Relationship between Environmental Responsibility and Financial Performance of Firm: A Literature Review

Environmental Sustainability is the need of the hour. It has the potential to influence overall profitability of organization. The organizations should take accountability for the impacts of their operations on environment and should disclose the same in their annual and sustainability reports. The purpose of this study is to analyze the relationship between environmental responsibility and financial performance of firm through review of extant literature, so as to find answer to the research question 'whether going green is profitable for firm or not'. Various theoretical, review and empirical researches have been conducted in past years for examining this relationship. But the results are mixed, inconsistent and often contradictory; ranging from positive, to negative, to statistically insignificant relationship; depending upon the choice of measure of environmental responsibility, measure of financial performance, sample composition, time-period and control variables. We, however, observed that majority of studies indicate positive relationship. This paper attempts to critically analyze prior studies in order to build up scope for further research, so that future researchers may reach to better and more consistent results.