The impact of environmental practices on firms’ efficiency: the case of ICT-producing sectors

Abstract

The aim of this paper is to shed light on the debate concerning the impact of environmental practices on firms' efficiency. It focuses on two of the most representative sectors of information and communication technologies' industry, i.e. computer hardware and telecommunications equipment. The Data Envelopment Analysis (DEA) method was chosen to measure firm-level efficiency, since we are interested in the relative evaluation of a firm with respect to all other firms in a given set. The methodology is based on a three-stage approach: (1) construct an appropriate efficiency ratio, (2) divide the sampled companies into two discrete categories, i.e. the companies with more restrictive environmental practices (adherence to specific standards) and those with less restrictive practices (adoption of a general framework), and (3) calculate DEA efficiency scores. According to our findings, ICT companies which implement strict environmental practices are not necessarily more efficient than their rivals. Consequently, except for the case of compulsory regulations, ICT companies should consider all the possibilities and implement the practices best suited to their needs.