Environmental Conservation Costs and Operational Efficiency: Evidence from Japanese Manufacturing Firms

　This study investigates whether environmental conservation costs (ECC) support the operational effectiveness and financial stability of Japanese manufacturing firms. Using a balanced panel of 128 non-financial companies listed on the Tokyo Stock Exchange from 2010 to 2022, we manually collected firm-level ECC data based on the Ministry of the Environment, Japan's guidelines from sustainability reports and matched them with financial data from Compustat Global/S&P Capital IQ. Applying pooled ordinary least squares regression with firm-level clustered standard errors and winsorized variables, we examine two aspects of performance as measures of operating efficiency and profitability: asset turnover and profit margin. The results show that ECC is positively associated with asset turnover and profit margin, and that the effect is stronger in more profitable companies, substantiating the Resource-Based View that green practices generate competitiveness. These findings contribute to sustainability finance research by going beyond perceptual measures of environmental, social, and governance ratings, and measuring actual firm-level spending on environmental activities, thereby providing more nuanced insights into how environmental practices translate into actual financial performance. This study offers clear managerial and policy implications by showing that transparent environmental conservation costs improve disclosure quality and serve as a measure of improved efficiency and profitability.

論説 (Articles)