Operational efficiency integrating the evaluation of environmental investment: the case of Japan

Purpose - The purpose of this study is to explore whether a connection exists between business operational efficiency and environmental responsibility.Design methodology approach - This research adopts the DEA method through a four-step analysis to examine inter-industry differences in terms of operational efficiency with environmental consideration. The sample comprises 32 Japanese firms from three different industries listed in the Tokyo Stock Exchange between 2001 and 2006.Findings - The results indicate a positive correlation with statistical significance in terms of a firm's environmental conservation cost, net income and economic benefit of environmental conservation for the three Japanese industries. In addition, the relationship among a firm's environmental conservation cost, CO2 emission reduction and total CO2 emission are positively correlated but without significance. In particular, business operational efficiency integrating social responsibility for anti-global warming initiatives ( = total CO2 emission level) could be applied to distinguish differences in terms of operational efficiency among industries.Research limitations implications - Japanese firms adopt a voluntary environmental disclosure; therefore this study is constrained by the availability of long-term data.Social implications - This study enables environmentally conscious investors and fund managers to distinguish the operationally efficient industries when taking environmental performance into account.Originality value - The study is a novel attempt to analyze inter-industry differences in terms of operational efficiency when considering environmental conservation through the DEA method using a four-step analysis.