Eco-labelling and firm financial performance

Abstract

Eco-labels are alleged to attain the labelled firm with enhanced financial performance. However, there is virtually no empirical evidence on the impact of eco-labelling on firm financial performance. This study seeks to fill this gap by determining whether eco-labelled firms report superior financial performance compared to equivalent firms without an eco- label. Regression analyses of secondary accounting data of 858 firms indicate that eco- labelled firms report superior return on sales. Contrary to suggestions from the CSR literature and the resource-advantage theory, the findings suggest that the positive effect diminishes and that financial returns are hampered over time. This contradict that eco-labelling induce innovative learning effects resulting in a long term comparative advantage. These findings have practical and academic implications related to the design and implementation of eco- labels and the study significantly contribute to the emerging debate concerning the financial value of environmental investments. Limitations and directions for future research are discussed