The Association between Environmental Performance and Financial Performance: An Empirical Examination of Energy Industry in Australia and New Zealand

Abstract

Purpose: This paper outlines the impact that energy companies exert on the environment and the subsequent effect on financial performance of the energy companies. A major plank of this paper is whether the Kyoto protocol of which New Zealand is a signatory and Australia who is not a signatory have an impact on the environmental performance and outcomes of the energy companies. Design/Methodology/Approach: This paper adopts a content analysis of financial statements of selected energy company annual reports. The analysis examines financial and sustainability reports where available from a period of 1996–2006. This paper follows a quantitative paradigm. Findings: The analysis indicates that there is a distinct correlation between the environmental performance of the energy company and subsequent financial performance, pursuant to H1. It was found that the descriptive, multivariate and clustering statistics show that good economic performance does not drive the environmental performance of a company, but certainly has an effect on it, pursuant to H2. It was found that the descriptive, multivariate and clustering statistics show that the ratification of international regulations (such as Kyoto Protocol) does not make any difference in environmental performance between regulation ratified and non-ratified countries, pursuant to H3. Originality/Value: This paper it is anticipated will be a valuable tool to researchers, students and practitioners’ who are seeking insight and verification that there is direct benefit to those energy companies that are socially responsible and are committed to environment improvements and change.

Keywords: Kyoto Protocol, environmental performance, financial performance

JEL Classification: Q48