Greenhouse gas emission practices and financial performance

Purpose The ambiguous effect of sustainable business practices on business financial performance is explained empirically as the result of the disparity of the practices analyzed, the inadequate relation proposed and the misspecification of the moderating variables. The purpose of the present study is to determine the effect that each of these factors can have as justification for the divergence of outcomes in previous studies. Design/methodology/approach Several dependence models have been estimated in order to observe the type of effect of greenhouse gas emissions (GHGE) practices on FP, attempting to establish whether this relationship is linear, positive or negative, or a curve. Additionally, the authors interacted these GHGE practices with the level of firms' innovation in relation to their competitors. Findings The results show that greenhouse gas emission controls have an inverse‐linear effect on firm performance, independently of their level of innovation. This relationship is justified in that in contrast to previous articles, the authors have evidence of a null relationship between particular corporate social responsibility (CSR) practices and research and development expenses. Originality/value It is shown that it is the type of CSR practice observed and the business motives underlying it that is the determining factor of these divergences.