An Analysis of Environmental Management Practices on Financial Performance of Rubber Industry in Sri Lanka

Abstract

This study investigates the relationship between environmental management practices (EMPs) on financial performance (FP) using the dataset from 30 rubber manufacturing organizations by building panel models for the sample during the period of 2012-2016. The study has considered the three different EMPs of energy reduction (amount of furnace oil use per day), waste (amount of waste water generate), and recycle (amount of recycle waste water) in capturing the effect of EMPs on FP. In addition, to elucidate how financial performance is dealing with EMPs, the study used return on assets (ROA) as a determinant of financial performance. It is more difficult to identify the general relationship between EMPs and FP of firms due to its heterogeneity during growth of firms’.The estimation results suggested that the furnace oil consumption and recycling of waste water had significant positive driving forces on FP. However waste water treatment has no significant impact on FP. Therefore, it is critical to investigate the relationship between FP and EMPs which is yet to be resolved in order to build up a scope for companies to implement better environmental practices in the organizations.