The Effect of Implementing Green Accounting on Profitability

Abstract

Objective: This study aims to test and analyze the influence of Green Accounting which is proxied as environmental performance, environmental costs, and environmental disclosure on profitability.
Research Design & Methods: The study employed a quantitative approach with secondary data obtained from annual reports and company sustainability reports. The sample consisted of 14 coal mining subsector companies during the 2021–2023 period, resulting in 42 observations. Data analysis was performed using multiple linear regression.
Findings: The results of the study indicate that environmental performance and environmental disclosure have no effect on company profitability. Conversely, environmental costs have a negative and significant effect on profitability. This finding indicates that environmental performance and disclosure levels have not been able to increase company profits, while relatively low and short-term-oriented environmental spending is still seen as a burden that can reduce profitability.
Implications: The research findings provide implications for companies to manage environmental activities and investments more effectively to create sustainable economic value. Furthermore, companies need to integrate environmental strategies into business policies to translate environmental benefits into improved long-term financial performance.
Contribution & Value Added: This research expands the literature on green accounting and profitability, particularly in the coal mining sector in Indonesia. The findings provide empirical evidence regarding the relationship between environmental performance, environmental costs, and environmental disclosure and profitability and can serve as a reference for academics, practitioners, and future researchers in developing studies on environmental accounting and corporate sustainability.