How companies’ investments in energy saving activities affect financial performance

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2021-07-22
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en
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This study investigates the relationship of energy saving activities and financial performance. The research objective of this study is to contribute to the field of CSR investments and its impact on firm performance by providing insight through an empirical cross-sectional study on how the overall effect of investments in energy saving activities on financial performance is composed. This objective has been derived from different and sometimes contradicting findings in extant literature regarding the effect of CSR investments on financial performance. The research objective is studied by formulating an answer to the following research question: To what extent do companies’ investments in energy saving activities affect financial performance directly, and to what extent indirectly by means of reducing energy consumption? This study aims to understand if and how the rate of energy consumption mediates the relationship between investments in energy saving activities and financial performance. This research is conducted with a mixed methods approach. Firstly, regression analyses were conducted to test potential direct and indirect effects of this relationship. The data sample that was used for this study is the 2015 Dutch sub sample of the European Manufacturing Survey (EMS). To substantiate findings of the quantitative analyses, a qualitative part is added by conducting semi-structured interviews with CEOs of 4 Dutch manufacturing firms. These respondents have the expertise to provide valuable insights on the tested relationships which aids towards a more in-depth understanding of derived results from the quantitative analyses. Outcomes of the regression analyses indicate that investing in energy saving activities do not affect the financial performance of a firm directly, when measured in sales and production costs development. This is due to the fact that other factors, like firm characteristics and experience, also play part on the effect of these investments. Subsequently, the indirect influence of investments in energy saving activities through energy consumption on financial performance was assessed, leading to the following conclusion: manufacturing firms that are large consumers are investing more in energy saving activities as they are able to benefit financially from a reduction in energy consumption as this has a relatively big impact on their production costs. These benefits provide a firm the opportunity to lower prices which is likely to result in an increase in sales and further improved competitive advantage. However, manufacturing firms that are not relying too much on their energy consumption do not notice great economic benefits from these investments and are therefore less eager to invest in these activities than large energy consuming firms.
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Faculteit der Managementwetenschappen