TY - JOUR
T1 - Eco-efficiency based on social performance and its relationship with financial performance
T2 - A cross-industry analysis of South Korea Suh et al. Eco-efficiency and financial performance
AU - Suh, Yongyoon
AU - Seol, Hyeonju
AU - Bae, Hyerim
AU - Park, Yongtae
N1 - Publisher Copyright:
© 2014 by Yale University.
PY - 2014/12/1
Y1 - 2014/12/1
N2 - Summary: As corporate responsibility for environmental management has gained attention, eco-efficiency has become recognized as an important concept for improving the social performance of the business sector as well as that of the public sector. Improving eco-efficiency is widely accepted not only as a means of increasing economic value, but also as a means of reducing environmental effects. However, managing for eco-efficiency should take into consideration the differences among industries, because the impact of eco-efficiency on financial and social performance varies among industries. To explore this variation, we conducted a cross-industry analysis of eco-efficiency based on social performance using data envelopment analysis (DEA). DEA measures relative efficiency and is a useful tool for taking into account the relative importance of industry-specific characteristics. Using DEA, eco-efficiency scores were derived based on the ratio of two factors of social performance: (1) value-added inducing and production-inducing economic spillover effects and (2) the amount of greenhouse gases emitted and energy used. Then, we identified the relationships between our eco-efficiency score and financial performance, which is a measure of the firm's stability. The case study is based on 272 firms in 16 industries in South Korea. Results show that firms in product manufacturing and service-intensive industries tend to have higher eco-efficiency scores than those in raw material or chemical-intensive industries. In addition, most of the industries reveal no relationship between traditional financial performance metrics and eco-efficiency scores. A handful of industries had significant relationships with one or more financial performance metrics; in some cases, these relationships were negative, whereas in others they were positive. Surprisingly, almost all industries have no significant relationships between eco-efficiency and financial performance. This result implies that government support for policies that reward firms that attempt to be eco-efficient are needed, or that other nonfinancial metrics that influence eco-efficiency, such as employment and brand reputation, should be considered. This article is expected to support policy makers as they formulate industry-specific environmental strategies.
AB - Summary: As corporate responsibility for environmental management has gained attention, eco-efficiency has become recognized as an important concept for improving the social performance of the business sector as well as that of the public sector. Improving eco-efficiency is widely accepted not only as a means of increasing economic value, but also as a means of reducing environmental effects. However, managing for eco-efficiency should take into consideration the differences among industries, because the impact of eco-efficiency on financial and social performance varies among industries. To explore this variation, we conducted a cross-industry analysis of eco-efficiency based on social performance using data envelopment analysis (DEA). DEA measures relative efficiency and is a useful tool for taking into account the relative importance of industry-specific characteristics. Using DEA, eco-efficiency scores were derived based on the ratio of two factors of social performance: (1) value-added inducing and production-inducing economic spillover effects and (2) the amount of greenhouse gases emitted and energy used. Then, we identified the relationships between our eco-efficiency score and financial performance, which is a measure of the firm's stability. The case study is based on 272 firms in 16 industries in South Korea. Results show that firms in product manufacturing and service-intensive industries tend to have higher eco-efficiency scores than those in raw material or chemical-intensive industries. In addition, most of the industries reveal no relationship between traditional financial performance metrics and eco-efficiency scores. A handful of industries had significant relationships with one or more financial performance metrics; in some cases, these relationships were negative, whereas in others they were positive. Surprisingly, almost all industries have no significant relationships between eco-efficiency and financial performance. This result implies that government support for policies that reward firms that attempt to be eco-efficient are needed, or that other nonfinancial metrics that influence eco-efficiency, such as employment and brand reputation, should be considered. This article is expected to support policy makers as they formulate industry-specific environmental strategies.
KW - Data envelopment analysis
KW - Eco-efficiency
KW - Financial performance
KW - Industrial ecology
KW - Input-output analysis
KW - Social performance
UR - http://www.scopus.com/inward/record.url?scp=84916880437&partnerID=8YFLogxK
U2 - 10.1111/jiec.12167
DO - 10.1111/jiec.12167
M3 - Article
AN - SCOPUS:84916880437
SN - 1088-1980
VL - 18
SP - 909
EP - 919
JO - Journal of Industrial Ecology
JF - Journal of Industrial Ecology
IS - 6
ER -