Effects of Environmental Management Standards on Business Performance in India

Purpose of this study was to test the effects of perceived importance of environmental management on business performance while controlling for firm size and cost of implementation of the environmental management standards. The term environmental management refers to a business process that ensures an environmentally friendly manufacturing process; i.e., one that complies with the Environmental Management Standards (ISO 14001), whereas business performance relates to firm's profitability, international trade, “green” (environmentally friendly) image and competitive advantage. Using survey method and multiple regression analysis, results of this study indicated that (1) environmental management was significantly positively related to profitability and international trade; (2) firm size was significantly positively related to competitive advantage and (3) cost was significantly negatively related to competitive advantage. The implication for managers is that they can use the findings to formulate strategies to differentiate and position their firms as green, and thus can target green consumers and attract potential investors interested in investing in green firms. This study contributes to literature by operationalizing the environmental management scale, testing it for its reliability and validity and applying it in the emerging market of India whose managers' attitudes toward environment are somewhat different from developed countries.