The research of Robert Klassen shows that managing environmental and social issues helps strengthen the bottom line
Financial performance improves when firms invest in environmental management practices.
That’s the clear message from recent research co-authored by Ivey Professor Robert Klassen and Markus Biehl from the Schulich School. Their study, based on Statistics Canada data from the manufacturing sector, looked at green investments and their impact on the bottom line. “We were trying to explore whether firms can be leaner and greener at the same time,” says Klassen.
Green investments were divided into three categories: pollution control, pollution prevention, and management practices. Pollution control includes “end-of-pipe” installations such as air scrubbers and water treatment plants. Pollution prevention includes technologies or processes that reduce pollution at the source. Management practices include training employees around environmental issues and monitoring environmental performance.
The study showed that investments in pollution prevention or pollution control had no impact, either positive or negative, on the firm’s bottom line. But investments in environmental management practices resulted in significant financial returns. “We were surprised to see such strong results on the management practice side,” says Klassen.
Reprint from Ivey Business Journal
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