Is There Causality Relationship between Corporate Performance and Energy Efficiency? An Empirical Evidence from Fertilizer Industry in Indonesia
DOI:
https://doi.org/10.47747/fmiic.v1i3.3546Abstract
This study examines the dynamic relationship between corporate performance, energy efficiency, and environmental & social responsibility cost (ESRC) using panel data from six fertilizer companies in Indonesia over the period 2013–2024. The analysis employs the Panel Vector Autoregression (PVAR) model and Granger causality test to capture interdependencies and causal linkages among variables. The results reveal that corporate performance, energy efficiency, and ESRC exhibit strong dynamic persistence and interact in a complex manner across time. Energy efficiency is found to significantly influence corporate performance, while ESRC also plays a crucial role in shaping firm performance. Furthermore, a bidirectional causal relationship exists between energy efficiency and ESRC, indicating their complementary roles in supporting sustainable business practices. These findings suggest that sustainability-related investments may impose short-term costs but generate long-term benefits through improved efficiency and competitiveness. The study highlights the importance of integrating energy efficiency and social-environmental responsibility into corporate strategy. It provides empirical evidence that sustainability practices are key drivers of long-term firm performance, particularly in energy-intensive industries such as fertilizer production.
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