How environmental responsibility can improve financial performance

Environmental responsibility can enhance a company's financial performance, according to a new study co-authored by a South Korean economist and a Mexican researcher. The research, published in the journal Corporate Social Responsibility and Environmental Management, demonstrates that sustainability indirectly boosts corporate profits by increasing sales.

Led by Professor Sang-Ho Lee of Chonnam National University in South Korea, the study examined data from 579 publicly listed Korean companies between 2019 and 2022. The researchers found that companies with stronger environmental performance actually generated higher sales, which in turn led to improved returns on assets and equity.

However, this relationship did not hold true for smaller firms, suggesting that larger companies are better equipped to translate environmental initiatives into increased consumer demand through greater visibility and reputation.

The study also noted that the sales-mediated effect became more pronounced after the COVID-19 pandemic, reflecting heightened consumer and stakeholder sensitivity toward sustainability. As green consumerism continues to rise, companies across various industries are adopting eco-friendly practices such as reducing greenhouse gas emissions and embracing green technologies.

The findings emphasize the importance of green consumerism in improving environmental quality and the financial performance of businesses. The researchers believe that their results can serve as a guide for businesses, investors, and policymakers in developing strategies that strengthen both environmental responsibility and consumer trust.