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Prof. Noushi Rahman, Pace U. Lubin School of Business

Prof. Noushi Rahman, Pace U. Lubin School of Business

Is there a measurable “green bottom line” that justifies in financial terms companies’ efforts to cut environmental impacts?

The key word here is measurable, and measuring such factors is the specialty of Dr. Noushi Rahman, a professor of management at the Pace University Lubin School of Business. As one of this year’s Pace Academy Faculty Scholars, Rahman has turned his skills at assessing corporate performance to this question.

This is the second of two posts (the first is here) in which he explains his work:

As a response to mounting stakeholder and shareholder pressures to reduce harmful impacts on the environment, firms across a variety of industries have started to embrace environmentally responsible practices in the past decade.

But can investments in environmental responsibility yield a sufficient return to sustain themselves given the corporate focus on the bottom line? Many scholars have conducted empirical studies to examine the relationship between corporate environmental performance (CEP) and corporate financial performance (CFP).

The burgeoning number of such studies has prompted the publication of three meta-analyses (Dixon-Fowler, Slater, Johnson, Ellstrand, & Romi, 2013; Gabriel, 2012; Horvathova, 2010).  In addition, three more meta-analyses have addressed the CEP-CFP relationship as part of a broader effort to examine the relationship between financial success and corporate social performance (Orlitzky, 2003; Walsh et al., 2007; de Brito & Berardi, 2010).

What is disconcerting is that with the exception of citing Orlitzky et al. (2003), the first meta-analysis on this topic, the more recently published meta-analyses do not cite other meta-analyses published in previous years.  The results reported by these studies are not readily comparable, either.  Therefore, there remains a critical need for a comprehensive meta-analysis on the CEP-CFP relationship; such a meta-analysis would not only incorporate the strengths and overcome the weaknesses of prior efforts, but also reconcile the seemingly different results of the three meta-analyses on CEP-CFP relationship.  Table 1 summarizes the characteristics of the three meta-analyses on the CEP-CFP relationship.

Table 1: Comparison of recent meta-analyses on firm-level environment-performance relationship


Main IV

Main DV

Sample Size Model

Moderating Effect Results

Gabriel, A. (2012) Sustainability-oriented strategies Overall Organizational Performance (Triple Bottom Line) [separate measures, not aggregate] 18 articles, 64 experimental treatments, 23,871 observations Random effects Effect size (r) of reactive sustainability approach is .182 (p<0.000) and homogeneous (Q = 215.93); effect size (r) of proactive sustainablity approach is .359 (P<0.000) and homogeneous (Q = 428.74).
Dixon-Fowler, H., Slater, D., Johnson, J., Ellstrand A., Romi, A., (2013) Environmental performance Financial Performance 72 articles, 71 usable samples, n=22,869 Random effects The overall relationship is positive (p<0.000). Moderating effects of large vs. small, and U.S vs. international, with small firms appearing to benefit more than large firms (p=.015) and US-based firms appear to benefit more than international counterparts (p=0.035). Other moderators tested lacked statistical support.
Horvathova, E. (2010) Environmental performance (EP) Financial Performance (FP) 37 empirical studies, 64 outcomes Ordered Probit Coverage of North America as opposed to Europe has significant positive odds ratio (1.45, p<.01); qualitative environmental variable has a significant positive odds ratio (1.24, p<.01); signficant negative odds ratio is reported for regression method (-1.30, p<.01), correlation method (-2.59, p<.01), and portfolio studies method (-2.39, p<.01).


Dixon-Fowler, H. R., Slater, D. J., Johnson, J. L., Ellstrand, A. E., & Romi, A. M. (2013). Beyond “Does it Pay to be Green?” A Meta-Analysis of Moderators of the CEP–CFP Relationship. Journal of Business Ethics, 112(2), 1-14.

Gabriel, A. (2012). Relationship between firm’s sustainability strategic behaviour and performance: a meta-analytic review and theoretical integration. Unpublished masters thesis, University of Waterloo, Ontario, Canada.

Graham, M. (1999). The morning after Earth Day: Practical environmental politics. Washington, DC: Brookings Institution Press.

Horváthová, E. (2010). Does environmental performance affect financial performance? A meta-analysis. Ecological Economics, 70(1), 52-59.

Savage, D. (2008). Justices slash Exxon Valdez verdict: Fishermen and others hurt by the oil spill are to share $507 million, a fraction of the initial punitive award. Los Angeles Times, July 26. Retrieved from: