Sustainability certifications and financial profitability: An analysis on palm oil companies in Malaysia

B. A.M. Hafizuddin-Syah, Shahida Shahimi, Siti Hanisah Fuad

Research output: Contribution to journalArticle

Abstract

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.

Original languageEnglish
JournalJurnal Pengurusan
Volume54
Publication statusPublished - 1 Jan 2018

Fingerprint

Palm oil
Certification
Sustainability
Malaysia
Profitability
Industry
Governance
Oil industry
Criticism
Profit
Costs
Importing
Deforestation
Firm profitability
Sustainable development

Keywords

  • Malaysia
  • MSPO
  • Oil palm
  • Profitability
  • RSPO
  • SDG

ASJC Scopus subject areas

  • Business and International Management
  • Accounting
  • Business, Management and Accounting (miscellaneous)

Cite this

Sustainability certifications and financial profitability : An analysis on palm oil companies in Malaysia. / Hafizuddin-Syah, B. A.M.; Shahimi, Shahida; Fuad, Siti Hanisah.

In: Jurnal Pengurusan, Vol. 54, 01.01.2018.

Research output: Contribution to journalArticle

@article{07374f4b62cc4c6ab11e588044f42916,
title = "Sustainability certifications and financial profitability: An analysis on palm oil companies in Malaysia",
abstract = "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.",
keywords = "Malaysia, MSPO, Oil palm, Profitability, RSPO, SDG",
author = "Hafizuddin-Syah, {B. A.M.} and Shahida Shahimi and Fuad, {Siti Hanisah}",
year = "2018",
month = "1",
day = "1",
language = "English",
volume = "54",
journal = "Jurnal Pengurusan",
issn = "0127-2713",
publisher = "Penerbit Universiti Kebangsaan Malaysia",

}

TY - JOUR

T1 - Sustainability certifications and financial profitability

T2 - An analysis on palm oil companies in Malaysia

AU - Hafizuddin-Syah, B. A.M.

AU - Shahimi, Shahida

AU - Fuad, Siti Hanisah

PY - 2018/1/1

Y1 - 2018/1/1

N2 - 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.

AB - 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.

KW - Malaysia

KW - MSPO

KW - Oil palm

KW - Profitability

KW - RSPO

KW - SDG

UR - http://www.scopus.com/inward/record.url?scp=85061078261&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85061078261&partnerID=8YFLogxK

M3 - Article

AN - SCOPUS:85061078261

VL - 54

JO - Jurnal Pengurusan

JF - Jurnal Pengurusan

SN - 0127-2713

ER -