Environmental sustainability and financial performance of SMEs

This paper focuses on the relationship between environmental sustainability and the financial performance of SMEs in terms of profit development and revenue development. The analysis uses a unique dataset of 337 Dutch and Chinese firms. The results suggest a significant positive association between environmental sustainability and firm performance. It appears, however, that different indicators of environmental sustainability display a distinct relationship with the two performance measures. When firms have a policy on the re-usage of materials they perform significantly better in terms of profit development and when firms have a policy on the reduction of pollution they perform significantly better in terms of revenue development. Furthermore, we also find that firms that communicate to their employees about their sustainability efforts perform better in terms of profit development. Finally, weak support is found for a moderating effect of communication to employees on the positive relationship between sustainability and profit development.