Role of environmental management for business performance: Special reference to rubber processing in Sri Lanka

Abstract

In developing interest in environmental management, many companies have focused on environmental sustainability. The influence of environmental management on business performance has become a critical issue, but often leading to contradictory results due to absence of clear frameworks. Hence the aim of this paper is two-fold: firstly, to examine what constitute significant determinants of environmental management; secondly, to discover the relationships between environmental management, environmental investment and business performance outcomes. This research provides an empirical analysis to discover significant determinants of environmental management that managers need to understand order to achieve environmental sustainability within their organization. This study develops a framework to measure the relationship between environmental management and business performance by incorporating four aspects of the balanced scorecard into the model. The hypothesized relationships of this model are tested with data collected from 30 rubber manufacturing firms in Sri Lanka by building panel models for the sample in 2012-2016. This study found that, in general, environmental management
does not have a significant impact on business performance and that environmental investment weakened the relationship between environmental management and business performance. Only two specific determinants of environmental management, furnace oil usage and environmental design, have a significant impact on firm performance. Therefore, it is critical to investigate the relationship between business performance and environmental management, which is yet to be resolved, in order to build up a scope for firms to implement better and essential environmental sustainability.
Keywords: Environmental management, business performance, environmental investment, panel models, balanced scorecard, rubber industry, Sri Lanka