The Influence of Environmental Cost and Carbon Productivity on Profitability: The Mediating Role of Green Innovation
Abstract
This study aims to examine the influence of environmental cost and carbon productivity on company profitability, with green innovation as a mediating variable. The sample comprises 54 firm-year observations from 18 basic industry sector companies listed on the Indonesia Stock Exchange (IDX) for the 2022–2024 period. Data were analyzed using Partial Least Squares-Structural Equation Modeling (PLS-SEM). The results show that green innovation does not mediate the effect of environmental cost or carbon productivity on profitability. However, environmental cost has a significant direct effect on profitability (negative direction), while carbon productivity has no significant effect. In addition, green innovation itself exerts a significant positive influence on profitability. These findings suggest that environmental investment directly impacts firm profits and green innovation can enhance profitability, whereas improving carbon productivity alone has not yet produced a tangible financial impact. Practically, this study provides insights for manufacturing firms in formulating sustainability strategies that balance environmental cost, carbon productivity, and green innovation to optimize profitability.
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EKOMBIS REVIEW: Jurnal Ilmiah Ekonomi dan Bisnis is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
