Beyond the Frontier of Eco-Efficiency: How Firms Achieve Eco-Effectiveness in Corporate Environmental Management

Growing environmental concerns have intensified the search for business strategies that balance long-term competitiveness with ecological sustainability. This study explores the concepts of eco-efficiency and eco-effectiveness to assess whether firms can achieve sustainable growth while reducing their environmental impacts. We use industry-specific data from publicly traded companies listed on the S&P 1200 index and apply output-oriented and bad output efficiency analyses to evaluate the relationship between production levels and polluting emissions across sectors. The results reveal a positive correlation between firm growth and emissions, indicating that eco-efficiency alone cannot guarantee sustainable outcomes. These findings highlight a decoupling dilemma: Firms face a strategic trade-off between relative improvements in efficiency and the pursuit of absolute decoupling through eco-effectiveness. By empirically identifying firms exhibiting eco-effective trajectories, this study provides novel evidence on the conditions under which business growth becomes environmentally regenerative. This study advances strategic management and sustainability literature by positioning eco-effectiveness as the next frontier for corporate environmental performance, with important implications for scholars, managers, and policymakers seeking to align business strategies with planetary boundaries.