Environmental sustainability and financial performance of the small‐scale tea processors in Kenya
Gatimbu, Karambu Kiende
Ogada, Maurice J.
Kariuki, Samuel N.
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In the light of global warming, natural resource depletion and increasing stakeholder demand for environmental sustainability; corporate entities are compelled to reexamine their impact on the biophysical environment. Although the debate on how investment in environmental sustainability impacts on the corporates themselves is inconclusive, it is clear that combating negative environmental impacts can be very expensive and may substantially reduce the profits. Thus, this study sought to establish the relationship between environmental efficiency and profitability of small‐scale tea processors in Kenya. Using a random effects model on a 5‐year panel data (2012–2016) on all the 54 small‐scale tea processors in Kenya, the study found a negative correlation between environmental efficiency and profitability. The tea processors, whose environmental efficiency score was above 80%, recorded a paltry profitability of not more than 1.23%. The policy implication is that the tea processors may require motivation to take up environment conserving innovations and technologies in their production processes. These motivations could take the form of government subsidies or tax waivers on such innovations and technologies.