Heliyon 8 (2022) e12486

Contents lists available at ScienceDirect

Heliyon
journal homepage: www.cell.com/heliyon

Research article

Evaluating the effects of environmental management practices on

environmental and financial performance of firms in Malaysia: the
mediating role of ESG disclosure
Qaisar Ali a, Asma Salman b, *, Shazia Parveen c, d
a
Faculty of Islamic Economics and Finance (FEKIM), Universiti Islam Sultan Sharif Ali, Brunei Darussalam
b
College of Business Administration, American University in the Emirates, United Arab Emirates
c
National College of Business Administration and Economics, Lahore, Pakistan
d
Association of Professional Researchers and Academicians, United Kingdom

A R T I C L E I N F O A B S T R A C T

Keywords: The concepts of environmental and business sustainability are well-established in the business lexicon of pro-
Environmental management gressive firms. However, firms are yet to examine the effects of environmental management practices (EMPs) on
Environmental practices environmental performance (EP) and financial performance (FP) by connecting the missing linkage of environ-
Environmental performance
ment, social, and governance disclosure (ESGD). This study analyses the impact of EMPs on EP and FP and offers
Financial performance
ESG
empirical evidence of whether ESGD mediates the relationship between EP and FP of firms in Malaysia. The data
from 141 listed firms on Bursa Malaysia was extracted between 2009–2020. The data was analyzed using data
envelopment analysis (DEA) and the generalized method of moments (GMM) technique. The findings reflect that
EMPs have a significant positive effect on EP and all five proxies of EP have a significant positive effect on ESGD
(except ‘S’) and FP. Also, ESGD together with its three proxies mediates the relationship between EP and FP. The
findings of this research offer an empirical rationale for regulators and policymakers of industrial firms to
accelerate their EMPs and improve ESGD mechanisms for better environmental and financial outcomes.

1. Introduction management system by synergizing organizational structure, planning

Global businesses have started employing different environmental
management practices (EMPs) to mitigate the effects of surging envi-
ronmental threats (Tene et al., 2021). The findings of recent studies have
confirmed that industrial firms play a concomitant role in the destruction
of the ecological system and regulators, business managers, and scholars
are exploring various methods to combat these issues (Ali et al., 2022;
Pinto et al., 2018; Shahab et al., 2020). The current global business
environment is complex which has further enhanced the uncertainties
about gaining a competitive advantage and survival without complying
with environmental legitimacy and addressing the concerns of stake-
holders (Shahzad et al., 2020).
Simultaneously, scholars have suggested that strategic implementation
of EMPs improves firms' environmental performance (EP) which alterna-
tively contributes to improving the environment, social, and governance
(ESG) and financial performance (FP) (Chen et al., 2018; Zheng et al.,
2020). Proactive implementation of EMPs involves, developing a
environmental initiatives, sharing responsibilities, developing processes,
and acquiring resources to implement, achieve, review and maintain an
effective environmental policy (Aslam et al., 2021). The evidence of
theoretical studies predicted that organizations’ voluntary commitment to
environmental initiatives helps in gaining a competitive advantage by
leveraging strategic resources (Zhang and Ma, 2021) and seeking a wider
social acceptance by legitimatizing environmentally-driven operations
(Elzinga et al., 2020). According to resource-based view (RBV) and stake-
holder legitimacy theories, consistent organizational commitment of good
EMPs may improve their EP which improves ESG and may result in
financial benefits, competitive advantage, improved reputation, and posi-
tive brand image. RBV and institutional theories under similar settings
further argued that the organizational commitment of good EMPs cajoles
managers to develop environment-friendly initiatives which lead to better
EP, ESGD, and improved FP (Feng and Wang, 2016; Hart, 1995; DiMaggio
and Powell, 1983). Additionally, commitment to good EMPs leads to
developing and maintaining an effective business connection with

* Corresponding author.
E-mail address: asma.salman@aue.ae (A. Salman).

https://doi.org/10.1016/j.heliyon.2022.e12486
Received 7 October 2021; Received in revised form 6 November 2021; Accepted 12 December 2022
2405-8440/© 2022 The Author(s). Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
Q. Ali et al.
stakeholders and exploiting critical resources. Based on the proceeding
argument, this study aims to investigate whether EMPs improve the EP and
ESGD of industrial firms and alternatively affect FP.
Progressive organizations use environmental, social, and governance
disclosure (ESGD) as a tool of their wider corporate social responsibility
(CSR) to engage stakeholders and disclose their environmental policies,
initiatives, and performance (Crane et al., 2019). Often, organizations are
rated based on their good EMPs and EP which considerably contribute to
strategic positioning and influence organizational perception, value, and
image (Martins, 2005). Investors, for example, require ESGD information
to assess the firm's ethical and sustainable performance for a better un-
derstanding and evaluation of the decision-making pertaining to ESGD
issues (Amel-Zadeh and Serafeim, 2018; van Duuren et al., 2016).
Therefore, ESGD is significant to scrutinize organizations' discrete claims
about the contribution of information-based governance to CSR as well as
examining strategic operational changes through EMPs (Depoers et al.,
2016). Lastly, scrutinizing organizational response offer contemporary
information on the implications of sustainability concepts in response to
growing capital which will help in analyzing the investment and
expenditure on ESG initiatives. This leads us to examine whether ESGD
improves FP by mediating the relationship between EP and FP.
The past studies examining the relationship between EMPs, EP, FP,
and ESGD have several limitations. According to the studies of Dragomir
(2018), Henri and Journeault (2008), Trumpp et al. (2015), and Xie and
Hayase (2007), organizations characterize environmentalism as a
multilayer construct that determines two distinct characters i.e., EMPs
and EP which are difficult to interrelate. Most empirical studies have
focused on analyzing environmental approaches through the lens of
economic benefits which primarily concentrate on the financial benefits
of going green (Clarkson et al., 2011; Jiang et al., 2018; Jyoti and
Khanna, 2021). Also, past studies instead of directly measuring the
environmental initiatives of organizations have used environmental
disclosure proxies which may render errors in capturing the actual EMPs
and EP (Albertini, 2013; Deegan, 2013, 2017). Hence, it is argued here
that the generalizing capacity of these studies is minimal. A few studies
have attempted to develop scales to analyze EMPs (Al-Tuwaijri et al.,
2004; Clarkson et al., 2008; Ilinitch et al., 1998; Montabon et al., 2007;
Xie and Hayase, 2007) however, the failure to validate these scales raise
concerns about the authenticity of these studies (Trumpp et al., 2015).
Scholars have addressed these limitations by developing an exclusive
EMPs scale using five sub-dimensions to statistically measure EMPs (Xie
and Hayase, 2007). The statistical confirmation of this scale was vali-
dated by Trumpp et al. (2015) while measuring organizational EMPs.
There is no evidence of a mutual agreement in the extant literature about
the measurement of EMPs (Song et al., 2018). The emergence and dis-
covery of new sources of information potentially contribute to the actual
quality of EMP measurement (Hassan and Romilly, 2018; Tadros and
Magnan, 2019) which indicates that the efficiency of EMPs, EP, and FP
should be measured by using data envelopment analysis (DEA) (Aslam
et al., 2021). Some emerging studies have corroborated the efficiency,
EMPs, and EP of firms using DAE however, these studies were restricted
to micro-level analysis (Jin et al., 2014; Wojcik et al., 2019; Zhou et al.,
2006, 2007). Nonetheless, promulgated by the rare usage of DEA to
measure environmental and financial efficiency at the organizational
level, this study rendered the DEA approach to estimate the environ-
mental (EMPs, EP, and ESGD) and financial performance of firms.
The social, environmental, and regulatory dynamics in Malaysia are
considered relevant drivers to conduct this study. Recently, Malaysians
were characterized as an environmental nation (Mei et al., 2016).
Malaysia is touted as one of the developing countries in Southeast Asia
and a pioneer of industrialization in the region through its economic
growth. Industrialization has played a major role in expanding economic
growth and facilitating the achievement of Mission (Wawasan) 2020
(Chin et al., 2019). However, in the process of industrialization and
economic expansion, industrial firms have heavily polluted the envi-
ronment (Awang et al., 2000) such as industries in Klang Valley, Penang
2
Heliyon 8 (2022) e12486
and Iskandar contribute to one-third of the overall pollution of the
country (Azmi et al., 2010). To tackle these issues, the government of
Malaysia has imposed stringent environmental regulations on industrial
firms.1 However, the effectiveness and compliance with these regulations
by the firms through their EMPs and the interaction of these EMPs with
the performance of firms need further investigation.
Based on the contemporary limitations of the prior studies and the
relevance of current research to the Malaysian context, we seek to
contribute to the extant literature in several ways. First, the present study
empirically examines the interrelationship between EMPs, EP, ESGD, and
FP which is expected to provide a benchmark for future research in
similar settings (Chen et al., 2016, 2018). Secondly, the current research
measures EP through major inputs and outputs of EP which substantially
differentiates it from the past studies that have separately used the in-
dicators of carbon emission (CO2), energy, waste, and water to measure
EP (Arena et al., 2003; Clarkson et al., 2011). The present study
employed major indicators of energy (input), sales (good output), and
carbon emission (bad output) as the proxies of EP which represent the
inclusiveness of this research. Third, ESGD is conceptualized as a medi-
ator which may allow firms to examine the effectiveness of their EMPs
and EP contributing to the literature on measuring sustainability and FP.
Fourth, the methodological approach of this research is discrete in the
context of environmental management studies as the DEA technique is
still at a rudimentary phase in environmental studies. Lastly, we use five
major proxies (total carbon emission produced, carbon emission in-
tensity, carbon emission productivity, carbon emission per unit size, and
DEA) to measure EP and ESG scores of individual components as the
proxies of ESGD to analyze its mediating role.
The rest of the study is organized as follows. Section two outlines the
theoretical background and hypotheses followed by the research
methods in section three. Section four delineates the findings and dis-
cussion and finally, section five concludes this study.
2. Conceptualizing EMPS and EP
These days organizations face constant pressure from their stake-
holders to implement EMPs (Delmas and Toffel, 2008). Generally,
different organizations perceive EMPs differently. According to Shriv-
astava and Hart (1995), EMPs allow organizations to combat perspective
environmental issues by acquiring raw materials and implementing
environment-friendly practices in packaging and waste disposition.
Therefore, EMPs represent a set of organizational practices focused on
the conservation of resources by decreasing consumption and improving
waste disposal. Organizations also leverage technology in designing
products, manufacturing, and managing their waste. Similarly, Mono-
tabon et al. described EMPs as “the set of techniques, policies, and pro-
cedures used by the firms to monitor and control the impact of their
activities on the natural environment.” EMPs help firms in improving
their EP which represents environmental initiatives taken by the firms to
streamline their operations in a way that does not harm the environment
(Tyteca, 1996; Ulubeyli, 2013). Organizations require dynamic capabil-
ities to implement EMPs (Bowen et al., 2001). Hence, it is crucial for
organizations to improve their EP through changes in business processes
and by developing unique capabilities. Managers need to focus on
developing environment-related capabilities instead of involving in
complex environmental initiatives. Earlier studies suggested that man-
agers require proper guidance to develop these capabilities to support
EMPs (Bowen et al., 2001) and improve organizational EP.
Earlier studies employed different business perspectives to define EP.
According to Lober (1996), EP is an organizational commitment to pre-
serving and protecting their natural environment considering different
1
The details of environmental and industrial regulations are available on the
official portal of Department of Environment:https://www.doe.gov.my/portalv
1/en/tentang-jas/perundangan/akta-kaedah-peraturan-arahan2/peraturan
Q. Ali et al.
focus areas including maintenance of water, air, soil, etc. EP has several
dimensions which broadly examine the impact on the natural environ-
ment, resources, consumption, waste, and emissions resulting due to
diverse business activities. Considering EP as a multidimensional
concept, Epstein (1996) categorized pollutants and waste reduction, re-
sources and energy conservation, manufacturing safe products, and po-
tential risks as the major dimensions of EP. Another definition of EP was
suggested by the Organization for Economic Co-operation and Develop-
ment (OECD), governments use EP to assess the public sector firms'
progress to achieve environmental goals, promote continuous policy
dialogue, and peer learning, and stimulate accountability among the
firms. The scant literature on EP offers a limited understanding of the
concept and has linked societal obligations (Judge and Douglas, 1998),
and stakeholders’ expectations (Lankoski, 2000) to EP. Further, re-
searchers employed different approaches to determine the EP of firms
ranging from the process, resources consumption, emissions, and waste,
efficiency, ecological and financial effects, and the perception of con-
sumers (James, 1994). Another systematic study determined EP by
analyzing impact indicators which evaluated the physical and monetary
impacts of EP (Bartolomeo, 1995). Recent research developed an exclu-
sive index using 40 performance indicators to measure EP and ranked
180 countries based on their climate change performance, environmental
health, and ecosystem vitality (Wolf et al., 2022) Similarly, another study
measured EP by designing socioeconomic and environmental indicators
(Zhang and Wu, 2022).
2.1. Conceptual background
The past studies have applied several conventional theories namely
legitimacy, resource dependence, stakeholder, and signaling theories to
understand and interpret the linkage between EP and FP (Boakye et al.,
2021). The main problem with these conventional theories is the lack of
effectiveness to address complex environmental issues and poor recog-
nition of the significance of natural resources as a part of organizations’
social and environmental strategy (Oliver, 1997; Wagner, 2015).
Therefore, organizations require a holistic framework to address dy-
namic environmental issues that can explain different EMPs and link EP
and FP. In this regard, institutional and resource-based view (RBV) the-
ories are employed to address dynamic environmental issues faced by the
firms and analyze the linkage between EMPs, EP, ESGD, and FP (Tran
et al., 2021).
The features of RBV advance that developing internal capabilities
helps organizations in gaining a competitive advantage (Barney, 1991).
RBV offers an explanation of how firms may develop internal resources.
According to Nisar et al. (2021), access to tangible (skilled labour) and
intangible (financial and non-financial) resources allows firms to achieve
a competitive advantage. In the context of industrial firms, pollution
reduction burdens firms’ resources (Porter and Van der Linde, 1995)
whereas, these environment-related initiatives achieve sustainability
(Al-Tuwaijri et al., 2004; Jung et al., 2018). Hence, RBV requires firms to
adopt and develop strategic environmental capabilities to represent good
EMPs which will also boost their growth, financial performance, and
access to critical resources.
Alternatively, firms' environmental initiatives represent their wider
external engagement which can be explained through institutional the-
ory (Berrone et al., 2017). This theory suggests that transformations in
social and cultural expectations are highly influenced due to firms’
operational activities (Feng and Wang, 2016). The isomorphism in firms
is categorized into coercive, cognitive, and normative types (DiMaggio
and Powell, 1983). Institutional isomorphism represents direct (regula-
tory authorities and governments) and indirect forces (social and cultural
expectations) that impact structural and technical components while
complying with environmental legitimacy (Liao et al., 2020). A few
external forces such as political factors exerted by stakeholders, force
firms to undergo environmental scrutiny, fines, closures, and consumers
boycotting their products (DiMaggio and Powell, 1983). Normative
3
Heliyon 8 (2022) e12486
components argue that social values, institutional affiliations and net-
works, suppliers, skilled employees, and customers are influenced by the
media (Soobaroyen and Ntim, 2013). Consequently, instead of devel-
oping environment-specific protocols, firms allocate essential resources
to implement EMPs as a part of their wider organizational policy (Wang
et al., 2018). This leads to infer that commitment to good EMPs will result
in better EP, especially by reducing CO2 emission and pollution. Thus,
maintaining good relations with their key stakeholders allow firms to
improve their FP.
Based on the complexity of EMPs and the dynamic business envi-
ronment, it is impossible to rely on a single theoretical framework to
explain the economic perspective. Therefore, the current study suggests
analyzing the EMPs, EP, ESG, and FP of industrial firms using RBV and
institutional theories. This approach responds to the limitations high-
lighted in the recent studies (Aerts et al., 2008; Feng and Wang, 2016;
Moussa et al., 2020) and encouraged the integration of socio-political
elements to investigate firms’ environmental and financial prospects.
2.2. Relevance of DEA technique
The plethora of literature concentrated on the nexus between the
environment and FP of firms has rigorously used DEA which offers an
adequate justification to establish the empirical foundation of this study.
DEA is useful to evaluate firms' efficiency and use as a diagnostic tool for
environmental management decision-making (Emrouznejad et al., 2019;
Khodadadipour et al., 2021; Wegner and Amin, 2019). A recent study
used two-a stage DEA method to explore the efficiencies of 23 countries
through capital, labor, and energy consumption and concluded that
Iceland, Luxemburg, and New Zealand were the most efficient countries
(Halkos and Argyropoulou, 2021). According to Wei et al. (2021), the
current techniques are unable to provide accurate measurement of CO2
emission, therefore DEA combined with stochastic multicriteria accept-
ability analysis (SMAA-2) are acceptable techniques for the evaluation of
energy and environmental efficiencies. DEA technique has also been used
in assessing firms’ sustainability of environmental performance (Cui
et al., 2021), eco-efficiency and eco productivity (Demiral and Sa
glam,
2021; Matsumoto and Chen, 2021), carbon emission performance, and
economic determinants (Lv et al., 2021), environmental performance
(Albertini et al., 2021; Matsumoto et al., 2020), and haze influencing
factors (Zhou et al., 2019). Similarly, DEA coupled with stochastic DEA
cross efficiency has been used in the past to design regulatory strategies
for the banking industry (Liu et al., 2020; Zhao et al., 2021). Based on the
settings of this study and realizing the relevance of DEA to accurately
measure the impact of EMPs on EP and FP, it is justified to adopt this
method to evaluate the performance of firms, address issues in existing
environmental policies, and propose perspective eco-friendly business
strategies (Sueyoshi et al., 2017).
2.3. Empirical literature and hypotheses
2.3.1. Nexus between EMPs and EP
RBV argues that firms may achieve EP targets by allocating resources
and developing capabilities through proper environment-friendly ini-
tiatives (Alam et al., 2019). Firms that utilize advanced-level EMPs and
structures are able to improve their FP and contribute to environmental
protection in two different ways. Firstly, developing capabilities and
allocating resources to leverage clean technologies allow firms to
harmonize their business according to emerging global markets and
facilitate achieving eco-efficiency targets. Secondly, the adoption of
relevant EMPs inspires organizations to develop clean and efficient en-
ergy policies. Hence, the reduction of CO2 emissions and environmental
protection is only possible by embracing and implementing a range of
EMPs programs.
Progressive firms have restructured their strategic directions to ach-
ieve EP goals by implementing different concepts of EMPs (Ali et al.,
2020a; Florida, 1996; Li et al., 2021; Theyel, 2002). The findings of
Q. Ali et al. Heliyon 8 (2022) e12486

previous studies examining the relationship between EMPs and EP reflect operational costs as well as improves their ESGD (Nguyen et al., 2020).
mixed results. The studies on US chemical firms revealed that enhanced Following RBV's logic, EP can be considered an institutional strategy that
EMPs commitment lowers environmental practices resulting in the may help firms in gaining a competitive advantage by resolving their ESG
release of more toxic material in the atmosphere (Delmas and Blass, issues. Consequently, the second hypothesis is proposed as follows;
2010). Whereas, recent studies contradicted these findings and suggested
H2. EP has a positive effect on the ESGD of firms.
that firms taking green initiatives may highly improve their green per-
formance (Ali et al., 2020b; Chen et al., 2018; Mungai et al., 2020; Jyoti
2.3.3. Nexus between EP and FP
and Khanna, 2021). This leads to establishing that implementing good
RBV also suggested that gaining a competitive advantage and
EMPs allow firms to minimize the hazardous impact on the ecological
improving FP hinge on firms' environmental efficiency fulfilling the
system (Du et al., 2019; Wang et al., 2018). Modern-day firms gearing to
sustainability expectations of influential stakeholders, environment
achieve environmental and social goals need to remain proactive in
conservation, and seeking wider social acceptance (Hart, 1995; Rivera
implementing effective environmental strategies by focusing on reducing
et al., 2017). This indicates that firms' tentative engagement in envi-
carbon emissions (Moussa et al., 2020). Another study on the European
ronmental initiatives is guided by external and internal pressures such as
hotel industry (Italy, Spain, and Portugal) found that despite obtaining
accountability pressure from stakeholders, reputation, and brand value in
environmental certification European hotels were unable to report sig-
the global market which often results in positive changes in FP (Russo
nificant improvement in EP. While in Malaysia, stakeholders (investors,
and Fouts, 1997; Shen et al., 2019). Institutional theory advances a
creditors, government, and environmental agencies) are highly con-
similar narrative of improvement in firms' FP through environmental
cerned with the contribution of firms toward sustainable development
commitments. Firms’ ongoing commitment to environment-friendly
(Atan et al., 2018). This has led the Malaysian government to implement
initiatives establishes progressive connections with their stakeholders
several environmental regulations on industrial firms to protect the
and significantly reduces operational costs (Nguyen et al., 2020; Zeng
environment and enhance the industrial sector's contribution to the
et al., 2010).
sustainable development of the country (Md Nor et al., 2016). Studies on
The findings of past empirical studies analyzing the relationship be-
Malaysian firms found that general EMPs under ESG compliance have no
tween EP and FP reported mixed results. Some seminal and a few novel
significant impact on FP (Atan et al., 2018), however, implementing
studies claimed that EP and FP are positively associated (Al-Tuwaijri
innovative EMPs and green initiatives have indicated a positive effect on
et al., 2004; Ambec and Lanoie, 2008; Konar and Cohen, 2001; Manrique
FP (Ong et al., 2019). This argument essentializes investigating the
and Martí-Ballester, 2017; Prado-Lorenzo and Garcia-Sanchez, 2010;
impact of EMPs on EP and examining whether good EMPs result in better
Russo and Fouts, 1997; Wagner, 2015). These findings were authenti-
EP. Hence, hypothesis one is proposed as follows;
cated by recent studies of Rivera et al. (2017) and Aslam et al. (2021)
H1. EMPs have a positive effect on the EP of firms. while analyzing the impact of EP on the FP of US-listed and
Japanese-listed firms. However, some studies have also claimed that EP
and FP of firms have no mutual association and/or negative relationship
2.3.2. Nexus between EP and ESGD
with each other negative (Cormier and Magnan, 1997; Stanwick and
Theoretical components of institutional theory indicate that firms
Stanwick, 1998; Earnhart and Lizal, 2007; Qiu et al., 2016; Walls et al.,
may improve their ESGD by committing to good EP as these practices
2012). This indicates that literature on the relationship between EP and
reduce firms’ operational cost, optimize resources and energy con-
FP is scattered and no mutual agreement exists between scholars. The
sumption, and results in a positive effect on FP. Alternatively, features of
findings of previous studies are inconclusive due to two main factors.
RBV argue that firms may achieve competitive advantage and improve
First, most of these studies have focused on subjective methods to esti-
their growth by improving their EP allowing them to improve their
mate firms’ EP using disclosure proxies which poorly capture the actual
reputation, brand value, and establish a close relationship with key
EP of firms (Albertini, 2013; Deegan, 2013, 2017; de Castro Sobrosa Neto
stakeholders which may positively influence FP (Russo and Fouts, 1997).
et al., 2020). Second, there is well-documented evidence that the effec-
Although ESGD is established as a common criterion for firms' ratings,
tiveness of environment-friendly initiatives can only be seen in the long
there is a lack of information about firms' responses and the impact of
term therefore, firms need to stay committed to their environmental
these ratings on their performance (Clementino and Perkins, 2021). The
activities to gain economic and financial benefits (Busch and Lew-
findings of past studies argue that ESGD motivates firms to avoid class
andowski, 2017). Whereas, studies analyzing the effect of EP on FP of
action and mitigate financial penalties by improving their EP (Murphy
Malaysian firms lack robustness due to theoretical and sample limitations
and McGrath, 2013). The literature on ESGD and EP for firms is largely
(Atan et al., 2018; Hazudin et al., 2015; Md Nor et al., 2016; Ong et al.,
fragmented as a few studies found a significantly positive relationship
2019). The government of Malaysia continues to develop various regu-
between EP and ESGD (Alareeni and Hamdan, 2020; Albitar et al., 2020),
lations and acts to monitor industrial effluents and their effect on the
and others reported a modest relationship between EP and ESGD (Huang,
environment. These regulations are expected to improve the EP of in-
2021). Besides regulatory compliance, firms tend to remain cautious in
dustrial firms which may positively affect FP. Consequently, the third
the selection of their environmental initiatives and employ different
hypothesis predicts that;
EMPs so that besides regulatory compliance under ESGD, these EMPs
improve their sustainability and financial performance (Arun et al., H3. EP has a positive effect on FP for firms.
2022). Over the years, organizations have designed and implemented
numerous ESG-based business models to address environmental and 2.3.4. ESGD as the mediator between EP and FP
financial sustainability issues (Rajesh and Rajendran, 2020). However, The earlier discussion indicates that most of the past studies have
the scant literature on ESG offers little information about its integration focused on analyzing the direct impact of EMPs on the FP of firms and the
and strategic implementation at the firm level which may affect the results of these studies present mixed findings (Florida, 1996; Hertin
environmental policies of the firms (Lokuwaduge and Heenetigala, et al., 2008; Jiang et al., 2018; Jyoti and Khanna, 2021; Miroshnychenko
2017). A few scholars have attempted to classify factors of firms' et al., 2017; Montabon et al., 2007; Xie et al., 2019). The findings of these
engagement in ESG initiatives and concluded that firms often engage in studies are limited due to the failure to incorporate the impact of
environmental initiatives to minimize the internal and external stake- essential mediators between EMPs, EP, and FP. The institutional theory's
holders' pressure by designing strategies for EP which may lead to better theoretical components argue that firms' commitment to strong EMPs
ESGD (Russo and Fouts, 1997; Shen et al., 2019). EP motivates firms to increases their opportunities to experience positive changes in EP
continue implementing environment-friendly initiatives by establishing through investments in environmental initiatives which allow firms to
an effective relationship with their stakeholders which reduces their reduce their negative impact on the environment, improve brand value,

4
Q. Ali et al.
and result in positive changes in FP (Lin et al., 2013; Porter and Van der
Linde, 1995). RBV argues a similar perspective of positive changes in
firms' FP by implementing good EMPs which lower production costs,
increase productivity and firms efficiently utilize their resources (Ber-
nauer et al., 2007). RBV also suggests that commitment towards good
EMPs represents firms' broad commitment toward corporate social re-
sponsibility (CSR) policy which should be disclosed in corporates'
nonfinancial reporting (Raimo et al., 2020) hence, corporates are
required to establish certain standards and indicators to estimate EMPs
and EP (Kassem et al., 2017). As suggested by institutional theory,
commitment toward good EMPs improves EP by investing in environ-
mental initiatives and allocation of resources. However, powerful
stakeholders often require firms to disclose their environmental, social,
and governance (ESG) information so that investment decisions are made
accordingly (Chouaibi et al., 2021). ESG disclosure (ESGD) incorporates
ratings of the firms based on their EP therefore, firms concerned with the
reputation of their brand value concentrate on improving their ratings.
Past studies have associated ESGD with firms' operating performance and
operational costs (Ruan and Liu, 2021). Additionally, it is also confirmed
that ESGD reduces firms' risk-taking behavior and lowers their financing
cost (Di Tommaso and Thornton, 2020; Oikonomou et al., 2014) which
will avoid spending on unnecessary EMPs. This leads us to infer that firms
with better ESGD ratings represent better EP which results in better FP
therefore, it is predicted that the relationship between EP and FP is
essentially mediated by ESGD (Figure 1) which leads us to propose the
fourth hypothesis as follows;
H4. ESGD mediates the relationship between EP and FP of the firms.
3. Materials and methods
3.1. Data and sampling
This study covers the FP of Malaysian firms between 2009–2020. The
selection of the study period is important to estimate the constructs of
this study as the Ministry of Environment and Water promulgated ‘In-
dustrial Effluent Regulations 2009’ which required Malaysian industrial
firms no implement best management practices to prevent and reduce the
discharge of industrial effluent contaminating the environment. Hence,
the study period is projected to estimate the actual effect of EMPs, EP,
and ESGD on FP. Initially, the sample contained 1764 firm-year obser-
vations of 147 firms from 13 different industries listed on Bursa Malaysia.
However, in the final sample, 6 firms from different sectors (real estate
and finance) were excluded for comparison of results also, these firms
had mandated regulatory and reporting patterns (Ntim, 2016). Addi-
tionally, excluded firms were not significant contributors to environ-
mental pollution and energy consumption. During data screening, we
excluded 227 firm-year observations due to a lack of information about
carbon emissions and EMPs during the sample selection period. The final
sample contained an unbalanced panel dataset of 1537 firm-year obser-
vations of 141 firms in 10 different industries between 2009–2020. The
descriptive statistics of firms with industry types are reported in Table 1.
We used three popular databases i.e., Thomson Reuters Assets 4,
Worldscope, and Bloomberg to extract data related to EMPs, EP, FP, and
ESGD as these databases are authentic data sources in the world press.
Table 1 shows that the industrial products & services industry had 405
Figure 1. Theoretical model.
5
Heliyon 8 (2022) e12486
(26.35%) firm-year observations, followed by the energy 246 (16%), and
transportation and logistics 172 (11.11%) industries.
3.2. Experimental variables
To test the hypotheses of this study, we operationalized four main
variables. EMPs is an explanatory variable estimated using a scale
developed by Xie and Hayase (2007), Trumpp et al. (2015), and Aslam
et al. (2021). This scale is comprised of five sub-dimensions of EMPs with
29 items covering broad areas of environmental policy (8 items), envi-
ronmental objectives (5 items), environmental processes (6 items),
organizational structure (4 items), and environmental monitoring (6
items). The items of the scale were imported from Xie and Hayase (2007),
Trumpp et al. (2015), and Aslam et al. (2021) and were modified to suit
the context of this study. We used this measurement scale to estimate the
EMPs index by adding scores of dimensions items (1 represents an
environmental initiative taken by the firm, 0 no initiative taken). Simi-
larly, EP scores are estimated by following the same criteria to represent
the level of EP quality which ranges from 29 (implementing good EMPs)
to 0 (implementing poor EMPs). The developed scale elucidates all the
aspects of firms’ environmental initiatives promulgated by ISO 14001.
The scale operationalized to measure EMPs is presented in Table 2.
EP is a response variable estimated by five unique proxies. These
proxies are environmental efficiency (EP_DEA) representing total energy
consumption (input) and sales (good output) and total carbon emission
(bad output) (Chen et al., 2017; Song et al., 2018). According to (Chen
et al. 2017), environmental efficiency can be measured through
nonparametric techniques such as DEA, which considers a range of inputs
into several different outputs (desired and undesired) and exclude pre-
viously established assumptions about the relationships between inputs
and outputs. Following these criteria, firms' environmental efficiency is
estimated by applying a constant return to scale input DEA efficiency.
Based on the sensitivity to the environment, industries in the initial
sample were divided into two types (sensitive and non-sensitive) which
helped in estimating firms' efficiencies each year. Carbon emission pro-
ductivity (EP_EE) was the second proxy of EP which was estimated by net
sales to total carbon emission (Chen et al., 2018). Whereas, carbon
emission per unit size of total assets (EP_PUS) and carbon emission
produced (EP_Emi) were the third and fourth proxies of EP which were
Table 1. Classifying the firms into relative industries.
Industries f %
Industrial products & Services 405 26.35
Energy 246 16
Transportation & Logistics 172 11.11
Utilities 134 8.71
Technology 125 8.13
Health care 119 7.74
Consumer products & Services 106 6.89
Construction 102 6.63
Telecommunication & Media 73 4.74
Plantation 55 3.57
Total 1537 100
Q. Ali et al. Heliyon 8 (2022) e12486

developed using Mungai et al. (2020) and Moussa et al. (2020) criteria.
Finally, the intensity of carbon emission (EP_Int) was the fifth proxy of EP Table 2. Operationalizing EMPs scale.
which was measured using carbon emission/sales following Trumpp and Sub-dimensions Items Source
Guenther's (2017) criteria. We separated these proxies based on their Environmental 1. Firm has the policy to improve efficiency, Xie and
expected association with EMPs, FP, and ESGD. policy resources, and packaging. Hayase (2007)
FP is also a response variable estimated by Tobin's Q technique. The 2. Firm has established a policy for inclusive
past studies analyzing the effects of EMPs on firms' FP have vigorously efficiency of resources.
used this technique (Busch and Lewandowski, 2017; Horvathova, 2010; 3. Firm has a policy to improve sustainable
Manrique and Martí-Ballester, 2017; Shen et al., 2019; Surroca et al., packaging.
2010; de Castro Sobrosa Neto et al., 2020) and concluded that Tobin Q is 4. Firm has a policy to improve its water
efficiency.
a reliable technique to estimate the actual effect of firms' long-term in-
vestments (related to environment-friendly initiatives) (Dowell et al., 5. Firm has a policy to minimize the
environmental impact of its supply chains.
2000; Surroca et al., 2010) and it is less sensitive to management's
6. Firm has a dematerializing policy.
manipulation as compared to other accounting methods (Hassan and
7. Firm has an eco-friendly design policy.
Romilly, 2018).
8. Firm has a policy to assess a product's life
ESGD is a mediator between EP and FP of firms which were estimated
cycle.
by a proxy of ESG ratings developed by Bloomberg. This method is
Environmental 1. Firm has well-established targets of energy Aslam et al.
credible and commonly used in business studies and follows Conca et al. objectives efficiency. (2021)
(2021) criteria. The main reason to prefer Bloomberg's indicators is due
2. Firm has well-established targets of general
to the estimation method which directly calculates ESG based on relative resources' efficiency.
information disclosure instead of relying on empirical models. ESGD 3. Firm has well-established targets to use
scores were split into single components (E, S, and G) which allowed us to sustainable packaging.
estimate whether disclosure of individual E, S, and G components 4. Firm has well-established targets of water
(environment, social, and governance) mediate the relationship between efficiency.
EP and FP (1, represents ESG's individual component is disclosed; 0, no 5. Firm has well-established targets of supply
disclosure available). chain impact on the environment.
Finally, firm-specific characteristics such as size, clean technology, Environmental 1. Firm uses environmental selection criteria Trumpp et al.
Processes such as ISO 14000, energy consumption, etc to (2015)
leverage, research and development (R&D), and industry sensitiveness to
select its suppliers and sourcing partners.
pollution are used as control variables adopted from extant literature on
2. Firm describes and claims to have an
environmental studies (Liao, 2018; Liao et al., 2020; Hassan and Romilly, established supply chain as the firm's effort to
2018; Moussa et al., 2020). The size of firms is estimated by the natural log reduce overall environmental impact.
of firms' total assets (Haque and Ntim, 2020; Moussa et al., 2020). Past 3. Firm claims to utilize environmental criteria
studies suggested that implementing environment-friendly initiatives in (lifecycle assessment) for sourcing and
large firms is guided by their financial freedom to use clean energy for the eliminating materials.
reduction of carbon emissions (Moussa et al., 2020; Onubi et al., 2020; 4. Firm describes and claims to have
Jung et al., 2018). Similarly, implementing environment-friendly initia- established processes for improving energy
efficiency.
tives in small firms is guided by their flexible and non-hierarchical orga-
5. Firm describes and claims to have
nizational structure (Halkos and Tzeremes (2007). Past studies have
established processes for improving resources
confirmed that cleaner and green technologies allow firms to reduce car- efficiency.
bon emissions which positively influence firms' EP (Blackman and Ban- 6. Firm describes and claims to have
nister, 1998). The data related to clean technology usage (1, one use of established processes for improving sustainable
clean technologies; 0, no use) was retrieved from the Thomson Reuters packaging.
Assset4 database. In the context of leverage, past studies revealed that Organizational 1. Firm offers environmental issues training to Trumpp et al.
firms with high leverage enhance their commitment to good EMPs which structure its employees. (2015)
allows them to meet stakeholders' expectations and have a positive impact 2. Firm has a designated team for
environmental management.
on EP and FP (Moussa et al., 2020). Firms' leverage is measured by total
debt divided by total assets following Shahab et al.'s (2020) criteria. 3. Firm claims to have an EMS certification.

Alternatively, investment in R&D was found to have a positive impact on 4. Firm describes and claims to have
established processes for maintaining
firms’ EP and FP as it improves resource management and reduces carbon
environmental management.
emissions (Alam et al., 2019). We used a natural log of total R&D expen-
Environmental 1. Firm claims to use key performance Trumpp et al.
diture to estimate R&D. Lastly, Moussa et al. (2020) predicted that industry monitoring indicators (KPI) or balanced scorecards to (2015)
type can be linked to EMPs and EP, as environment-sensitive firms are assess energy efficiency.
likely to disclose more information regarding environment and social 2. Firm claims to use KPI or balance scorecard
performance as compared to non-sensitive firms (Qureshi et al., 2020). to assess resource efficiency.
Industrial context is estimated by following Qureshi et al. (2020) criteria (1 3. Firm claims to use KPI or balance scorecard
represents environment sensitivity and 0 non-sensitivity). All these vari- to assess sustainable packaging usage.
ables with respective estimations are reported in Table 3. 4. Firm claims to use KPI or balance scorecard
to assess water efficiency.
5. Firm claims to use KPI or balance scorecard
3.3. Estimation models to assess the supply chain's environmental
impact.
6. Firm conducts surveys of its suppliers'
While measuring the linkage between EMPs, EP, ESGD, and FP, it is
environmental performance.
essential to resolve endogeneity issues so that the findings are reliable
and valid. According to (Ullah et al. 2018), endogeneity issues during Note: score 1 is given if the information is available; 0, if no information is
statistical analysis can be resolved by a generalized method of moments available.

6
Q. Ali et al. Heliyon 8 (2022) e12486

(GMM). This technique uses internal instruments by deriving lagged
values of dependent variables (Blundell and Bond, 1998). Additionally,
the data loss during estimation can be recovered by a two-step GMM
model (Ullah et al., 2018). Therefore, this study corroborated the dy-
namic two-step GMM model to resolve endogeneity and causality issues
during model estimation which is consistent with the recent studies
examining EMPs, EP, and FP (Aslam et al., 2021; Haque and Ntim, 2018).
To examine the effect of EMPs on EP (H1), the GMM regression
estimation model is as follows;
EPit ¼ β0 þ β1EPit  1 þ β2EMPsit þ β3Cit þ μit þ εit
While, EP represents environmental performance estimated using five
proxies (EP_DEA; EP_EE; EP_PUS; EP_Emi; EP_Int) and as alternative
response variables; β is the coefficient of the degree of change; β1EPit – 1
represents first legged of the dependent variable; EMPs is the explanatory
variable which signifies environmental management practices, C in-
dicates control variables; i represents each firm, t is year, μ is the time
effect (fixed), and git is the error term.
The effect of EP on the ESGD of firms (H2) is analyzed through the
following regression model;
ESGDit ¼ β0 þ β1ESGDit  1 þ β2EPsit þ β3Cit þ μit þ εit
While, ESGD refers to the environment, social, and governance
disclosure; ESGDit – 1 is first lagged of the dependent variable; EP de-
termines environmental performance; C signifies control variables as
mentioned above.
The effect of EP on FP (H3) is analyzed using the following regression
model;
FPit ¼ β0 þ β1FPit  1 þ β2EPit þ β3Cit þ μit þ εit
While, FP indicates the financial performance of firms; FPit – 1 rep-
resents first lagged of outcome variable; EP determines environmental
performance; C represents control variables.
The mediating effect of ESGD between EP and FP (H4) is estimated
using the following regression model;
FPit ¼ β0 þ β1FPit  1 þ β2ESGDit þ β3EPit þ β4Cit þ μit þ εit
While, FP denotes firms’ financial performance; FPit – 1 represents
first lagged of the dependent variable; ESGD is the mediator which rep-
resents the environment, social, and governance disclosure; C represents
firm-specific characteristics (control variables).
4. Results
4.1. Descriptive statistics and correlation analysis
Table 4 outlines the descriptive statistics and univariate analysis of
the variables. The mean value of the main (explanatory) variable is 12.23
with a standard deviation of 5.15 which confirmed that most Malaysian
firms have adopted environmental management practices to protect the
environment and reduce carbon emissions. These findings are consistent
with the past studies of Atan et al. (2018) and Ong et al. (2019) revealed
that Malaysian industrial firms tend to implement innovative EMPs.
While, mean values of dependent variables FP and EP including all five
proxies of EP (EP_DEA, EP_EE, EE_Emi, EP_Int, and EP_PUS) are wide-
spread (less clustered). In contrast, the mean and standard deviation
values of ESGD and its three proxies (E, S, and G) are less spread and
appear more clustered around the mean.
The results of the correlation between variables are reported in
Table 5. The correlation between EMPs and EP is significantly positive
confirming that the results comply with earlier assumptions (imple-
menting effective EMPs has a positive effect on EP) (H1). Similarly, it is
notable from the correlation matrix that EP and ESGD have a significant
positive correlation. This result complies with our prediction in H2 (EP
has a positive effect on ESGD). The correlation between EP and FP is
significant and positive confirming the compliance of this result with our
prediction in H3. In terms of ESGD and its individual components, the
correlation results are significant and positive except for governance
proxy (G_D). Overall, the correlation analysis determines that the results
broadly comply with assumptions established under hypotheses (H1, H2,
H3, and H4). Finally, the correlation between independent (EMPs) and
control variables (F_size, C_Tech, Lev, R&D, and polluters) is low which
indicates that our models are less likely to suffer from multicollinearity
issues.
4.2. Hypothesis testing
The hypotheses were tested through a two-step GMM regression
analysis by controlling endogeneities of dynamic, simultaneous, and
omitted variables (Erdogdu, 2011; Ullah et al., 2018). First, we detected
serial autocorrelation (AR) issues in the models using p values. Generally,
p values of AR confirm whether the models have serial autocorrelation
problems. The results of the two-step GMM regression are reported in
Table 6. The p values of AR (1) are significant whereas, AR (2) are
insignificant which corroborates that our models do not contain serious
serial autocorrelation issues. After addressing the endogeneity issues, we
performed GMM regression analysis to analyze the effects of EMPs on EP
(H1), EP on ESGD (H2), and EP on FP (H3). The results of Two-step GMM
estimations (Table 6) delineate that EMPs were measured using 29 in-
dicators, EP through five proxies (EP_DEA, EP_EE, EP_PUS, EP_Emi, and
EP_Int), and ESGD through three proxies (E_D, S_D, and G_D). Three
proxies of EP (EP_DEA, EP_EE, and EP_PUS) predicted a positive associ-
ation with EMPs, ESGD, and FP while the other two proxies (EP_Emi and
EP_Int) predicted negative interaction with EMPs, ESGD, and FP
(Table 6). Altogether, 16 models were tested to examine the relationship
between EMPs and EP, EP and ESGD, and ESGD with EP and FP.
The mediating role of ESGD is analyzed by referring to H4 which
predicts that ESGD mediates the relationship between EP and FP and the
relationship is stronger in firms with better ESGD. The mediator effect is

Table 3. Variables’ estimations.

Variables Type Symbol Effect Source Measurements

Environmental management Independent EMPs  Assets 4 EMPs was calculated by adding 29 items presented in Table 2. EMPs score ranges from 0 to 29.
practices
Environmental performance Dependent EP  Assets 4 EP was measured by five different proxies as explained under variables and measurements.
Financial performance Dependent FP  Worldscope FP was estimated by market value of total shares þ total liabilities divided by total assets
Environment, social, Mediating ESGD Bloomberg ESGD was estimated by considering overall score of ESGD and then these scores were split (E, S,
governance disclosure and G) to analyze the mediating effect of each issue between EP and FP.
Size Control F_Size  Worldscope Natural log of firm's total assets.
Clean technology Control C_Tech  Assets 4 1, C_Tech is used; 0, C_Tech not used.
Leverage Control Lev  Worldscope Total debt divided by total assets.
Research and Development Control R&D  Worldscope Log. of total R&D expenditure.
Industry sensitiveness Control Polluters  1, firm is sensitive to environment; 0, firm is not sensitive to environment.

7
Q. Ali et al. Heliyon 8 (2022) e12486

Polluters
Table 4. Descriptive statistics of observed variables.

1.00
Variable Observations Mean Std.Dev Minimum Maximum
Dependent

-0.41
FP 1501 2.16 1.10 1.13 9.87

R&D

1.00
EP_DEA 1495 0.74 0.24 0.56 1.00
EP_EE 1487 3.48 1.62 3.25 9.21
EP_PUS 1492 0.23 0.05 0.82 1.23

0.40*
-0.47
1.00
Lev
EP_Emi 1504 10.49 2.23 4.22 12.92
EP_Int 1482 1.46 0.37 1.45 6.67
EP 1421 2.86 1.16 1.89 10.45

C_Tech

0.28*
0.39*
-0.66
Independent

1.00
EMPs 1537 12.23 5.15 0.00 29.00
Mediating
ESGD 1493 0.45 0.14 0.38 1.00

F_Size

0.61*
0.38*

-0.61
1.00

0.42
E_D 1493 0.58 0.36 0.27 0.95
S_D 1493 1.34 0.54 0.46 1.98
G_D 1493 0.90 0.48 0.26 1.89

-0.33*
0.54*
0.38*
0.38*
Control

1.00

0.47
G_D
F_Size 1496 20.14 1.12 17.78 23.54
C_Tech 1496 1.40 0.76 0.00 1.00
Lev 1496 2.76 1.23 0.55 2.85

0.56*

0.42*
0.37*
0.11*
0.13*
1.00

0.73
S_D
R&D 1496 16.43 3.36 9.58 23.20
Polluters 1496 1.83 1.14 0.00 1.00

-0.42*
0.41*

0.62*
0.54*
0.24*
0.18*
1.00

0.63
E_D
examined by following the hierarchical technique developed by Baron
and Kenny (1986). This criterion is fulfilled provided independent vari-
ables (EMPs) have a significant impact on dependent variables (EP and

-0.17*
ESGD

0.65*
0.27*

0.46*
0.12*
0.15*
0.27*
FP), independent variables (EP) have a significant impact on mediating

1.00

0.34
variable (ESGD), and finally mediating variables (ESGD) have a signifi-
cant impact on dependent variables (FP). After fulfilling these conditions,
the combined effect of EMPs and ESGD on EP and FP was examined.

-0.09*

-0.25*
0.32*

0.38*

0.42*
0.26*
0.13*
EMPs

1.00

0.38

0.38
The results highlight that mediation conditions are satisfactory
(Table 6). The combined regression results of the impact of independent
(EMPs) and mediating variable (ESGD) on dependent variables (EP and
FP) are reported in Table 6 (models 4, 7, 10 13, and 16). The coefficients
0.31*

0.20*

0.23*

0.16*
-0.25
-0.52

-0.39
1.00

0.22
0.32
0.48
related to the effect of EMPs on EP and FP (β ¼ 0.005, p < 0.05; β ¼
EP

0.010, p < 0.05; β ¼ 0.023, p < 0.01; β ¼ 0.006, p < 0.01; β ¼ 0.003 p <
0.10) are significant and varies (positive, negative) based on the proxy
EP_Int

0.28*
0.44*

0.31*
0.30*

0.88*

0.16*
-0.35
-0.34
used for EP measurement. Further, it was noticeable that coefficients
1.00

0.22

0.26

related to the effect of EP on ESGD (model 2, 6, 9, 12, and 15) were 0.35
significant (β ¼ 0.039, p < 0.01; β ¼ 0.018, p < 0.05; β ¼ 0.031, p < 0.01;
β ¼ 0.010, p < 0.01; β ¼ 0.012 p < 0.01) and fluctuated (positive/
EP_Emi

-0.08*
0.70*

0.23*
-0.16

-0.32
-0.47
1.00

0.30

0.27

0.42

0.56
0.19
0.14

negative) based on the effect of relative EP proxy. While, ESGD as a

mediator between EP and FP statistically remains significant and varies
(positive, negative) based on the disclosure score of relative proxy (E_D,
S_D, G_D). To examine the mediating effect of ESGD between EP and FP,
EP_PUS

-0.09*

-0.23*
0.34*
0.12*

0.24*

0.13*
0.43*

0.19*
-0.07
-0.40

-0.37
-0.18
1.00

0.32

we performed the Sobel test following Baron and Kenny's (1986) tech-
nique, and the results of the mediation effect together with path co-
* Represents statistical significance at a 5% level.

efficients are reported in Table 7. Overall, the mediation effect of ESGD

and its three proxies appears significant and positive except for
-0.43*

-0.28*

-0.26*
EP_EE

0.14*
0.26*

0.47*

0.42*
0.17*
0.14*
0.08*

0.27*
0.32*
-0.29
-0.15
1.00

EP*S_D*FP.

4.3. Robustness checks

EP_DEA

-0.05*

-0.10*

-0.09*
-0.27*
0.45*

0.47*

0.41*
0.36*
0.13*
0.10*

0.18*
0.52*
-0.17

-0.12
1.00

0.08
Table 5. Correlation analysis.

To examine the robustness of the results, we performed two robust-

ness checks. The first robustness check involved the measurement of
certain EMPs frequently employed by the firms. This was estimated by
-0.14*
0.07*
0.15*

0.23*

0.36*
0.10*
0.10*

0.16*

0.14*
0.08*

0.32*
-0.10

-0.07

reviewing the values of the items in the index representing frequently

1.00

0.09

0.06

0.17
FP

taken environmental initiatives of the firms. The items for environmental

policy (EPL) represent the highest values in the index indicating that
firms strictly comply with environmental regulations by designing rela-
Polluters
EP_DEA

EP_PUS
EP_Emi

C_Tech
EP_Int

F_Size
EP_EE

tive EPL. We used similar criteria to estimate EPL by adding the values of
ESGD
EMPs

R&D
G_D
E_D
S_D

Lev
EP
FP

the items and constructed an index to measure its impact on EP, ESGD,

8
Q. Ali et al. Heliyon 8 (2022) e12486

Table 6. Results of GMM regression analysis.

Dependent
variables
Variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9 Model 10
EP_DEA FP FP FP EP_EE FP FP EP_PUS FP FP
Lagged of 0.054*** 0.047*** 0.475*** 0.562*** 0.756*** 0.457*** 0.486*** -0.047*** 0.454*** 0.481***
dependent (0.002) (0.004) (0.008) (0.010) (0.002) (0.006) (0.004) (0.007) (0.010) (0.012)
variables
þEMPs 0.004*** 0.008*** 0.005*** 0.007*** 0.010*** 0.009*** 0.023***
(0.0007) (0.002) (0.001) (0.002) (0.001) (0.001) (0.000)
E_D 0.048*** 0.039***
(0.002) (0.001)
S_D 0.065*** 0.018***
(0.004) (0.001)
G_D 0.044*** 0.031**
(0.002) (0.001)
ESGD 0.028*** 0.051***
(0.001) (0.003)
EP_DEA 0.020*** 0.226***
(0.003) (0.009)
EP_EE 0.068*** 0.063***
(0.004) (0.002)
EP_PUS -0.287*** -0.264***
(0.008) (0.002)
F_Size 0.027*** -0.047*** -0.063*** -0.042*** 0.053*** -0.073*** -0.048*** 0.069*** -0.0342*** -0.017***
(0.006) (0.008) (0.001) (0.006) (0.010) (0.004) (0.010) (0.009) (0.004) (0.002)
C_Tech 0.033*** 0.027*** 0.036*** 0.047*** -0.024*** 0.063*** 0.010*** 0.018*** 0.042*** 0.034***
(0.008) (0.003) (0.010) (0.004) (0.005) (0.002) (0.000) (0.001) (0.012) (0.006)
Lev 0.066*** 0.058*** 0.072*** 0.056*** -0.683*** 0.0832*** 0.094*** 0.063*** 0.078*** 0.065***
(0.010) (0.004) (0.003) (0.013) (0.025) (0.015) (0.007) (0.009) (0.000) (0.003)
R&D 0.028** 0.024*** 0.018*** 0.047*** 0.053*** 0.043*** 0.049*** 0.071*** 0.026*** 0.022***
(0.010) (0.007) (0.003) (0.014) (0.014) (0.018) (0.008) (0.034) (0.005) (0.002)
Polluters -0.021*** 0.018*** 0.024*** 0.028*** 0.032*** 0.031*** 0.035*** 0.009** 0.025*** 0.016***
(0.006) (0.003) (0.010) (0.003) (0.015) (0.009) (0.014) (0.012) (0.006) (0.000)
Constant -0.273*** 0.824*** 0.927*** 0.735*** 0.687*** -0.469*** 0.786*** 0.729*** 0.507*** 0.494***
(0.037) (0.071) (0.062) (0.062) (0.043) (0.024) (0.043) (0.053) (0.038) (0.025)
Yearly effect Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
AR (1) p values -2.14 (0.03) -2.52 (0.02) -2.17 (0.01) -2.26 (0.03) -2.86 (0.01) -2.51 (0.04) -2.28 (0.00) -5.78 (0.04) -2.31 (0.02) -2.39 (0.01)
AR (2) p values -2.51 (0.14) 0.43 (0.48) 0.52 (0.40) 0.72 (0.58) 0.57 (0.62) 0.41 (0.67) 0.66 (0.74) -0.87 (0.36) 0.24 (0.62) 0.37 (0.50)
Hansen test's p 0.45 0.53 0.58 0.55 0.56 0.42 0.47 0.50 0.49 0.52
values
Obs. 1495 1501 1501 1501 1487 1501 1501 1492 1501 1501
Total firms 141 141 141 141 141 141 141 141 141 141

Dependent variables
Variables Model 11 Model 12 Model 13 Model 14 Model 15 Model 16
EP_Emi FP FP EP_Int FP FP
Lagged of dependent variables 0.847*** (0.003) 0.476*** (0.008) 0.484*** (0.005) 0.796*** (0.006) 0.464*** (0.010) 0.456*** (0.002)
EMPs -0.010*** (0.001) 0.006*** (0.001) -0.002*** (0.001) 0.003* (0.001)
E_D -0.023** (0.002) 0.010*** (0.001)
S_D -0.016*** (0.003) 0.008*** (0.001)
G_D -0.019*** (0.001) 0.682*** (0.009)
ESGD -0.012*** (0.004) 0.412*** (0.004)
EP_Emi -0.045*** (0.004) 0.038*** (0.003)
EP_Int -0.258*** (0.002) -0.246*** (0.008)
F_Size 0.067*** (0.006) -0.001*** (0.005) -0.023*** (0.007) 0.053*** (0.004) -0.026*** (0.003) 0.063*** (0.012)
C_Tech -0.038*** (0.006) 0.093*** (0.007) 0.084*** (0.009) 0.048*** (0.001) 0.075*** (0.008) 0.010*** (0.000)
Lev 0.237*** (0.045) 0.912*** (0.026) 0.830*** (0.030) 0.434*** (0.009) 0.822*** (0.021) 0.987*** (0.035)
R&D -0.004 (0.004) 0.069*** (0.001) 0.057*** (0.003) -0.026*** (0.008) 0.056*** (0.002) 0.041*** (0.007)
Polluters 0.218*** (0.010) 0.009*** (0.015) 0.042*** (0.028) 0.057*** (0.004) 0.048*** (0.025) 0.078*** (0.025)
Constant -0.358*** (0.221) 0.098 (0.223) 0.524*** (0.261) -0.795*** (0.041) 0.312*** (0.213) 0.634*** (0.269)
Yearly effect Yes Yes Yes Yes Yes Yes
AR (1) p values -3.28 (0.01) -3.53 (0.01) -2.56 (0.01) -2.83 (0.00) -2.50 (0.01) -3.55 (0.01)
AR (2) p values -2.32 (0.34) 0.40 (0.82) 0.58 (0.74) 2.24 (0.38) 0.43 (0.86) 0.49 (0.82)

(continued on next page)

9
Q. Ali et al.
Table 6 (continued )
Dependent variables
Hansen test's p values 0.68 0.57
Obs. 1504 1501
Total firms 141 141
Note. The definitions and explanations of variables are available in Table 3.
* Represents statistical significance at 5% level.
** Represents statistical significance at 10% level.
*** Represents statistical significance at 1% level.
and FP. The results in Table 8 disseminate that EPL has a significant
(positive/negative) effect on EP (models 1, 5, 8, 11, and 14). Further,
coefficients for models 1, 5, 8, 11, and 14 are also significant (positive/
negative) indicating EP affects ESGD. Similarly, the results (models 3 and
6) show EP's positive effect on FP confirming that our findings are
consistent with the results reported in Table 6.
The second robustness check was conducted by replacing EPMs with
environmental processes (EPR) as the examination of the index revealed
that most of the firms have ignored implanting effective EPR. The results
in Table 9 indicate that EPL has an insignificant effect on EP (models 1, 5,
8, 11, and 14), EP also represents an insignificant effect on ESGD (models
1, 5, 8, 11, and 14), and finally, EP represents an insignificant effect on
FP. These findings are also compatible with the theoretical assumptions
of our research implying that better EPMs lead to better EP, ESGD, and
FP.
5. Discussion
According to H1, implementing effective EMPs have a positive effect
on EP. The results of GMM regression in Table 6 (models 1, 5, and 8)
confirmed that EMPs along with all control variables have a significant
positive effect on EP (β ¼ 0.004, <0.01; β ¼ 0.07, p < 0.01; β ¼ 0.009; p <
0.01 which confirmed that H1 is supported. The proxies used for
measuring EP were EP_DEA, EP_EE, and EP_PUS indicating energy effi-
ciency, carbon emission productivity, and carbon emission improvement,
while proxies EP_Emi and EP_Int indicate carbon emission output levels
(lower carbon emission levels and intensity represent positive EP and
vice versa). Additionally, models 11 and 14 elucidate that firms’ EMPs
have a significant and negative effect on EP which indicates a negative
association between EMPs and EP (β ¼ 0.010, p < 0.01; β ¼ 0.002, p
< 0.01. This finding established that effective EMPs have a positive effect
on the EP of firms and validates the findings of past studies (see, Aslam
et al., 2021; Clarkson et al., 2008; Hassan and Romilly, 2018; Moussa
et al., 2020) suggested adopting good EMPs for a better EP. Additionally,
this result reinforces the theoretical arguments of RBV and institutional
theories that encouraged firms to adopt EMPs to reduce their environ-
mental impacts. Hence, firms aiming to maximize their EP need to
incorporate effective EMPs at operational and organizational levels
(Nisar et al., 2021; Famiyeh et al., 2018; Moussa et al., 2020). However,
this finding contradicts the studies of Heras-Saizarbitoria et al. (2020)
and Testa et al. (2018) revealed that although EMPs are vigorously used
by global firms, their effectiveness remains challenging for certain firms
due to technical issues.
Table 7. Results of mediating effect of ESGD.
Path descriptions Coefficients Standard estimates t-statistics
EP → ESGD → FP 0.0023*** 0.0002 2.5212
EP → E_D → FP 0.0057** 0.0004 5.8587
EP → S_D → FP -0.0019*** 0.0001 -3.5724
EP → G_D → FP 0.0039*** 0.0002 4.7647
Note. The definitions of variables are presented in Table 3.
**Represents significance at a 5% level.
***Represents significance at 1% level.
Heliyon 8 (2022) e12486
0.96 0.47 0.53 0.92
1501 1482 1501 1501
141 141 141 141
The effect of EP on the ESGD of firms is examined by referring to H2
which predicted that better EP has a positive effect on ESGD. The results
of GMM regression (models 1, 5, 8, 11, and 14) elucidate that EP and all
control variables have a significant (positive/negative) effect on ESGD (β
¼ 0.048, p < 0.02; β ¼ 0.065, p < 0.04; β ¼ 0.044, p < 0.02; β ¼ -0.023, p
< 0.02; β ¼ -0.019, p < 0.01) hence, H2 is supported. This result infers
that firms aiming to improve their ESGD need to strategically improve
their EP by implementing a range of environmental initiatives. This
finding supports RBV's conceptual argument that requires firms to allo-
cate strategic environmental resources to achieve sustainable growth
(Hart, 1995). This result confirms the finding of recent studies (Liao,
2018; Jiang et al., 2018; Xie et al., 2019) highlighting that progressive
firms may achieve a competitive advantage through their environmental
initiatives leading to better ESGD. This result contradicts the findings of
Miroshnychenko et al. (2017) and Yang et al. (2011) delineating that,
often environmental activities incur an extra financial burden on firms
therefore, firms need to carefully select their environmental initiatives.
Similarly, the effect of EP on the FP of firms is examined by referring
to H3. The results (models 3 and 6) represent that EP along with all
control variables has a significant positive effect on FP (β ¼ 0.02, p <
0.01; β ¼ 0.068, p < 0.01) hence, H3 is supported. Also, models 12 and
15 (Table 6) show that coefficient values are negative which establishes
that reduction in carbon emission intensity (DEA_Int) and carbon emis-
sion levels (DEA_Emi) has a positive impact on FP and vice versa. This
result validates the earlier studies (Hassan and Romilly, 2018; Aslam
et al., 2021) confirming that the proxies used for measuring EP are ac-
curate predictors of firms’ FP. While, the coefficient values (β ¼ 0.287,
p < 0.01) in model 9 are significant and negative which establishes that
EP has a negative effect hence, EP_PUS proxy is not an accurate predictor
of FP. Altogether, the results of H3 are consistent with the theoretical
underpinnings of RBV and institutional theories validating the narrative
established by earlier studies (Busch and Lewandowski, 2017; Hassan
and Romilly, 2018; Jyoti and Khanna, 2021; Shahab et al., 2020) that
continuous improvement in EP improves FP of firms.
To examine the mediating effect of ESGD between EP and FP, we
performed the Sobel test following Baron and Kenny's (1986) technique.
The results of the Sobel test examine the mediating effect of ESGD be-
tween EP and FP and are reported in Table 7. The path coefficients (β ¼
0.0023, p < 0.01; β ¼ 0.0057, p < 0.01; β ¼ -0.0019, p < 0.05; β ¼
0.0039, p < 0.01) are statistically significant confirming that ESGD and
its three proxies (E_D, S_D, G_D) mediates the relationship between EP
and FP. This finding supports H4 and endorses the arguments of past
studies (Chouaibi et al., 2021; Conca et al., 2021) revealing that ESGD
improves EP and FP. This result also validates RBV and institutional
theories which require firms to establish certain standards and indicators
to estimate EP (Kassem et al., 2017). Firms need to disclose these in-
dicators to their influential stakeholders to facilitate their investment
decisions (Chouaibi et al., 2021). This result establishes that firms may
represent a better FP through public disclosure of their EMPs and EP
initiatives in the form of ESG ratings which significantly help in
improving their reputation and brand value (Ruan and Liu, 2021). This
finding confirms the arguments of earlier studies (Di Tommaso and
Thornton, 2020; Oikonomou et al., 2014) and corroborated that ESGD
reduces firms' risk-taking behavior, lower operational cost, and avoids
unnecessary spending on environmental activities. However, another
10
Q. Ali et al. Heliyon 8 (2022) e12486

Table 8. Results of GMM regression (robustness checks – alternate variable 1).

Dependent
variables
Variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9 Model 10
EP_DEA FP FP FP EP_EE FP FP EP_PUS FP FP
Lagged of 0.043*** 0.046*** 0.403*** 0.455*** 0.562*** 0.541*** 0.537*** -0.056*** 0.505*** 0.528***
dependent (0.003) (0.002) (0.006) (0.010) (0.005) (0.001) (0.003) (0.007) (0.006) (0.010)
variables
EPL 0.008*** 0.016*** 0.004*** 0.010*** 0.014*** 0.011*** 0.019***
(0.001) (0.007) (0.002) (0.004) (0.003) (0.004) (0.004)
E_D 0.048*** 0.039***
(0.002) (0.001)
S_D 0.048*** 0.026***
(0.010) (0.003)
G_D 0.033*** 0.036**
(0.005) (0.002)
ESGD 0.042*** 0.046***
(0.005) (0.006)
EP_DEA 0.031*** 0.038***
(0.011) (0.001)
EP_EE 0.062*** 0.066***
(0.005) (0.009)
EP_PUS -0.424*** -0.414***
(0.006) (0.001)
F_Size 0.019*** -0.038*** -0.044*** -0.048*** 0.029*** -0.030*** -0.031*** 0.040*** -0.031*** -0.036***
(0.002) (0.002) (0.003) (0.004) (0.006) (0.012) (0.006) (0.004) (0.008) (0.003)
C_Tech 0.052*** 0.047*** 0.048*** 0.043*** -0.036*** 0.040*** 0.039*** 0.028*** 0.037*** 0.033***
(0.004) (0.002) (0.006) (0.001) (0.006) (0.007) (0.006) (0.010) (0.011) (0.004)
Lev 0.052*** 0.055*** 0.053*** 0.046*** -0.404*** 0.032*** 0.041*** 0.042*** 0.028*** 0.045***
(0.006) (0.002) (0.003) (0.006) (0.011) (0.003) (0.001) (0.006) (0.008) (0.002)
R&D 0.018** 0.015*** 0.017*** 0.014*** 0.015*** 0.016*** 0.012*** 0.011*** 0.021*** 0.018***
(0.001) (0.002) (0.001) (0.003) (0.002) (0.003) (0.001) (0.003) (0.003) (0.001)
Polluters -0.031*** 0.037*** 0.035*** 0.030*** 0.032*** 0.034*** 0.033*** 0.038** 0.034*** 0.026***
(0.004) (0.002) (0.005) (0.001) (0.003) (0.002) (0.003) (0.010) (0.003) (0.007)
Constant -0.362*** 0.713*** 0.816*** 0.624*** 0.576*** -0.358*** 0.675*** 0.618*** 0.496*** 0.383***
(0.026) (0.069) (0.051) (0.051) (0.032) (0.013) (0.032) (0.042) (0.027) (0.014)
Yearly effect Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
AR (1) p values -2.16 (0.01) -2.18 (0.01) -2.22 (0.02) -2.18 (0.04) -2.16 (0.01) -2.31 (0.02) -2.27 (0.03) -4.12 (0.03) -2.43 (0.01) -2.36 (0.02)
AR (2) p values -2.32 (0.11) 0.46 (0.47) 0.48 (0.41) 0.63 (0.48) 0.52 (0.38) 0.54 (0.31) 0.50 (0.21) -0.62 (0.25) 0.36 (0.22) 0.48 (0.15)
Hansen test's p 0.50 0.52 0.53 0.51 0.57 0.55 0.54 0.58 0.53 0.59
values
Obs. 1495 1501 1501 1501 1487 1501 1501 1492 1501 1501
Total firms 141 141 141 141 141 141 141 141 141 141

Dependent variables
Variables Model 11 Model 12 Model 13 Model 14 Model 15 Model 16
EP_Emi FP FP EP_Int FP FP
Lagged of dependent variables 0.634*** (0.001) 0.524*** (0.003) 0.521*** (0.002) 0.603*** (0.004) 0.452*** (0.007) 0.532*** (0.002)
EPL -0.009*** (0.002) 0.013*** (0.004) -0.011*** (0.003) 0.010* (0.005)
E_D -0.018** (0.008) 0.024*** (0.004)
S_D -0.032*** (0.000) 0.015*** (0.004)
G_D -0.024*** (0.006) 0.448*** (0.010)
ESGD -0.020*** (0.002) 0.283*** (0.007)
EP_Emi -0.036*** (0.009) 0.028*** (0.002)
EP_Int -0.301*** (0.006) -0.278*** (0.004)
F_Size 0.053*** (0.004) -0.043*** (0.010) -0.038*** (0.001) 0.042*** (0.006) -0.031*** (0.008) 0.038*** (0.010)
C_Tech -0.043*** (0.003) 0.051*** (0.010) 0.053*** (0.005) 0.047*** (0.002) 0.044*** (0.003) 0.040*** (0.008)
Lev 0.318*** (0.034) 0.835*** (0.026) 0.805*** (0.027) 0.389*** (0.002) 0.524*** (0.012) 0.556*** (0.014)
R&D -0.010 (0.001) 0.032*** (0.006) 0.030*** (0.002) -0.035*** (0.001) 0.040*** (0.008) 0.044*** (0.013)
Polluters 0.036*** (0.003) 0.032*** (0.015) 0.038*** (0.018) 0.041*** (0.003) 0.045*** (0.032) 0.041*** (0.017)
Constant -0.482*** (0.221) 0.063 (0.223) 0.329*** (0.261) -0.420*** (0.002) 0.363*** (0.184) 0.528*** (0.221)
Yearly effect Yes Yes Yes Yes Yes Yes
AR (1) p values -2.72 (0.02) -2.94 (0.00) -3.16 (0.00) -2.56 (0.01) -3.28 (0.02) -2.62 (0.00)
AR (2) p values -2.59 (0.31) 0.48 (0.48) 0.61 (0.53) 2.36 (0.35) 0.48 (0.57) 0.50 (0.45)

(continued on next page)

11
Q. Ali et al. Heliyon 8 (2022) e12486

Table 8 (continued )
Dependent variables
Hansen test's p values 0.56 0.53 0.61 0.46 0.64 0.66
Obs. 1504 1501 1501 1482 1501 1501
Total firms 141 141 141 141 141 141

* Represents statistical significance at 5% level.

** Represents statistical significance at 10% level.
*** Represents statistical significance at 1% level.

notable feature of the mediation effect was the negative path coefficient disclosure. This can be an interesting research perspective as the firms
for EP*S_D*FP which lays the foundation for future studies to further continue facing diverse social pressure due to the impact of business
investigate the effect of EP on ESGD, especially the effect on social activities on the environment and society.

Table 9. Results of GMM regression (robustness checks – alternate variable EPR).

Dependent variables
Variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9 Model 10
EP_DEA FP FP FP EP_EE FP FP EP_PUS FP FP
Lagged of dependent 0.031 0.035 (0.010) 0.382 0.263 0.374* 0.422** 0.366** -0.042* 0.348** 0.242*
variables (0.005) (0.003) (0.008) (0.002) (0.013) (0.001) (0.011) (0.018) (0.018)
EPL 0.010 0.023* 0.004** 0.046 0.037* 0.026 0.024*
(0.016) (0.036) (0.020) (0.012) (0.014) (0.007) (0.015)
E_D 0.048 0.039***
(0.002) (0.001)
S_D 0.016 0.047
(0.006) (0.009)
G_D 0.054 0.017*
(0.020) (0.005)
ESGD 0.028** 0.037
(0.010) (0.005)
EP_DEA 0.065 0.056
(0.003) (0.008)
EP_EE 0.044* 0.048*
(0.002) (0.006)
EP_PUS -0.335 -0.338
(0.010) (0.009)
F_Size 0.037 -0.029* -0.022* -0.033 0.021* -0.018 -0.0224 0.038 -0.035 -0.018
(0.001) (0.006) (0.002) (0.006) (0.002) (0.008) (0.003) (0.008) (0.011) (0.001)
C_Tech 0.029 0.017 (0.007) 0.022 0.027 -0.026 0.041 0.044 0.042 0.034 0.038
(0.003) (0.002) (0.013) (0.009) (0.016) (0.003) (0.007) (0.006) (0.002)
Lev 0.062 0.060 (0.006) 0.072 0.063 -0.665 0.060 0.041* 0.056 0.048 0.051
(0.004) (0.011) (0.005) (0.006) (0.004) (0.020) (0.003) (0.001) (0.004)
R&D 0.024 0.032** 0.036** 0.035 0.028 0.027 0.025 0.038 0.042 0.022*
(0.006) (0.001) (0.004) (0.008) (0.006) (0.003) (0.004) (0.009) (0.016) (0.007)
Polluters -0.046 0.052* 0.055 0.049 0.054* 0.048 0.046 0.044 0.039 0.038*
(0.019) (0.010) (0.010) (0.005) (0.005) (0.007) (0.003) (0.011) (0.001) (0.003)
Constant -0.462 0.513 (0.062) 0.604 0.541 0.493 -0.479 0.573 0.448 0.371 0.452*
(0.018) (0.022) (0.038) (0.022) (0.014) (0.022) (0.038) (0.016) (0.010)
Yearly effect Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
AR (1) p values -3.28 -3.35 (0.03) -3.38 (0.00) -3.47 (0.02) -2.87 -2.74 (0.01) -2.71 (0.01) -3.19 (0.04) -2.90 (0.03) -2.94
(0.02) (0.03) (0.01)
AR (2) p values -2.47 0.58 (0.37) 0.63 (0.52) 0.66 (0.40) 0.61 (0.44) 0.62 (0.20) 0.58 (0.38) -0.57 (0.39) 0.52 (0.18) 0.42 (0.26)
(0.15)
Hansen test's p values 0.73 0.66 0.74 0.58 0.64 0.78 0.84 0.66 0.82 0.60
Obs. 1495 1501 1501 1501 1487 1501 1501 1492 1501 1501
Total firms 141 141 141 141 141 141 141 141 141 141

Dependent variables
Variables Model 11 Model 12 Model 13 Model 14 Model 15 Model 16
EP_Emi FP FP EP_Int FP FP
Lagged of dependent variables 0.442 (0.004) 0.327 (0.008) 0.412 (0.006) 0.338 (0.005) 0.262* (0.017) 0.221 (0.003)
EPL -0.320 (0.017) 0.336 (0.002) -0.038 (0.010) 0.041 (0.008)
E_D -0.527 (0.009) 0.042 (0.002)

(continued on next page)

12
Q. Ali et al. Heliyon 8 (2022) e12486

Table 9 (continued )
Dependent variables
S_D -0.021 (0.003) 0.026** (0.002)
G_D -0.036 (0.003) 0.039* (0.004)
ESGD -0.058 (0.007) 0.063 (0.022)
EP_Emi -0.048 (0.002) 0.034 (0.006)
EP_Int -0.202* (0.004) -0.359 (0.008)
F_Size 0.042 (0.007) -0.053 (0.009) -0.057 (0.004) 0.048 (0.002) -0.046* (0.005) 0.035** (0.008)
C_Tech -0.028* (0.001) 0.026 (0.003) 0.032 (0.002) 0.038 (0.000) 0.031 (0.005) 0.039 (0.004)
Lev 0.064 (0.034) 0.062 (0.008) 0.065 (0.015) 0.328* (0.006) 0.045 (0.002) 0.044* (0.011)
R&D -0.018 (0.006) 0.026 (0.002) 0.031 (0.004) -0.036 (0.004) 0.043 (0.004) 0.040 (0.004)
Polluters 0.069 (0.004) 0.057 (0.006) 0.056 (0.004) 0.061 (0.008) 0.056 (0.012) 0.055** (0.003)
Constant -0.035 (0.158) 0.038 (0.196) 0.303 (0.162) -0.023 (0.006) 0.384 (0.116) 0.415* (0.118)
Yearly effect Yes Yes Yes Yes Yes Yes
AR (1) p values -3.14 (0.01) -3.82 (0.02) -3.56 (0.04) -3.58 (0.07) -3.46 (0.05) -2.95 (0.10)
AR (2) p values -3.17 (0.47) 0.38 (0.53) 0.48 (0.53) 3.20 (0.58) 0.48 (0.48) 0.40 (0.40)
Hansen test's p values 0.63 0.77 0.68 0.61 0.60 0.65
Obs. 1504 1501 1501 1482 1501 1501
Total firms 141 141 141 141 141 141

* Represents statistical significance at 5% level.

** Represents statistical significance at 10% level.
*** Represents statistical significance at 1% level.

6. Conclusion effectiveness of EMPs in improving environmental performance which will

This study has examined the effects of environmental management
practices (EMPs) on the environmental performance (EP) and financial
performance (FP) of firms using environment, social, and governance
disclosure (ESGD) as the mediator between EP and FP. The data between
2009 to 2020 was collected from 141 firms listed on Bursa Malaysia. The
results elucidate that EMPs have a positive effect on EP. Similarly, im-
provements in EP positively influence the ESGD and FP of firms while
ESGD scores together with its individual components mediate the rela-
tionship between EP and FP. These results are consistent with the insights
of the resource-based view (RBV) and institutional theories.
Our findings delivered multiple contributions to developing literature
related to optimizing corporate efficiency through environmental man-
agement. First, our results contribute to resolving environmental and eco-
nomic issues of organizations through continuous improvement in
environmental initiatives and integration of strategic resources. The find-
ings have revealed that the adoption of voluntary and mandatory EMPs will
allow Malaysian firms to embrace the concept of environmental legitimacy.
Second, the results of the current study suggest that relative environmental
programs and their disclosure improve the organizational image and brand
value by reducing firms' ecological footprints. Third, the insight of this study
contributes to examining the missing linkage between investments in
environmental initiatives and their effectiveness. This will help the man-
agers to justify the investments in environmental programs as the results
have just confirmed that disclosure of environmental programs through
ESGD will help the firms to justify investments in environmental initiatives
to gain financial benefits. This will also help in achieving customer loyalty
and meeting stakeholders' expectations as the firm publicly discloses its
environmental, social, and governance agendas. Finally, the current study
contributes to developing strategic matrices for business owners concerned
about their survival in today's competitive market. The findings have sug-
gested that investing in green programs will help in the mitigation of
environmental issues and generate perpetual financial outputs.
6.1. Implications for practice
Our findings have several theoretical and practical implications for
regulators, policymakers, and managers. The insight of this study offers a
strategic roadmap for the regulators contemplating different options to
reduce ecological effects and achieve environmental sustainability through
zero carbon emission. Governments across the world may consider the
reduce firms' negative impact on the environment by minimizing carbon
emissions. The policymakers of industrial firms may use the results of this
study to improve their economic situation and contribute to environmental
sustainability as the findings have suggested that firms implementing a
range of EMPs represent better EP and FP. The managers and business
owners may use these findings to improve their firms’ reputation, image,
and brand value through a toolkit established in our findings which re-
quires a synergy between EMPs, EP, and better ESGD ratings.
6.2. Limitations and future studies
Like any other empirical study, the present study also has a few
limitations which are deliberated briefly and future studies are recom-
mended to address these limitations. This study uses a single country
data-Malaysia hence, it is essential to remain cautious while interpreting
and generalizing the results. Although the robustness of our findings is
verified through statistical procedures, future studies are recommended
to incorporate regional, cultural, and country-level factors as suggested
by Albertini (2013) while generalizing the results. Second, the time
covered in this study ranged from 2009–2020 while, the ongoing
pandemic has seriously limited firms’ capabilities to implement different
environmental initiatives. Future research may incorporate the recent
data as it may elucidate a completely different perspective of EMPs, EP,
FP, and ESGD. Third, the data analysis technique may still suffer from
endogeneity problems, future studies are encouraged to consider addi-
tional measures and techniques such as difference-in-difference, gener-
alized, two-and three-stage least squares regression to ensure the
robustness of results (Xue et al., 2022). Fourth, the proxies used for
estimating EP and ESGD scores may not reflect the actual picture of
environmental performance and environment, social, and governance
disclosure. Future studies may consider using other proxies such as water
and material and ESG scores by regional rating agencies such as Thomson
Reuters and MSCI to measure environmental performance and ESGD.
Declarations
Author contribution statement
Qaisar Ali: Analyzed and interpreted the data; Contributed reagents,
materials, analysis tools or data; Wrote the paper.

13
Q. Ali et al.
Asma Salman: Conceived and designed the experiments; Performed
the experiments; Analyzed and interpreted the data; Wrote the paper.
Shazia Parveen: Performed the experiments; Analyzed and inter-
preted the data; Wrote the paper.
Funding statement
This research did not receive any specific grant from funding agencies
in the public, commercial, or not-for-profit sectors.
Data availability statement
Data included in article/supp. material/referenced in article.
Declaration of interests statement
The authors declare no competing interests.
Additional information
No additional information is available for this paper.
References
Aerts, W., Cormier, D., Magnan, M., 2008. Corporate environmental disclosure, financial
markets and the media: an international perspective. Ecol. Econ. 64 (3), 643–659.
Alam, M.S., Atif, M., Chien-Chi, C., Soytas, U., 2019. Does corporate R&D investment
affect firm environmental performance? Evidence from G-6 countries. Energy Econ.
78, 401–411.
Albertini, E., 2013. Does environmental management improve financial performance? A
meta-analytical review. Organ. Environ. 26 (4), 431–457.
Albertini, F., Gomes, L.P., Grondona, A.E.B., Caetano, M.O., 2021. Assessment of
environmental performance in building construction sites: data envelopment analysis
and Tobit model approach. J. Build. Eng. 44, 102994.
Albitar, K., Hussainey, K., Kolade, N., Gerged, A.M., 2020. ESG disclosure and firm
performance before and after IR: the moderating role of governance mechanisms. Int.
J. Account. Inf. Manag. 28 (3), 429–444.
Ali, Q., Salman, A., Yaacob, H., Zaini, Z., Abdullah, R., 2020a. Does big data analytics
enhance sustainability and financial performance? The case of banks. J. Asian Finan.
Econ. Bus. 7 (7), 1–13.
Ali, Q., Salman, A., Parveen, S., Zaini, Z., 2020b. Green Behaviour and Financial
Performance: Impact on the Malaysian Fashion Industry. SAGE Open.
Ali, Q., Parveen, S., Yaacob, H., Zaini, Z., 2022. The management of Industry 4.0
technologies and environmental assets for optimal performance of industrial firms in
Malaysia. Environ. Sci. Pollut. Control Ser.
Alareeni, B.A., Hamdan, A., 2020. ESG impact on performance of US S&P 500-listed
firms. Corp. Govern. 20 (7), 1409–1428.
Arun, T., Girardone, C., Piser a, S., 2022. ESG issues in emerging markets and the role of
banks. In: Handbook of Banking and Finance in Emerging Markets. Edward Elgar
Publishing, pp. 321–344.
Al-Tuwaijri, S.A., Christensen, T.E., Hughes Ii, K.E., 2004. The relations among
environmental disclosure, environmental performance, and economic performance: a
simultaneous equations approach. Account. Org. Soc. 29 (5–6), 447–471.
Ambec, S., Lanoie, P., 2008. Does it pay to be green? A systematic overview. Acad.
Manag. Perspect. 22 (4), 45–62.
Amel-Zadeh, A., Serafeim, G., 2018. Why and how investors use ESG information:
evidence from a global survey. Financ. Anal. J. 74 (3), 87–103.
Arena, U., Mastellone, M.L., Perugini, F., 2003. The environmental performance of
alternative solid waste management options: a life cycle assessment study. Chem.
Eng. J. 96 (1–3), 207–222.
Aslam, S., Elmagrhi, H.M., Rehman, R., Ntim, C.G., 2021. Environmental management
practices and financial performance using data envelopment analysis in Japan: the
mediating role of environmental performance. Bus. Strat. Environ. 30 (4),
1655–1673.
Atan, R., Alam, M.M., Said, J., Zamri, M., 2018. The impacts of environmental, social, and
governance factors on firm performance: panel study of Malaysian companies.
Manag. Environ. Qual. 29 (2), 182–194.
Awang, M.B., Jaafar, A.B., Abdullah, A.M., Ismail, M.B., Hassan, M.N., Abdullah, R., et al.,
2000. Air quality in Malaysia: impacts, management issues and future challenges.
Respirology 5 (2), 183–196.
Azmi, S.Z., Latif, M.T., Ismail, A.S., Juneng, L., Jemain, A.A., 2010. Trend and status of air
quality at three different monitoring stations in the Klang Valley, Malaysia. Air
Quality. Atmos. Health 3 (1), 53–64.
Baron, R.M., Kenny, D.A., 1986. The moderator–mediator variable distinction in social
psychological research: conceptual, strategic, and statistical considerations. J. Pers.
Soc. Psychol. 51 (6), 1173–1182.
Bartolomeo, M., 1995. Environmental performance indicators in industry. Nota di lavoro
41/95. Fondazione ENI Enrico Mattei, Milan.
14
Heliyon 8 (2022) e12486
Bernauer, T., Engel, S., Kammerer, D., Sejas Nogareda, J., 2007. Explaining green
innovation: ten years after Porter's win-win proposition: how to study the effects of
regulation on corporate environmental innovation? Politische Vierteljahresschr. 39,
323–341. https://ssrn.com/abstract¼918733.
Berrone, P., Fosfuri, A., Gelabert, L., 2017. Does green washing pay off? Understanding
the relationship between environmental actions and environmental legitimacy.
J. Bus. Ethics 144 (2), 363–379.
Blackman, A., Bannister, G.J., 1998. Community pressure and clean technology in the
informal sector: an econometric analysis of the adoption of propane by traditional
Mexican brickmakers. J. Environ. Econ. Manag. 35 (1), 1–21.
Blundell, R., Bond, S., 1998. Initial conditions and moment restrictions in dynamic panel
data models. J. Econom. 87 (1), 115–143.
Boakye, J.D., Tingbani, I., Ahinful, S.G., Nsor-Ambala, R., 2021. The relationship between
environmental management performance and financial performance of firms listed in
the Alternative Investment Market (AIM) in the UK. J. Clean. Prod. 278, 124034.
Bowen, F.E., Cousins, P.D., Lamming, R.C., Faruk, A.C., 2001. The role of supply
management capabilities in green supply. Prod. Oper. Manag. 10 (2), 174–190.
Busch, T., Lewandowski, S., 2017. Corporate carbon and financial performance: a meta-
analysis. J. Ind. Ecol. 22 (4), 745–759.
Chen, F., Ngniatedema, T., Li, S., 2018. A cross-country comparison of green initiatives,
green performance and financial performance. Manag. Decis. 56 (5), 1008–1032.
Chen, N., Xu, L., Chen, Z., 2017. Environmental efficiency analysis of the Yangtze River
Economic Zone using super efficiency data envelopment analysis (SEDEA) and tobit
models. Energy 134, 659–671.
Chen, P.H., Ong, C.F., Hsu, S.C., 2016. Understanding the relationships between
environmental management practices and financial performances of multinational
construction firms. J. Clean. Prod. 139, 750–760.
Chin, Y.S.J., De Pretto, L., Thuppil, V., Ashfold, M.J., 2019. Public awareness and support
for environmental protection—a focus on air pollution in peninsular Malaysia. PLoS
One 14 (3), 206–212.
Chouaibi, S., Chouaibi, J., Rossi, M., 2021. ESG and corporate financial performance: the
mediating role of green innovation: UK common law versus Germany civil law.
EuroMed J. Bus. Preprint.
Clarkson, P.M., Li, Y., Richardson, G.D., Vasvari, F.P., 2011. Does it really pay to be
green? Determinants and consequences of proactive environmental strategies.
J. Account. Publ. Pol. 30 (2), 122–144.
Clarkson, P.M., Li, Y., Richardson, G.D., Vasvari, F.P., 2008. Revisiting the relation
between environmental performance and environmental disclosure: an empirical
analysis. Account. Org. Soc. 33 (4–5), 303–327.
Clementino, E., Perkins, R., 2021. How do companies respond to environmental, social
and governance (ESG) ratings? Evidence from Italy. J. Bus. Ethics 171, 379–397.
Conca, L., Manta, F., Morrone, D., Toma, P., 2021. The impact of direct environmental,
social, and governance reporting: empirical evidence in European-listed companies in
the agri-food sector. Bus. Strat. Environ. 30 (2), 1080–1093.
Cormier, D., Magnan, M., 1997. Investors' assessment of implicit environmental liabilities:
an empirical investigation. J. Account. Publ. Pol. 16 (2), 215–241.
Crane, A., Matten, D., Glozer, S., Spence, L., 2019. Business Ethics: Managing Corporate
Citizenship and Sustainability in the Age of Globalization, fifth ed. Oxford University
Press, Oxford.
Cui, Z., Yang, F., Ren, F., Zhang, X., Jing, Z., 2021. Assessing sustainability environmental
performance of three urban agglomerations in China: an input–output modeling
approach. Ecol. Indicat. 130, 108079.
de Castro Sobrosa Neto, R., de Lima, C.R.M., Bazil, D.G., de Oliveira Veras, M., de
Andrade Guerra, J.B.S.O., 2020. Sustainable development and corporate financial
performance: a study based on the Brazilian Corporate Sustainability Index (ISE).
Sustain. Dev. 28, 960–977.
Deegan, C., 2017. Twenty five years of social and environmental accounting research
within Critical Perspectives of Accounting: hits, misses and ways forward. Crit.
Perspect. Account. 43, 65–87.
Deegan, C., 2013. The accountant will have a central role in saving the planet really? A
reflection on ‘green accounting and green eyeshades twenty years later. Crit.
Perspect. Account. 24 (6), 448–458.
Delmas, M., Blass, V.D., 2010. Measuring corporate environmental performance: the
trade-offs of sustainability ratings. Bus. Strat. Environ. 19 (4), 245–260.
Delmas, M.A., Toffel, M.W., 2008. Organisational responses to environmental demands:
opening the black box. Strat. Manag. J. 29 (10), 1027–1055.
Demiral, E.E., Sa
glam, U., 2021. Eco-efficiency and Eco-productivity assessments of the
states in the United States: a two-stage Non-parametric analysis. Appl. Energy 303,
117649.
Depoers, F., Jeanjean, T., Jer^
ome, T., 2016. Voluntary disclosure of greenhouse gas
emissions: contrasting the carbon disclosure project and corporate reports. J. Bus.
Ethics 134 (3), 445–461.
DiMaggio, P.J., Powell, W.W., 1983. The iron cage revisited: institutional isomorphism
and collective rationality in organizational fields. Am. Socio. Rev. 48 (2), 147–160.
www.jstor.org/stable/2095101.
Di Tommaso, C., Thornton, J., 2020. Do ESG scores effect bank risk taking and value?
Evidence from European banks. Corp. Soc. Responsib. Environ. Manag. 27, 2286–2298.
Dowell, G., Hart, S., Yeung, B., 2000. Do corporate global environmental standards create
or destroy market value? Manag. Sci. 46 (8), 1059–1074.
Dragomir, V.D., 2018. How do we measure corporate environmental performance? A
critical review. J. Clean. Prod. 196, 1124–1157.
Du, K., Li, P., Yan, Z., 2019. Do green technology innovations contribute to carbon
dioxide emission reduction? Empirical evidence from patent data. Technol. Forecast.
Soc. Change 146, 297–303.
Earnhart, D., Lizal, L., 2007. Effect of pollution control on corporate financial
performance in a transition economy. Eur. Environ. 17 (4), 247–266.
Q. Ali et al.
Elzinga, R., Reike, D., Negro, O.S., Boon, W.P.C., 2020. Consumer acceptance of circular
business models. J. Clean. Prod. 254, 119988.
Emrouznejad, A., Yang, G., Amin, G.R., 2019. A novel inverse DEA model with
application to allocate the CO2 emissions quota to different regions in Chinese
manufacturing industries. J. Oper. Res. Soc. 70 (7), 1079–1090.
Epstein, M.J., 1996. Measuring Corporate Environmental Performance. IMA/McGraw
Hill, San Francisco, CA, USA.
Erdogdu, E., 2011. The impact of power market reforms on electricity price-cost margins
and cross-subsidy levels: a cross country panel data analysis. Energy Pol. 39 (3),
1080–1092.
Famiyeh, S., Adaku, E., Amoako-Gyampah, K., Asante-Darko, D., Amoatey, C.T., 2018.
Environmental management practices, operational competitiveness and
environmental performance: empirical evidence from a developing country. Journal
of Manufacturing. Technol. Manag. 29 (3), 588–607.
Feng, T., Wang, D., 2016. The influence of environmental management systems on
financial performance: a moderated-mediation analysis. J. Bus. Ethics 135 (2),
265–278.
Florida, R., 1996. Lean and green: the move to environmentally conscious manufacturing.
Calif. Manag. Rev. 39 (1), 80–105.
Halkos, G.E., Tzeremes, N.G., 2007. Productivity efficiency and firm size: an empirical
analysis of foreign owned companies. Int. Bus. Rev. 16 (6), 713–731.
Halkos, G., Argyropoulou, G., 2021. Modeling energy and air pollution health damaging:
a two-stage DEA approach. Air Qual. Atmos. Health 14, 1221–1231.
Haque, F., Ntim, C.G., 2020. Executive compensation, sustainable compensation policy,
carbon performance and market value. Br. J. Manag. 31 (3), 525–546.
Haque, F., Ntim, C.G., 2018. Environmental policy, sustainable development, governance
mechanisms and environmental performance. Bus. Strat. Environ. 27 (3), 415–435.
Hart, S.L., 1995. A natural-resource-based view of the firm. Acad. Manag. Rev. 20 (4),
986–1014.
Hassan, O.A., Romilly, P., 2018. Relations between corporate economic performance,
environmental disclosure and greenhouse gas emissions: new insights. Bus. Strat.
Environ. 27 (7), 893–909.
Hazudin, S.F., Mohamad, S.A., Azer, I., Daud, R., Paino, H., 2015. ISO 14001 and financial
performance: is the accreditation financially worth it for Malaysian firms. Procedia
Econ. Finance 31, 56–61.
Henri, J.F., Journeault, M., 2008. Environmental performance indicators: an empirical
study of Canadian manufacturing firms. J. Environ. Manag. 87 (1), 165–176.
Heras-Saizarbitoria, I., Boiral, O., García, M., Allur, E., 2020. Environmental best practice
and performance benchmarks among EMAS certified organizations: an empirical
study. Environ. Impact Assess. Rev. 80, 106315.
Hertin, J., Berkhout, F., Wagner, M., Tyteca, D., 2008. Are EMS environmentally
effective? The link between environmental management systems and environmental
performance in European companies. J. Environ. Plann. Manag. 51 (2), 259–283.
Horv athova, E., 2010. Does environmental performance affect financial performance? A
meta-analysis. Ecol. Econ. 70 (1), 52–59.
Huang, D.Z.X., 2021. Environmental, social and governance (ESG) activity and firm
performance: a review and consolidation. Account. Finance 61, 335–360.
Ilinitch, A.Y., Soderstrom, N.S., Thomas, T.E., 1998. Measuring corporate environmental
performance. J. Account. Publ. Pol. 17 (4–5), 383–408.
James, P., 1994. Business environmental performance measurement. Bus. Strat. Environ.
3 (2), 59–67.
Jiang, Y., Xue, X., Xue, W., 2018. Proactive corporate environmental responsibility and
financial performance: evidence form Chinese energy enterprises. Sustainability 10
(4), 964.
Jin, J., Zhou, D., Zhou, P., 2014. Measuring environmental performance with stochastic
environmental DEA: the case of APEC economies. Econ. Modell. 38, 80–86.
Judge, W.Q., Douglas, T.J., 1998. Performance implications of incorporating natural
environmental issues into the strategic planning process. An empirical assessment.
J. Manag. Stud. 35 (2), 241–262.
Jung, S., Nam, C., Yang, D.-H., Kim, S., 2018. Does corporate sustainability performance
increase corporate financial performance? Focusing on the information and
communication technology industry in korea. Sustain. Dev. 26, 243–254.
Jyoti, G., Khanna, A., 2021. Does Sustainability Performance Impact Financial Performance?
Evidence from Indian Service Sector Firms. Sustainable Development, pp. 1–10.
Kassem, E., Trenz, O., Hrebícek, J., Faldík, O., 2017. Sustainability assessment and
reporting in agriculture sector. Acta Univ. Agric. Silvic. Mendelianae Brunensis 65
(4), 1359–1369.
Khodadadipour, M., Hadi-Vencheh, A., Behzadi, M.H., Rostamy-malkhalifeh, M., 2021.
Efficiency evaluation with cross-efficiency in the presence of undesirable outputs in
stochastic environment. Commun. Stat. Theor. Methods.
Konar, S., Cohen, M.A., 2001. Does the market value environmental performance? Rev.
Econ. Stat. 83 (2), 281–289.
Lankoski, L., 2000. Determinants of Environmental Profit. An Analysis of the Firm Level
Relationship between Environmental Performance and Economic Performance.
Dissertation. Helsinki University of Technology.
Li, X., Yu, Z., Salman, A., Ali, Q., Hafeez, M., Aslam, M.S., 2021. The role of financial
development indicators in sustainable development-environmental degradation
nexus. Environ. Sci. Pollut. Res. J. 28, 33707, 33178.
Liao, Z., Liu, Y., Li, M., 2020. Is environmental innovation contagious? A study on the
mechanism of individual firms' environmental innovation affecting the industry.
Sustain. Dev. 28, 1787–1795.
Liao, Z., 2018. Environmental policy instruments, environmental innovation and the
reputation of enterprises. J. Clean. Prod. 171, 1111–1117.
Lin, R.J., Tan, K.H., Geng, Y., 2013. Market demand, green product innovation, and firm
performance: evidence from Vietnam motorcycle industry. J. Clean. Prod. 40,
101–107.
15
Heliyon 8 (2022) e12486
Liu, J., Fang, M., Jin, F., Wu, C., Chen, H., 2020. Multi-attribute decision making based on
stochastic DEA cross-efficiency with ordinal variable and its application to evaluation
of banks’ sustainable development. Sustainability 12 (6), 2375.
Lober, D.J., 1996. Evaluating the environmental performance of corporations. J. Manag.
Issues 8 (2), 184–205.
Lokuwaduge, C.S.D.S., Heenetigala, K., 2017. Integrating environmental, social and
governance (ESG) disclosure for a sustainable development: an Australian study. Bus.
Strat. Environ. 26 (4), 438–450.
Lv, Y., Liu, J., Cheng, J., Andreoni, V., 2021. The persistent and transient total factor
carbon emission performance and its economic determinants: evidence from China's
province-level panel data. J. Clean. Prod. 316, 128198.
Manrique, S., Martí-Ballester, C.P., 2017. Analyzing the effect of corporate environmental
performance on corporate financial performance in developed and developing
countries. Sustainability 9 (11), 1957.
Martins, L.L., 2005. A model of the effects of reputational rankings on organizational
change. Organ. Sci. 16 (6), 701–720.
Matsumoto, K., Makridou, G., Doumpos, M., 2020. Evaluating environmental
performance using data envelopment analysis: the case of European countries.
J. Clean. Prod. 272, 122637.
Matsumoto, K., Chen, Y., 2021. Industrial eco-efficiency and its determinants in China: a
two-stage approach. Ecol. Indicat. 130, 108072.
Md Nor, N., Bahari, N.A.S., Adnan, N.A., Kamal, S.M.Q.A.S., Mohd Ali, I., 2016. The
effects of environmental disclosure on financial performance in Malaysia. Procedia
Econ. Finance 35, 117–126.
Mei, N.S., Wai, C.W., Ahmad, R., 2016. Environmental awareness and behaviour index for
Malaysia. Proc. Social Behav. Sci. 222, 668–675.
Miroshnychenko, I., Barontini, R., Testa, F., 2017. Green practices and financial
performance: a global outlook. J. Clean. Prod. 147, 340–351.
Montabon, F., Sroufe, R., Narasimhan, R., 2007. An examination of corporate reporting,
environmental management practices and firm performance. J. Oper. Manag. 25 (5),
998–1014.
Moussa, T., Allam, A., Elbanna, S., Bani-Mustafa, A., 2020. Can board environmental
orientation improve US firms' carbon performance? The mediating role of carbon
strategy. Bus. Strat. Environ. 29 (1), 72–86.
Mungai, M.E., Ndiritu, W.S., Rajwani, T., 2020. Do voluntary environmental management
systems improve environmental performance? Evidence from waste management by
Kenyan firms. J. Clean. Prod. 265, 121636.
Murphy, D., McGrath, D., 2013. ESG reporting–class actions, deterrence, and avoidance.
Sustain. Account. Manag. Pol. J. 4 (2), 216–235.
Nguyen, H., Ntim, C.G., Malagila, J., 2020. Women on corporate boards and corporate
outcomes: a systematic literature review and future research agenda. International.
Rev. Finan. Anal. 71, 101554.
Nisar, Q.A., Haider, S., Ali, F., Jamshed, S., Ryu, K., Gill, S.S., 2021. Green human
resource management practices and environmental performance in Malaysian green
hotels: the role of green intellectual capital and pro-environmental behavior. J. Clean.
Prod. 311, 127504.
Ntim, C.G., 2016. Corporate governance, corporate health accounting and firm value: the
case of HIV/AIDS disclosures in Sub-Saharan Africa. Int. J. Account. 51 (2), 155–216.
Oikonomou, I., Brooks, C., Pavelin, S., 2014. The effects of corporate social performance
on the cost of corporate debt. Financ. Rev. 49, 49–75.
Oliver, C., 1997. Sustainable competitive advantage: combining institutional and
resource-based views. Strat. Manag. J. 18 (9), 697–713, 10.1002/(SICI)1097-
0266(199710)18:9%3C697.
Ong, T.S., Lee, A.S., Teh, B.H., Magsi, H.B., 2019. Environmental innovation,
environmental performance and financial performance: evidence from Malaysian
environmental proactive firms. Sustainability 11, 3494.
Onubi, O.H., Yusof, A.N., Hassan, S.A., 2020. How environmental performance influence
client satisfaction on projects that adopt green construction practices: the role of
economic performance and client types. J. Clean. Prod. 272, 122763.
Pinto, C.M.G., Pedroso, B., Moraes, J., Pilatti, A.L., Picinin, T.C., 2018. Environmental
management practices in industries of Brazil, Russia, India, China and South Africa
(BRICS) from 2011 to 2015. J. Clean. Prod. 198, 1251–1261.
Prado-Lorenzo, J.-M., Garcia-Sanchez, I.-M., 2010. The role of the board of directors in
disseminating relevant information on greenhouse gases. J. Bus. Ethics 97 (3),
391–424.
Porter, M.E., Van der Linde, C., 1995. Toward a new conception of the environment-
competitiveness relationship. J. Econ. Perspect. 9 (4), 97–118.
Qiu, Y., Shaukat, A., Tharyan, R., 2016. Environmental and social disclosures: link with
corporate financial performance. Br. Account. Rev. 48 (1), 102–116.
Qureshi, M.A., Kirkerud, S., Theresa, K., Ahsan, T., 2020. The impact of sustainability
(environmental, social, and governance) disclosure and board diversity on firm
value: the moderating role of industry sensitivity. Bus. Strat. Environ. 29 (3),
1199–1214.
Raimo, N., de Nuccio, E., Giakoumelou, A., Petruzzella, F., Vitolla, F., 2020. Non-financial
information and cost of equity capital: an empirical analysis in the food and beverage
industry. Br. Food J. 123 (1), 49–65.
Rajesh, R., Rajendran, C., 2020. Relating Environmental, Social, and Governance scores
and sustainability performances of firms: an empirical analysis. Bus. Strat. Environ.
29 (3), 1247–1267.
Rivera, J.M., Mu~ noz, M.J., Moneva, J.M., 2017. Revisiting the relationship between
corporate stakeholder commitment and social and financial performance. Sustain.
Dev. 25, 482–494.
Ruan, L., Liu, H., 2021. Environmental, social, governance activities and firm
performance: evidence from China. Sustainability 13, 767.
Russo, M.V., Fouts, P.A., 1997. A resource-based perspective on corporate environmental
performance and profitability. Acad. Manag. J. 40 (3), 534–559.
Q. Ali et al.
Shahab, Y., Ntim, C.G., Chen, Y., Ullah, F., Li, H.X., Ye, Z., 2020. Chief executive officer
attributes, sustainable performance, environmental performance, and environmental
reporting: new insights from upper echelons perspective. Bus. Strat. Environ. 29 (1), 1–16.
Shahzad, M., Qu, Y., Zafar, U.A., Ding, X., Rehman, S., 2020. Translating stakeholders’
pressure into environmental practices – the mediating role of knowledge
management. J. Clean. Prod. 275, 124163.
Shen, F., Ma, Y., Wang, R., Pan, N., Meng, Z., 2019. Does environmental performance
affect financial performance? Evidence from Chinese listed companies in heavily
polluting industries. Qual. Quantity 53 (4), 1941–1958.
Shrivastava, P., Hart, S., 1995. Creating sustainable corporations. Bus. Strat. Environ. 4,
154–165.
Soobaroyen, T., Ntim, C.G., 2013. Social and environmental accounting as symbolic and
substantive means of legitimation: the case of HIV/-AIDS reporting in South Africa.
Account. Forum 37 (2), 92–109.
Song, M.L., Fisher, R., Wang, J.L., Cui, L.B., 2018. Environmental performance evaluation
with big data: theories and methods. Ann. Oper. Res. 270 (1–2), 459–472.
Stanwick, P.A., Stanwick, S.D., 1998. The relationship between corporate social
performance, and organizational size, financial performance, and environmental
performance: an empirical examination. J. Bus. Ethics 17 (2), 195–204.
Sueyoshi, T., Yuan, Y., Goto, M., 2017. A literature study for DEA applied to energy and
environment. Energy Econ. 62, 104–124.
Surroca, J., Trib o, J.A., Waddock, S., 2010. Corporate responsibility and financial
performance: the role of intangible resources. Strat. Manag. J. 31 (5), 463–490.
Tadros, H., Magnan, M., 2019. How does environmental performance map into
environmental disclosure? A look at underlying economic incentives and legitimacy
aims. Sustain. Account. Manag. Pol. J. 10 (1), 62–96.
Tene, C.V.T., Boiral, O., Heras-Saizarbitoria, I., 2021. Internalizing environmental
management practices in Africa: the role of power distance and orality. J. Clean.
Prod. 291, 125267.
Testa, F., Iraldo, F., Daddi, T., 2018. The effectiveness of EMAS as a management tool: a key
role for the internalization of environmental practices. Organ. Environ. 31 (1), 48–69.
Theyel, G., 2002. Regional innovation resources for environmental management.
Technol. Entrepren. 2, 83.
Tran, M., Beddewela, E., Ntim, C.G., 2021. Governance and sustainability in Southeast
Asia. Account. Res. J. 30 (4), 516–545.
Trumpp, C., Endrikat, J., Zopf, C., Guenther, E., 2015. Definition, conceptualization, and
measurement of corporate environmental performance: a critical examination of a
multidimensional construct. J. Bus. Ethics 126 (2), 185–204.
Trumpp, C., Guenther, T., 2017. Too little or too much? Exploring Ushaped relationships
between corporate environmental performance and corporate financial performance.
Bus. Strat. Environ. 26 (1), 49–68.
Tyteca, D., 1996. On the measurement of the environmental performance of firms: a literature
review and a productive efficiency perspective. J. Environ. Manag. 46 (3), 281–308.
Ullah, S., Akhtar, P., Zaefarian, G., 2018. Dealing with endogeneity bias: the generalized
method of moments (GMM) for panel data. Ind. Market. Manag. 71, 69–78.
Ulubeyli, S., 2013. Drivers of environmental performance of cement plants. Ind. Manag.
Data Syst. 113 (8), 1222–1244.
van Duuren, E., Plantinga, A., Scholtens, B., 2016. ESG integration and the investment
management process: fundamental investing reinvented. J. Bus. Ethics 138 (3), 525–533.
16
Heliyon 8 (2022) e12486
Wagner, M., 2015. The link of environmental and economic performance: drivers and
limitations of sustainability integration. J. Bus. Res. 68 (6), 1306–1317.
Wegner, M., Amin, G.R., 2019. Minimizing greenhouse gas emissions using inverse DEA
with an application in oil and gas. Expert Syst. Appl. 122, 369–375.
Walls, J.L., Berrone, P., Phan, P.H., 2012. Corporate governance and environmental
performance: is there really a link? Strat. Manag. J. 33 (8), 885–913.
Wang, S., Li, J., Zhao, D., 2018. Institutional pressures and environmental management
practices: the moderating effects of environmental commitment and resource
availability. Bus. Strat. Environ. 27 (1), 52–69.
Wei, F., Zhang, X., Chu, J., Yang, F., Yuan, Z., 2021. Energy and environmental efficiency
of China’s transportation sectors considering CO2 emission uncertainty. Transport.
Res. Transport Environ. 97, 102955.
Wojcik, V., Dyckhoff, H., Clermont, M., 2019. Is data envelopment analysis a suitable tool
for performance measurement and benchmarking in non-production contexts? Bus.
Res. 12 (2), 559–595.
Wolf, M.J., Emerson, J.W., Esty, D.C., de Sherbinin, A., Wendling, Z.A., et al., 2022. 2022
Environmental Performance Index. Yale Center for Environmental Law & Policy, New
Haven, CT.
Xie, J., Nozawa, W., Yagi, M., Fujii, H., Managi, S., 2019. Do environmental, social, and
governance activities improve corporate financial performance? Bus. Strat. Environ.
28 (2), 286–300.
Xie, S., Hayase, K., 2007. Corporate environmental performance evaluation: a
measurement model and a new concept. Bus. Strat. Environ. 16 (2), 148–168.
Xue, Q., Bai, C., Xiao, W., 2022. Fintech and corporate green technology innovation:
impacts and mechanisms. Manag. Decis. Econ. 43 (8), 3898–3914.
Yang, M.G.M., Hong, P., Modi, S.B., 2011. Impact of lean manufacturing and
environmental management on business performance: an empirical study of
manufacturing firms. Int. J. Prod. Econ. 129 (2), 251–261.
Zhang, Q., Ma, Y., 2021. The impact of environmental management on firm economic
performance: the mediating effect of green innovation and the moderating effect of
environmental leadership. J. Clean. Prod. 292, 126057.
Zhang, Y., Wu, Z., 2022. Environmental performance and human development for
sustainability: towards to a new Environmental Human Index. Sci. Total Environ. 838
(part 4), 156491.
Zhao, L., Zhu, Q., Zhang, L., 2021. Regulation adaptive strategy and bank efficiency: a
network slacks-based measure with shared resources. Eur. J. Oper. Res. 295 (1),
348–362.
Zheng, S., He, C., Hsu, C.S., Sarkis, J., Chen, H.J., 2020. Corporate environmental
performance prediction in China: an empirical study of energy service companies.
J. Clean. Prod. 266, 121395.
Zhou, Y., Li, L., Sun, R., Gong, Z., Bai, M., Wei, G., 2019. Haze influencing factors: a
data envelopment analysis approach. Int. J. Environ. Res. Publ. Health 16 (6),
914.
Zeng, S.X., Meng, X.H., Yin, H.T., Tam, C.M., Sun, L., 2010. Impact of cleaner production
on business performance. J. Clean. Prod. 18 (10–11), 975–983.
Zhou, P., Poh, K.L., Ang, B.W., 2007. A non-radial DEA approach to measuring
environmental performance. Eur. J. Operat. Res. 178 (1), 1–9.
Zhou, P.A.B.W., Ang, B.W., Poh, K.L., 2006. Slacks-based efficiency measures for
modeling environmental performance. Ecol. Econ. 60 (1), 111–118.