How Does Corporate Environmental Responsibility (CER) contribute to Corporate Financial Performance (CFP)?

Abstract

Despite growing interest in mitigating the negative impact on corporate environmental responsibility initiatives, their impact on corporate financial performance remains unclear. The study reviews existing research to examine the impact of environmental responsibility practices on corporate financial performance. The study adopts systematic review to review 32 articles covering a period of 9 years (2015-2023) to review the relationship between environmental responsibility practices and firm financial performance. The study identified the conflicting relationship between environmentally responsibility practices and firm financial performance. The study observed positive relationships in firms operating in highly regulated sectors, and negative relationships in high polluters and emitters. Furthermore, the review indicates corporate environmental responsibility practices negatively impact on short-term corporate financial performance. The study underscores the mitigation policies that target high polluters and emitters as they are negatively affected by environmental responsibility initiatives. Additionally, the review highlights the urgent need for tax policies to mitigate high upfront expenditure associated with corporate environmental initiatives.