Less plastic, more profits? Estimating the effect of firms' efforts for plastic reduction on their financial performance

This study examines the impact of firms' efforts to reduce plastic usage on their financial performance. Using a difference-in-differences approach with matching, we find that Japanese firms in the food industry declaring their commitment to reducing plastics have effectively decreased the use of plastics while enhancing their profit per unit of plastic input. The estimation results indicate that the volume of plastic input has reduced by about 23%, and productivity has improved by about 39% after the declaration of these actions. According to our theoretical framework, the estimated increase in productivity can recover the decrease in profit resulting from reduced input, albeit the result is sensitive to model selection. These findings highlight the importance of firms' environmental commitments and the challenging task of reducing plastic usage without decreasing profitability.