• Journal of Environmental Policy
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• v.13 no.4
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• pp.3-49
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• 2014

Growing interest of stakeholders on corporate responsibilities for environment and tightening environmental regulations are highlighting the importance of environmental management more than ever. However, companies' awareness of the importance of environment is still falling behind, and related academic works have not shown consistent conclusions on the relationship between environmental performance and economic performance. One of the reasons is different ways of measuring these two performances. The evaluation scope of economic performance is relatively narrow and the performance can be measured by a unified unit such as price, while the scope of environmental performance is diverse and a wide range of units are used for measuring environmental performances instead of using a single unified unit. Therefore, the results of works can be different depending on the performance indicators selected. In order to resolve this problem, generalized and standardized performance indicators should be developed. In particular, the performance indicators should be able to cover the concepts of both environmental and economic performances because the recent idea of environmental management has expanded to encompass the concept of sustainability. Another reason is that most of the current researches tend to focus on the motive of environmental investments and environmental performance, and do not offer a guideline for an effective implementation strategy for environmental management. For example, a process improvement strategy or a market discrimination strategy can be deployed through comparing the environment competitiveness among the companies in the same or similar industries, so that a virtuous cyclical relationship between environmental and economic performances can be secured. A novel method for measuring eco-efficiency by utilizing Data Envelopment Analysis (DEA), which is able to combine multiple environmental and economic performances, is proposed in this report. Based on the eco-efficiencies, the environmental competitiveness is analyzed and the optimal combination of inputs and outputs are recommended for improving the eco-efficiencies of inefficient firms. Furthermore, the panel analysis is applied to the causal relationship between eco-efficiency and economic performance, and the pooled regression model is used to investigate the relationship between eco-efficiency and economic performance. The four-year eco-efficiencies between 2010 and 2013 of 23 companies are obtained from the DEA analysis; a comparison of efficiencies among 23 companies is carried out in terms of technical efficiency(TE), pure technical efficiency(PTE) and scale efficiency(SE), and then a set of recommendations for optimal combination of inputs and outputs are suggested for the inefficient companies. Furthermore, the experimental results with the panel analysis have demonstrated the causality from eco-efficiency to economic performance. The results of the pooled regression have shown that eco-efficiency positively affect financial perform ances(ROA and ROS) of the companies, as well as firm values(Tobin Q, stock price, and stock returns). This report proposes a novel approach for generating standardized performance indicators obtained from multiple environmental and economic performances, so that it is able to enhance the generality of relevant researches and provide a deep insight into the sustainability of environmental management. Furthermore, using efficiency indicators obtained from the DEA model, the cause of change in eco-efficiency can be investigated and an effective strategy for environmental management can be suggested. Finally, this report can be a motive for environmental management by providing empirical evidence that environmental investments can improve economic performance.