Corporate Sustainability, Environmental and Financial Performance in Emerging Markets: An Empirical Approach from the Colombian Manufacturing Industry

<ns3:p>Background Sustainability has become an important component of corporate strategy, especially in manufacturing industries. However, the literature has not reached a consensus on the relationship between investments in environmentally friendly forms of production and firm performance. This study examines how sustainability is related to the financial and environmental performance of firms in the Colombian manufacturing industry. Methods This study uses two data sources from the National Administrative Department of Statistics of Colombia: the Annual Manufacturing Survey and the Industrial Environmental Survey. The analysis focuses on 2018–2019, when detailed information is available on investments in renewable energy self-generation and in forms of production that reduce the consumption of non-renewable energy sources. The empirical strategy is based on fixed-effects regressions and heterogeneity analysis by investment size. Results Investment in sustainable forms of production is associated with both positive and negative aspects of firm performance. Firms investing in sustainability show better outcomes in value added per worker, wages per worker, and productivity. However, they also tend to have lower return on assets and, in some cases, lower sales performance. The results also show heterogeneity by investment size: firms with low investment tend to perform poorly in most measures, while firms with high investment show improvements in several performance indicators. In addition, firms investing in sustainable forms of production tend to have higher energy consumption and higher carbon dioxide emissions per worker. Conclusions The relationship between sustainability and firm performance is heterogeneous and depends on investment size. Although higher investment levels are associated with better financial performance in several dimensions, they are also associated with higher energy use and emissions. These results highlight a tension between financial and environmental performance in the Colombian manufacturing industry.</ns3:p>