Impact of organizational practices on environmental efficiency: a two-stage data envelopment analysis approach

Environmental performance assessment enables manufacturing firms to minimize operational costs and foster sustainability goals. To promote sustainable growth, this study examines the linkage between organizational practices and environmental efficiency, considering three aspects of sustainability. We employ a two-stage Data Envelopment Analysis (DEA) framework utilizing a cross-sectional dataset of 2172 apparel-producing firms from the 2012 Manufacturing Industry Survey in Bangladesh. In the first stage, a Directional Distance Function-oriented DEA model is applied to generate efficiency scores. The calculated efficiency scores signal notably low levels of production performance across the sample firms. In the second stage, these calculated efficiency scores are analyzed using several nonparametric and semi-parametric econometric models. The results suggest that incentives for workers improve businesses’ environmental performance, while social insurance plans have no noticeable impact. The findings further reveal a significant positive correlation between factor productivity (both labor and capital) and environmental performance, indicating that productivity increases may improve a firm’s environmentally friendly management. Moreover, tax payment and overall ecological performance have a significant inverse relationship. Finally, the findings point to the likely benefits of specialized business zones by suggesting that companies operating in Export Processing Zones (EPZs) exhibit superior environmental performance compared to others.