How does environmental accounting influence the profitability of firms?
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Environmental accounting positively impacts the profitability of firms by enhancing their financial performance through various mechanisms. Studies have shown that green accounting practices, such as environmental performance and disclosure, have a significant positive effect on company profitability . Specifically, environmental performance and profitability variables like return on assets (ROA) and return on equity (ROE) are positively correlated, indicating that a higher environmental performance rating leads to greater profitability . Additionally, profitability acts as a mediator between green accounting practices and firm value, as profitable companies tend to provide positive information to investors, thereby increasing their value . However, it is crucial for firms to efficiently manage environmental conservation costs to maximize profitability and ensure sustainable business practices .
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| Papers (4) | Insight |
|---|---|
| Environmental performance in green accounting does not directly affect profitability, while environmental disclosure can influence profitability, especially in mining companies, as per the study findings. | |
| Environmental accounting practices impact profitability differently: positive effect from pollution control policies, negative impact from research and waste management. Prioritizing environmental management can enhance financial performance. | |
09 Nov 2022 | Environmental cost disclosure affects profitability in Nigerian oil and gas firms. Return on equity is negatively impacted, while net profit margin is positively influenced, with no significant effect on earnings per share. |
| Environmental accounting, specifically green accounting, positively impacts company profitability by enhancing environmental performance, leading to higher profitability for firms, as shown in the study on Indonesian chemical industries. |
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