GREEN SUSTAINABILITY AND FINANCIAL PERFORMANCE OF HALAL FOOD COMPANIES: EVIDENCE OF MALAYSIA
DOI:
https://doi.org/10.21098/jimf.v10i4.2003Keywords:
Sustainability, Green, Halal food companies, Financial performance, Malaysia.Abstract
With growing concerns about environmental degradation and its impact on global ecosystems, the Halal food industry is facing increasing scrutiny and pressure to adopt sustainable practices. This research examines the relationship between green sustainability and the financial performance of Halal food companies in Malaysia. Applying a dynamic panel modelling to a sample of 75 companies over 10 years, we document diverse effects of sustainable practices on firms’ financial performance. More specifically, we note that efficient material usage is positively associated with both Return on Assets (ROA) and Tobin's Q (TBQ). Likewise, by reducing costs and enhancing the company's public image, effective emission management boosts both ROA and TBQ. However, energy-related initiatives negatively impact both ROA and TBQ. Biodiversity efforts, although costly in the short term, contribute to improved long-term market valuation. In a similar vein, while its decreases short-term profitability, environmental sustainability positively influences market valuation. Finally, water management initiatives often lead to decreased ROA and TBQ, which possibly is related to their high costs. From the results, policymakers should support efficient material usage and emission management through incentives to enhance profitability and market valuation. Additionally, they should consider providing financial assistance for biodiversity and environmental compliance initiatives while evaluating ways to mitigate the high costs associated with energy and water management to ensure sustainable industry growth.
ACKNOWLEDGMENT
We extend our sincere gratitude to the Institute of Halal Management, Islamic Business School, University Utara Malaysia, and the Research and Innovation Management Centre (RIMC) for their invaluable support and contribution to our current research. The institutional support from both entities has greatly enriched our study, emphasizing the significance of sustainable practices in the Halal food industry.
References
Abderahman, R., Karim, R., & Kevin, D. (2021). Halal food supply chains: A literature review of sustainable measures and future research directions. Foods and Raw materials, 9(1), 106-116.
Abdullah, R., Sabar, R., & Mustafar, M. (2018). Green Halal supply chain in Malaysian halal food companies: A conceptual framework. International Journal of Supply Chain Management, 7(5), 502-510.
Ahmad, A. N., Hashim, Y. Z. Y., Latif, N. H. M., Jaiyeoba, H. B., Samsudin, N., & Said, N. M. (2021). Positioning halalantoyyiban in halal food system: Production, processing, consumption, marketing, logistic and waste management. Halalpshere, 1(2), 17-40.
Ahmad, N., Shamsu, L. S. B. H., & Ariffin, M. D. I. (2023). Halal meat, food fraud, and consumer protection: A comparison of Islamic, European and Malaysian perspectives. Intellectual Discourse, 123, 145.
Ahmad, Z., Hidthiir, M. H. B., & Rahman, M. M. (2024). Impact of CSR disclosure on profitability and firm performance of Malaysian halal food companies. Discover Sustainability, 5(1), 18.
Ali, M. H., Iranmanesh, M., Tan, K. H., Zailani, S., & Omar, N. A. (2022). Impact of supply chain integration on halal food supply chain integrity and food quality performance. Journal of Islamic Marketing, 13(7), 1515-1534.
Ali, M. H., & Suleiman, N. (2016). Sustainable food production: Insights of Malaysian halal small and medium sized enterprises. International Journal of Production Economics, 181, 303-314.
Alshehhi, A., Nobanee, H., & Khare, N. (2018). The impact of sustainability practices on corporate financial performance: Literature trends and future research potential. Sustainability, 10(2), 494.
Ameer, R., & Othman, R. (2012). Sustainability practices and corporate financial performance: A study based on the top global corporations. Journal of Business Ethics, 108, 61-79.
Amid, A. (2024). Halal industry and issues. In Solving halal industry issues through research in halal sciences (pp. 1-14). Singapore: Springer Nature Singapore.
Arieftiara, D., Nawir, J., & Julianisa, I. A. (2022). Halal food certification, financial performance, and sustainability reporting: Comparative study of food and beverage firms in Malaysia and Indonesia. AgBioForum, 24(2), 12-22.
Azam, M. S. E., Abdullah, M. A., & Razak, D. A. (2019). Halal tourism: definition, justification, and scopes towards sustainable development. International Journal of Business, Economics and Law, 18(3), 23-31.
Bansal, P., & Clelland, I. (2004). Talking trash: Legitimacy, impression management, and unsystematic risk in the context of the natural environment. Academy of Management journal, 47(1), 93-103.
Batool, A., Shabbir, R., Abrar, M., & Bilal, A. R. (2023). Do fear and perceived knowledge of Covid-19 drive sustainable consumption behaviour in Muslims? The mediating role of religiosity. Journal of Islamic Marketing, 14(7), 1645-1668.
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115-143.
Buallay, A. (2019). Is sustainability reporting (ESG) associated with performance? Evidence from the European banking sector. Management of Environmental Quality: An International Journal, 30(1), 98-115.
Bux, C., Varese, E., Amicarelli, V., & Lombardi, M. (2022). Halal food sustainability between certification and blockchain: A review. Sustainability, 14(4), 2152.
Clarkson, P. M., Li, Y., Richardson, G. D., & Vasvari, F. P. (2011). Does it really pay to be green? Determinants and consequences of proactive environmental strategies. Journal of Accounting and Public Policy, 30(2), 122-144.
Coad, A., Segarra, A., & Teruel, M. (2013). Like milk or wine: Does firm performance improve with age?. Structural Change and Economic Dynamics, 24, 173-189.
Delmas, M. A., Nairn-Birch, N., & Lim, J. (2015). Dynamics of environmental and financial performance: The case of greenhouse gas emissions. Organization & Environment, 28(4), 374-393.
Deng, X., & Lu, J. (2017). The environmental performance, corporate social responsibility, and food safety of food companies from the perspective of green finance. Revista de Cercetare şi Intervenţie Socială, 58, 178-200.
Dincer, B., Keskin, A. İ., & Dincer, C. (2023). Nexus between sustainability reporting and firm performance: Considering industry groups, accounting, and market measures. Sustainability, 15(7), 5849.
Dowell, G., Hart, S., & Yeung, B. (2000). Do corporate global environmental standards create or destroy market value? Management Science, 46(8), 1059-1074.
Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60 (11), 2835-2857.
Elsayed, K., & Paton, D. (2005). The impact of environmental performance on firm performance: Static and dynamic panel data evidence. Structural Change and Economic Dynamics, 16, 395–412.
Fageh, A. (2022). Building a synergy between the Halal industry and the green industry in the maqasid syari'ah review as the basis of Islamic economics. Journal of Islamic Economic Laws, 5(1), 139-158.
Fama, E. F., & Schwert, G. W. (1977). Asset returns and inflation. Journal of Financial Economics, 5(2), 115-146.
FAO. (2012). Sustainable diets and biodiversity. directions and solutions for policy, research and action. In Burlingame, B., & Dernini, S. (Eds.), Nutrition and consumer protection division FAO, Roma, 309.
Gao, J., Hou, H., Zhai, Y., Woodward, A., Vardoulakis, S., Kovats, S., ... & Liu, Q. (2018). Greenhouse gas emissions reduction in different economic sectors: Mitigation measures, health co-benefits, knowledge gaps, and policy implications. Environmental Pollution, 240, 683-698.
Gatimbu, K. K., Ogada, M. J., Budambula, N., & Kariuki, S. (2018). Environmental sustainability and financial performance of the small‐scale tea processors in Kenya. Business Strategy and the Environment, 27(8), 1765-1771.
Gillani, S., Khan, M. M. S., & Ijaz, F. (2017). Factors reinforcing Pakistan halal food industry to be the world halal food hub. Journal of Education and Social Sciences, 6(2), 31-43.
Hall, M., & Weiss, L. (1967). Firm size and profitability. The Review of Economics and Statistics, 49(3), 319-331.
Haque, F., & Ntim, C. G. (2018). Environmental policy, sustainable development, governance mechanisms and environmental performance. Business Strategy and the Environment, 27, 415–435.
Hart, S. L., & Ahuja, G. (1996). Does it pay to be green? An empirical examination of the relationship between emission reduction and firm performance. Business strategy and the Environment, 5(1), 30-37.
Hejazi, R., Ghanbari, M., & Alipour, M. (2016). Intellectual, human and structural capital effects on firm performance as measured by Tobin's Q. Knowledge and Process Management, 23(4), 259-273.
Indra, & Ascarya. (2022). 255 Standard methodology for research in Islamic economics and finance. In Teaching and research methods for Islamic economics and finance (pp. 255-281). 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN: Routledge.
Jiang, S., Jakobsen, K., Bueie, J., Li, J., & Haro, P. H. (2022). A tertiary review on blockchain and sustainability with focus on Sustainable Development Goals. IEEE Access, 10, 114975-115006.
Johnson-Hall, T. D., & Hall, D. C. (2022). Redefining quality in food supply chains via the natural resource based view and convention theory. Sustainability, 14(15), 9456.
Junejo, S., Anwar, S., & Hamidi, M. L. (2023). Revolutionizing the halal food industry: The crucial role of green halal supply chain in Pakistani companies-a compelling theoretical framework. Journal of Islamic Economic Laws, 6(2), 1-18.
Kadirgama, K., Awad, O. I., Mohammed, M. N., Tao, H., & Bash, A. A. K. (2023). Sustainable green energy management: Optimizing scheduling of multi-energy systems considered energy cost and emission using attractive repulsive shuffled frog-leaping. Sustainability, 15(14), 10775.
Karagiorgos, T. (2010). Corporate social responsibility and financial performance: An empirical analysis on Greek companies. European Research Studies Journal, 13(4), 85–108.
Kasim, A., Gursoy, D., Okumus, F., & Wong, A. (2014). The importance of water management in hotels: A framework for sustainability through innovation. Journal of Sustainable Tourism, 22(7), 1090-1107.
Khan, A.U., & Ali, Y. (2021). Sustainable supplier selection for the cold supply chain (CSC) in the context of a developing country. Environment, Development and Sustainability, 23, 13135–13164.
King, A. A., & Lenox, M. J. (2002). Exploring the locus of profitable pollution reduction. Management Science, 48(2), 289-299.
Kumar, S., Teichman, S., & Timpernagel, T. (2012). A green supply chain is a requirement for profitability. International Journal of Production Research, 50(5), 1278-1296.
Kupiec, P., & Lee, Y. (2012). What factors explain differences in return on assets among community banks? Journal of Money Credit and Banking, 17, 69–83.
Liu, Y., Wang, A., & Wu, Y. (2021). Environmental regulation and green innovation: Evidence from China’s new environmental protection law. Journal of Cleaner Production, 297, 126698.
Lo, F. Y., & Liao, P. C. (2021). Rethinking financial performance and corporate sustainability: Perspectives on resources and strategies. Technological Forecasting and Social Change, 162, 120346.
Mabkhot, H. (2023). Factors affecting the sustainability of halal product performance: Malaysian evidence. Sustainability, 15(3), 1850.
Mankiw, N. G. (2013). Macroeconomics (8th ed.). Worth Publishers.
Marchi, B., & Zanoni, S. (2017). Supply chain management for improved energy efficiency: Review and opportunities. Energies, 10(10), 1618.
Mathenge, M., Sonneveld, B. G., & Broerse, J. E. (2022). Application of GIS in agriculture in promoting evidence-informed decision making for improving agriculture sustainability: A systematic review. Sustainability, 14(16), 9974.
Muhamed, A. A., Salim, N., Ab Rahman, M. N., Hamzah, F. M., & Ali, M. H. (2023). Effects of supply chain orientation on firm performance: Insights from a Malaysian case study of halal-certified small and medium-sized enterprises. Journal of Small Business & Entrepreneurship, 35(6), 927-943.
Mysaka, H., & Derun, I. (2021). Corporate financial performance and Tobin’s Q in dividend and growth investing. Contemporary Economics, 15(3), 276-288.
Nair, M. S., & Ahmed, P. K. (2022). Environmental sustainability and contemporary Islamic society: A shariah perspective. Asian Academy of Management Journal, 27(2), 211-231.
Northey, S. A., Mudd, G. M., Werner, T. T., Haque, N., & Yellishetty, M. (2019). Sustainable water management and improved corporate reporting in mining. Water Resources and Industry, 21, 100104.
Pham, D. C., Do, T. N. A., Doan, T. N., Nguyen, T. X. H., & Pham, T. K. Y. (2021). The impact of sustainability practices on financial performance: empirical evidence from Sweden. Cogent Business & Management, 8(1), 1912526.
Porter, M. E., & Linde, C. V. D. (1995). Toward a new conception of the environment-competitiveness relationship. Journal of Economic Perspectives, 9(4), 97-118.
Rahman, H. U., Zahid, M., & Al-Faryan, M. A. S. (2023). ESG and firm performance: The rarely explored moderation of sustainability strategy and top management commitment. Journal of Cleaner Production, 404, 136859.
Rejeb, A., Rejeb, K., & Zailani, S. (2021). Are halal food supply chains sustainable: A review and bibliometric analysis. Journal of Foodservice Business Research, 24(5), 554-595.
Rezai, G., Mohamed, Z., & Shamsudin, M. N. (2015). Can halal be sustainable? Study on Malaysian consumers’ perspective. Journal of Food Products Marketing, 21(6), 654-666.
Salim, H. K., Padfield, R., Yuzir, A., Mohamad, S. E., Kaida, N., Papargyropoulou, E., & Nakamura, S. (2018). Evaluating the organizational intention to implement an Environmental Management System: Evidence from the Indonesian food and beverage industry. Business Strategy and the Environment, 27(8), 1385-1398.
Shaheen, F., Zaman, K., Lodhi, M. S., Nassani, A. A., Haffar, M., & Abro, M. M. Q. (2022). Do affluent nations value a clean environment and preserve it? Evaluating the N-shaped environmental Kuznets curve. Environmental Science and Pollution Research, 29(31), 47267-47285.
Stuart, A. M., Pame, A. R. P., Vithoonjit, D., Viriyangkura, L., Pithuncharurnlap, J., Meesang, N., ... & Lampayan, R. M. (2018). The application of best management practices increases the profitability and sustainability of rice farming in the central plains of Thailand. Field Crops Research, 220, 78-87.
Sureeyatanapas, P., Poophiukhok, P., & Pathumnakul, S. (2018). Green initiatives for logistics service providers: An investigation of antecedent factors and the contributions to corporate goals. Journal of Cleaner Production, 191, 1-14.
Tan, K. H., Ali, M. H., Makhbul, Z. M., & Ismail, A. (2017). The impact of external integration on halal food integrity. Supply Chain Management: An International Journal, 22(2), 186-199.
Timpanaro, G., & Cascone, G. (2022). Food consumption and the Covid-19 pandemic: The role of sustainability in purchasing choices. Journal of Agriculture and Food Research, 10, 100385.
Yang, X., & Yao, Y. (2012). Environmental compliance and firm performance: evidence from China. Oxford Bulletin of Economics and Statistics, 74(3), 397-424.
Ye, J., & Dela, E. (2023). The effect of green investment and green financing on sustainable business performance of foreign chemical industries operating in Indonesia: The mediating role of corporate social responsibility. Sustainability, 15(14), 11218.
Downloads
Published
Issue
Section
License
Journal of Islamic Monetary Economics and Finance is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
