The effects of environmental conservation efforts on financial performance: a case study of the industrial and allied sector

Abstract

The purpose of this study was to determine the impact of environmental conservation on financial performance of organizations' management. The study was done using the exploratory design method. The target population were all the 18 public listed companies under industrial and allied segment in Kenya. A census of al I the 18 companies was therefore conducted. Both closed and open ended questionnaires were used to collect primary data from the officers of the company of the selected companies. The raw data from the field was analyzed using descriptive statistics. Data was presented in percentages and cross tabulation. The study found that in most organizations, sustainable environmental conservation development was considered an organizational important goal. Thus organizations practiced environmental ethics, management and safety practices, such as energy reduction, waste reduction, waste water reduction, adhering to statutory legislation environmental conservation by investing III technology which mmnnrze environmental impact of operation and production and planting trees. The study revealed that organizations spend great much resource in conserving the environment; by upgrading machines and infrastructure to meet the environmental conservation standards, sponsoring environmental conservation, and environmental rehabilitation programs. Environmental conservation activities engaged included; land rehabilitation through reforestation, Mau forest reforestation, tree campaign of UNEP,ECO challenge campaign, waste disposal management, and tree planting activities. The study revealed that organizations' expenses incurred for the last three years in environmental conservation had promoted organizations profitability, indirect benefits i.e. improved organization image. Further, the environment conservation programs affected management and financial decisions as well as management strategies. Therefore, budgeting process was affected, though at a small extent. The study revealed that more than half of the respondents indicated that their firm performance indicators profitability, liquidity, solvency and debt ration were within the expected limits. The study showed that environmental conservation effort had no great effect on the marketability of firm's stock and cost of capital, apart from effect on the firm

stocks and cost of capital. Moreover, environmental conservation had affected firms' equity and debt. TIle following recommendations based on the study findings were made; Industrial and allied sector need to develop a strong financial policy guiding the environmental conservation since the current study established that only a few fi1111s had policy guiding environmental conservation. This will go along in reducing competition with the wealth maximisation goal of a firm. This will also guide the organisation financial decisions. With the growmg concem for 'carbon credit', "green goals" and environmental sustainable production, industrial and allied sector should tap into this potential thereby attracting strategic investors and potential financiers through internal certification on environmental management systems. This will also lead to organisation enjoying financial subsidies as results of these efforts.