Do Eco-labels Pay Off? Causal Evidence from Japanese Firms

Eco-labels are widely promoted as information-based environmental instruments that generate “win–win†outc omes by improving both environmental quality and firm profitability. However, credible causal evidence on t heir financial effects remains limited. Using panel data on Japanese firms from 2012 to 2016, this study ex amines whether Type I (third-party certified) and Type II (self-declared) eco-labels improve firm financial pe rformance. To address selection bias, we apply inverse probability weighting with firm and year fixed effect s and stabilize weights through trimming and capping procedures. We further examine heterogeneity between B2C and B2B firms based on differences in consumer visibility. The results show that Type I labels have no significant financial effects across all specifications. Type II labels exhibit modest positive effects for B2 C firms under trimmed weights, but these effects disappear when extreme weights are capped, indicating li mited robustness. Overall, we find no consistent financial benefits from eco-label adoption, challenging the b usiness-case narrative and suggesting that eco-label policies should be justified primarily by environmental ef fectiveness rather than expected profitability gains.