Beyond the Frontier of Eco‐Efficiency: How Firms Achieve Eco‐Effectiveness in Corporate Environmental Management

ABSTRACT Growing environmental concerns have intensified the search for business strategies that balance long‐term competitiveness with ecological sustainability. This study explores the concepts of eco‐efficiency and eco‐effectiveness to assess whether firms can achieve sustainable growth while reducing their environmental impacts. We use industry‐specific data from publicly traded companies listed on the S&P 1200 index and apply output‐oriented and bad output efficiency analyses to evaluate the relationship between production levels and polluting emissions across sectors. The results reveal a positive correlation between firm growth and emissions, indicating that eco‐efficiency alone cannot guarantee sustainable outcomes. These findings highlight a decoupling dilemma: Firms face a strategic trade‐off between relative improvements in efficiency and the pursuit of absolute decoupling through eco‐effectiveness. By empirically identifying firms exhibiting eco‐effective trajectories, this study provides novel evidence on the conditions under which business growth becomes environmentally regenerative. This study advances strategic management and sustainability literature by positioning eco‐effectiveness as the next frontier for corporate environmental performance, with important implications for scholars, managers, and policymakers seeking to align business strategies with planetary boundaries.