Are firms' voluntary environmental management activities beneficial for the environment and business? An empirical study focusing on Japanese manufacturing firms

Abstract

In this paper, to clarify whether a firm's voluntary approach to environmental protection is beneficial for both the environment and business, we analyze whether a firm's voluntary implementation of an environmental management system (EMS) simultaneously reduces its environmental impacts and improves its productivity. Using data on Japanese manufacturing firms for 2002-2008, we find empirical support for the view that the implementation of an EMS simultaneously reduces environmental impacts and improves productivity, and that a reduction in environmental impacts also improves productivity. However, in the context of this relationship, the direct effect of implementing an EMS on productivity is conditional. If various other activities designed to improve productivity implemented in response to market discipline are also taken into account, the effect of implementing an EMS is hidden by the effects of these activities. This implies that voluntary environmental management activities are merely a minor component of these activities. Therefore, the relationship between the implementation of an EMS and productivity improvement is not strong, although implementing an EMS indirectly improves productivity by reducing environmental impacts.