Maintaining stability while boosting growth? The long-term impact of environmental accreditations on firms' financial risk and sales growth

PurposeIn this research, we examine the impact of ISO 14001, an international environmental management accreditation, on the long-term financial risk and sales growth of firms.Design/methodology/approachWe employ a quasi-experimental design and construct 682 treated and control firms that are matched using propensity score matching. We then test our hypotheses using the difference in difference model.FindingsWe find that, although ISO 14001 leads to lower financial risk, standard management systems such as ISO 14001 actually hinder the sales growth of firms, an unanticipated outcome. In particular, this trade-off worsens over time, becoming particularly more severe among firms that adopt ISO 14001 early and operate in less-polluting industries.Research limitations/implicationsWe present a hidden side of environmental accreditations, indicating a potential trade-off in the long-term efficacy of environmental standard management systems.Practical implicationsFirms must be cautious about adopting environmental management systems. Over time, a focus on environmental certification could potentially hinder firms' long-term growth. Firms should also be aware of certification timing and levels of industry pollution to resolve the tension in the trade-off.Originality/valueThis research is one of the first studies demonstrating that environmental accreditations result in a trade-off between reducing financial risk and improving sales growth.