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The Influence of Environmental Management Systems on Financial Performance: A Moderated-Mediation Analysis

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Abstract

This study utilizes hierarchical regression analysis to explore how environmental management systems (EMSs) influence financial performance through customer satisfaction and customer loyalty, and the moderating effects of switching cost. The originality of the present research is to unpack the “black box” through which a firm can profit from EMSs. The empirical results indicate that EMSs have positive and significant impacts on customer satisfaction, customer loyalty, and financial performance. In addition, switching cost negatively and significantly moderates the relationship between EMSs and customer satisfaction, but does not significantly moderates the relationship between EMSs and customer loyalty. The results also demonstrate that customer satisfaction and customer loyalty partially mediate the relationship between EMSs and financial performance. Our findings highlight that customer satisfaction, customer loyalty, and switching cost play important roles for a firm to profit from EMSs.

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Notes

  1. Case adapted from Cranwell Collision Repair, VIC, Australia.

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Authors and Affiliations

  1. School of Management, Northwestern Polytechnical University, Xi’an, China

    Taiwen Feng

  2. Department of Management, Monash Business School, Monash University, Melbourne, Australia

    Dan Wang

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  1. Taiwen Feng
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  2. Dan Wang
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Correspondence to Taiwen Feng.

Appendix 1

Appendix 1

List of measurement items

Environmental management systems

 EMS1: The business plan includes an extensive, detailed section that describes our objectives for environmental management

 EMS2: New environmental issues are continually identified and evaluated for their long-term impact

 EMS3: We have a responsibility to make environmental demands on our suppliers (e.g., recycle content of packaging, solvent emissions, etc.)

 EMS4: We provide our suppliers with detailed, written environmental requirementsa

 EMS5: Environmental lifecycle assessment has been used to redesign our product or manufacturing process

 EMS6: Formal plans and procedures are in place to identify and respond to potential environmental accidentsa

 EMS7: A formal, detailed system is used to consider environmental issues at the beginning of every manufacturing process change

Customer satisfaction

 CS1: Our company satisfies or exceeds the requirements and expectations of our customers

 CS2: Customer standards are always met by our company

 CS3: Our customers are pleased with the products and services we provide them

 CS4: Our customers seem happy with our responsiveness to their problems

 CS5: Our customers have always been well satisfied with the quality of our products over the past 3 years

Customer loyalty

 Our customers intend to ……

 CL1: Do more transactions with this company in the coming years

 CL2: Consider this company as their first choice for purchases

 CL3: Recommend this company to people who seek their advice on purchases

 CL4: Say something good about this company to others

 CL5: Encourage their friends and relatives to purchase from this company

Switching cost

 Customers have to pay a high cost ……

 SC1: For searching and evaluating information of alternative product providers before changing product provider

 SC2: To learn new product after changing product providera

 SC3: To build new relationships after changing product provider

 SC4: For the benefits lost by changing product provider

Financial performance

 FP1: Return on investment

 FP2: Return on assetsa

 FP3: Return on sales

 FP4: Net profit margin

 FP5: Growth in sales

 FP6: Growth in profit

 FP7: Growth in market sharea

Market turbulence

 MT1: The volumes of demand are difficult to predict

 MT2: Customer demand fluctuates drastically from week to week

 MT3: Sales forecasts are likely to be inaccurate

 MT4: Market trends are difficult to monitor

Competitive intensity

 CI1: Competition in our industry is cutthroat

 CI2: There are many “promotion wars” in our industry

 CI3: Any action that a company takes, others can make a response swiftly

 CI4: Price competition is a hallmark of our industrya

 CI5: One hears of a new competitive move almost every daya

 CI6: Our competitors are relatively stronga

  1. aItems are deleted after reliability or validity analysis

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Feng, T., Wang, D. The Influence of Environmental Management Systems on Financial Performance: A Moderated-Mediation Analysis. J Bus Ethics 135, 265–278 (2016). https://doi.org/10.1007/s10551-014-2486-z

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