Reviewing Environmental Management Systems: A hypothesis of Reverse Causality

Over the last two decades much attention in the literature has been addressed to the relationship between corporate environmental responsibility and financial performance. Results however remain contradictory. One view is that improved environmental performance usually means extra costs for the firm and reduced profits. A conflicting view is that improved environmental performance induces cost savings and increase sales and increases financial performance. Broadly speaking, most theorizing on the relationship between social and economic indicators assumes that the evidence is insufficient or too contrasting to draw any generalizable conclusions. Besides examining in detail the cause-effect relation between corporate environmental responsibility and competitive performance is to investigate another perspective clarifying the relationship. By means of an empirical study on listed Italian manufacturing firms, the existence was tested of a reverse causality between corporate environmental management and corporate financial performance.