Environmental Performance, Customer Satisfaction, and Profitability: A Study among Large U.S. Companies

Abstract

The academic community has been advocating for companies to focus on improving their environmental performance. While companies are increasingly taking environmental action driven mainly by top management commitment, there is interest in understanding whether by contributing to the sustainability of the natural environment companies can gain the satisfaction of their other stakeholders and in a manner that facilitates their competitiveness. With the use of partial least squares structural equation modeling among a sample of large U.S. publicly traded companies, this study investigates the role of customer satisfaction in driving an effect of companies’ environmental performance on their long-term oriented profitability. The results show that customer satisfaction positively affects the long-term oriented profitability of companies. However, customers are generally not satisfied with companies’ environmental performance. An opportunity, therefore, exists for companies to adopt new approaches to their environmental performance that are particularly focused away from reducing the use of environmental resources. An opportunity also exists for guidance to companies on environmental performance measurement metrics that reflect their involvement in the promotion of the sustainability of the natural environment.