages 1-15, August.
    2. Danquah Jeff Boakye & Ishmael TIngbani & Gabriel Ahinful & Isaac Damoah & Venancio Tauringana, 2020. "Sustainable environmental practices and financial performance: Evidence from listed small and medium‐sized enterprise in the United Kingdom," Business Strategy and the Environment, Wiley Blackwell, vol. 29(6), pages 2583-2602, September.
    3. Puneeta Goel & Rupali Misra, 2017. "Sustainability Reporting in India: Exploring Sectoral Differences and Linkages with Financial Performance," Vision, , vol. 21(2), pages 214-224, June.
    4. Chrisovalantis Malesios & Antonis Skouloudis & Prasanta Kumar Dey & Fouad Ben Abdelaziz & Apostolos Kantartzis & Konstantinos Evangelinos, 2018. "Impact of small‐ and medium‐sized enterprises sustainability practices and performance on economic growth from a managerial perspective: Modeling considerations and empirical analysis results," Business Strategy and the Environment, Wiley Blackwell, vol. 27(7), pages 960-972, November.
    5. Fatoki Olawale, 2018. "Environmental Sustainability Practices of Immigrant-Owned Small and Medium Enterprises in South Africa," European Review of Applied Sociology, Sciendo, vol. 11(17), pages 27-43, December.

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