Capitalizing on environmentally conscious behavior in firms and households

Abstract

Despite a surge of empirical studies examining associations between corporate environmental and financial performance, researchers have been unable to give an integrated account of the mechanisms linking the two, i.e., why and how this linkage operates. The lack of clarity regarding the implications of these studies therefore offers limited guidance as to how corporate managers should prioritize available environmental management options and allocate limited organizational resources to achieve desired environmental and financial outcomes. The first essay entitled “The Impact of Corporate Environmental Practices on Environmental and Financial Returns” highlights the type and scope of environmental practices conducted by U.S. chemical firms, examining how firms’ proactive pollution prevention activities and resulting environmental performance may be related to their financial performance in terms of cost competitiveness and market valuations. Drawing on detailed environmental information about 18,743 chemical plants and financial information about their 455 parent firms, the study finds that more-intensive PPAs are associated with both superior environmental performance and improved cost competitiveness but do not necessarily lead to higher market valuation.

In the energy sector, despite heightened awareness of the importance of the residential sector in the ongoing transition in the energy industry, little is known about the factors that affect households’ energy-use behaviors. Extending the current literature on involvement theory and energy-related behavior, the second essay entitled “The Role of Involvement in Energy Consumption and Purchasing Behavior” proposes an individual-level construct of household energy involvement that links behavioral antecedents (e.g., consumer values and preferences, socioeconomic and housing-specific characteristics) and their manifestations (e.g., energy consumption and energy durables purchase). Based on a survey administered to almost 5,500 Korean households, it finds that the measured level of involvement has a stronger association with consumer values, such as preferences for indoor comfort and automation, than with commonly identified socioeconomic or house-specific characteristics and is a strong predictor of energy use and energy durables purchase behavior. It thereby provides a explanation for the mixed results reported by earlier studies on the sources of energy behavior and suggests a more reliable process for identifying viable market segments and profiling target consumers to eventually improve the cost-effectiveness of investments in demand-side management programs.