Abstract

This paper examines the potential of environmental management systems (EMSs) to provide opportunities for reducing toxic releases cost-effectively and increasing environmental efficiency of a sample of S&P 500 firms. We use directional distance function to estimate firm-specific environmental efficiency. A truncated regression model with bootstraping is then estimated to analyze the determinants of the environmental efficiency of firms. The analysis shows that the comprehensiveness of an EMS, pressures to reduce toxic releases cost-effectively, innovativeness of firms and the threat of costly regulations in the future lead firms to become more environmental efficient. Regression results indicate that increasing the comprehensiveness of EMS by adopting one additional practice benefits the average firm by approximately US$ 35.5 million by increasing its environmental efficiency by 0.3%.

Original languageEnglish (US)
Pages (from-to)227-242
Number of pages16
JournalEnvironmental and Resource Economics
Volume50
Issue number2
DOIs
StatePublished - Oct 2011

Keywords

  • Directional distance function
  • Environmental efficiency
  • Environmental management systems
  • Toxic releases

ASJC Scopus subject areas

  • Economics and Econometrics
  • Management, Monitoring, Policy and Law

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