Sustainability certifications and financial profitability : an analysis on palm oil companies in Malaysia
As the second largest palm oil producer in the world, Malaysian palm oil industry has contributed significantly to the national GDP. However, this industry has been under criticism for serious deforestation and open burning activities, which obviously opposing to the objective of the oil palm Go...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Penerbit Universiti Kebangsaan Malaysia
2018
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| Online Access: | http://journalarticle.ukm.my/20488/1/30080-102237-1-PB.pdf http://journalarticle.ukm.my/20488/ https://ejournal.ukm.my/pengurusan/issue/view/1154 |
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| Summary: | As the second largest palm oil producer in the world, Malaysian palm oil industry has contributed significantly to the
national GDP. However, this industry has been under criticism for serious deforestation and open burning activities,
which obviously opposing to the objective of the oil palm Good Agricultural Practice on zero burning. As a result,
sustainability certification of Roundtable Sustainable Palm Oil and Malaysia Sustainable Palm Oil had been introduced
towards achieving sustainable development governance in this industry and fulfilling the needs of importing countries on
certified palm oil. However, the number of companies with sustainability certification is relatively low due to the concern
on potential additional cost, which then could affect firm profitability. Therefore, this study aims to examine the impact
of sustainability certification on financial profitability among 39 palm oil companies in Bursa Malaysia, from 2009 to
2016. Based on the GLS estimation model, the finding shows that the profitability of firms with sustainability certification
is almost 2% higher than firms without certification. The finding of this study provide useful input for industry players and
could encourage palm oil companies to subscribe sustainability certifications to improve their sustainability practices
and good governance as well as increase their profits. |
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