Business Strategy and Environmental Performance

Business strategy choices are very influential in a company’s environmental performance.
Companies that choose the cost leadership strategy tend to streamline their expenses which
leads to them overlooking the environmental cost. Meanwhile, differentiation strategy
encourages companies to accommodate environmental costs to fulfill customers’ demands.
Therefore, this research aims to examine the impacts of the strategy choices on environmental
performance, which has not been focused on by previous studies. This research’s samples are
public companies that are consistently participating in the PROPER program during the 2012-
2017 period. There are 228 observations fulfill the sample criteria. The data are processed
using the GRETL application that is fit for processing the panel data. We apply two proxies to
measure each strategy choice. Cost leadership is proxied with the number of employees
compared to the total asset of the companyand net sales to the book value of plants, properties,
and equipment. Differentiation is measured by sales, general and administrative costs to net
salesand net sales to the cost of goods sold. This research’s findings are, firstly, companies that
choose the cost leadership strategy have lower environmental performances, and, secondly,
companies with differentiation strategy have higher environmental performances.