The impact of green certification on economic and financial performance of firms: The case of ISO 14001 in Portugal

Climate change and the consequent increase in society's environmental awareness have pressured firms to include environmental sustainability in their agendas. Ideally, this should be done without compromising their financial viability or even by benefiting it. The present study aims to assess whether the implementation of environmentally sustainable activities by Portuguese companies increases economic return, or if it compromises profitability. To accomplish the objective, we use a regression analysis to relate the ISO 14001 certification, as proxy for the implementation of environmentally sustainable activities, with financial indicators for a sample of 1917 Portuguese companies of various sectors and dimensions. We cover the period from 2010 to 2020. Results showed a positive impact of certification on the profitability of firms at least for some indicators: Return on Assets, Return on Equity and Earnings Before Interest, Taxes, Depreciation, and Amortization. This positive effect may be due to, for example, reputational effects, cost savings, among other aspects, and provide some hope for environmental policies within firms. Hence, public policies promoting sustainable behaviors by firms should emphasize that these behaviors also benefit firms` financial performance.