The Influence of Environmental Efficiency on the Financial Performance of JSE-Listed Food and Beverage Producers
DOI:
https://doi.org/10.58423/2786-6742/2025-8-410-426Keywords:
eco-efficiency, net profit, financial performance, energy conservation, water conservation, carbon reduction, waste reduction, sales revenueAbstract
Companies operating in the manufacturing sector are commonly perceived as the primary contributors to environmental pollution, leading to increasing apprehension regarding the environmental issues arising from their production processes. These companies’ consumption of energy and water, carbon emission, and waste generated during the production process contribute significantly to environmental pollution experienced within the industry. Other challenges that present substantial risks to the conservation of the environment include among others, global warming, air pollution, and water scarcity. Hence, it becomes imperative to seek alternative strategies to address the environmental challenges encountered by businesses during the execution of production operations. As a result, eco-efficiency represents a potential approach for restructuring industrial operations and activities with the aim of reducing the adverse environmental effects of businesses. Due to its ability to reduce resource depletion and to decrease pollution, eco-efficiency is regarded as a valuable tool for achieving sustainable development. It is also believed that if industries commit to environmental protection activities such as engagement in activities that promote eco-efficiency, financial performance can be improved. This paper therefore measured the effect of eco-efficiency on corporate net profit for selected Johannesburg Stock Exchange listed food and beverage manufacturing companies for the period 2012 to 2021. The Generalised Method of Moment (GMM) statistical model was used to measure the relationship between eco-efficiency and corporate net profit. Data were obtained from published annual integrated reports of the Johannesburg Stock Exchange (JSE) listed food and beverage manufacturing companies. In analysing the effect of energy conservation on corporate net profit, a positive yet insignificant relationship was revealed. Results further revealed that water conservation is positively yet insignificantly related to net profit. In the same vein, carbon reduction was found to be positively and insignificantly related to net profit. On the other hand, waste reduction and sales revenue (control variable) are negatively related to net profit. Therefore, the paper recommends that companies should minimise the consumption of energy and water and reduce carbon emissions to enhance corporate net profit. The paper further recommends future research on the effect of eco-efficiency on other company success indicators. Future research may expand the panel years beyond ten years and focus on other sectors.
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