Abstract

Does it pay to be green? This question is by no means new or surprising; but what is really puzzling is that dedicated research efforts have failed to provide consistent evidence on this issue. Therefore, the ‘business case’ for sustainability is controversial, despite the fact that companies are more and more under pressure to standardize and expand their voluntary ethical practices. The research design serves the purpose of answering some of these questions: 77 large industrial European companies were included in a highly-relevant new dataset, containing aggregated greenhouse gas emission figures, as well as IFRS-compliant financial performance indicators. On these balanced panel data we conducted several types of analyses, tailored to capture the sign and strength of the relationship between environmental and financial performance. We also introduced an innovative measure of responsible governance, as an interaction term between board-level innovations and the level of independent assurance. Owing to the uniqueness of the database in use and to the complexity of the econometric analysis, our findings are another proof of the controversy surrounding the relationship between firm financial and environmental performance.