Beyond Compliance: How Environmental Performance Mediates the Impact of Green Accounting on Financial Performance inIndonesia's Stock Exchange

Abstract

Purpose:This study examines the impact of green accounting on financial performance and investigates whether environmental performance mediates this relationship in Indonesia's energy and mining sectors. The study also explores whether environmental performance creates economic value beyond regulatory compliance.

Design/methodology/approach:A quantitative research design was employed using secondary data from annual reports and sustainability reports of energy and mining companies listed on the Indonesia Stock Exchange (IDX) during the 2021–2024 period. A purposive sampling technique yielded 120 firm-year observations. The proposed relationships were analyzed using multiple linear regression and path analysis to assess both direct and indirect effects.

Findings:The results indicate that green accounting has a significant positive effect on financial performance but does not significantly influence environmental performance. Environmental performance has a significant negative effect on financial performance and does not mediate the relationship between green accounting and financial performance. These findings suggest that green accounting contributes to profitability through improved environmental cost management, whereas environmental performance primarily reflects regulatory compliance and corporate legitimacy rather than creating immediate financial value.

Practical implications:The findings encourage managers to integrate green accounting into strategic decision-making rather than treating environmental initiatives solely as compliance activities. Policymakers are also encouraged to strengthen environmental reporting frameworks that promote not only regulatory adherence but also long-term value creation and sustainable corporate performance.

Originality/value:This study extends the green accounting literature by examining the mediating role of environmental performance in the relationship between green accounting and financial performance within Indonesia's energy and mining sectors. It provides empirical evidence that environmental performance does not necessarily translate into superior financial outcomes when it is primarily driven by compliance-oriented practices, thereby offering new insights into the "beyond compliance" perspective.

Paper type:empirical research