Companies praised for strong financial performance may not be as efficient as they appear once their environmental impact is considered, according to new research from the University of Surrey. The study, published in the European Journal of Operational Research, found that businesses generating high revenues can still perform poorly when factors such as carbon emissions and energy use are included in assessments of corporate efficiency.
To better capture this broader picture, researchers developed a new way of measuring “sustainable corporate efficiency.” Instead of focusing solely on traditional financial indicators, the approach also incorporates environmental measures, including greenhouse gas emissions, energy consumption and revenues generated from environmentally friendly products and services. The goal was to determine how effectively companies create value while minimising environmental harm.
Dr Menelaos Tasiou, co-author of the study and Senior Lecturer in Finance at the University of Surrey, said businesses have traditionally been judged by how efficiently they convert resources into profits. Still, that perspective changes when environmental costs are taken into account. He explained that true efficiency means generating revenue while reducing the environmental damage associated with production, adding that profitability alone can hide how wasteful a company may actually be.
The research analysed more than 2,800 publicly listed companies across 61 countries between 2010 and 2022, creating one of the largest international datasets examining both financial and environmental performance together. Researchers combined corporate financial records aligned with the green economy — defined as low carbon, resource efficient and socially inclusive — with environmental disclosures such as energy use and greenhouse gas emissions. They then applied a machine learning method known as Convexified Efficiency Analysis Trees (CEAT) to estimate how efficiently companies convert resources into revenue while limiting pollution.
Unlike conventional approaches, the method recognises that production generates both desirable outputs, such as profits, and undesirable ones, such as emissions. This allowed researchers to compare companies on how successfully they balance financial returns with environmental responsibility. The findings revealed only a moderate relationship between financial efficiency and environmental efficiency, suggesting that companies performing well financially are not necessarily managing their environmental impact effectively. Significant differences also emerged across industries and countries, with high-emission sectors such as manufacturing and energy often lagging behind firms that were better able to reduce carbon intensity while maintaining revenue.
The researchers say the findings could help investors, regulators and policymakers identify businesses that are genuinely prepared for a low-carbon economy. The study also highlighted the importance of management quality, finding that companies with stronger leadership teams were more likely to balance profitability with environmental responsibility. As governments intensify efforts to reach net-zero targets and investors place greater scrutiny on sustainability performance, the researchers warn that companies failing to integrate environmental considerations into their operations risk losing their competitive edge in the years ahead.
More information: Chrysovalantis Gaganis et al, Beyond profit: Rethinking corporate efficiency frameworks through a sustainability lens, European Journal of Operational Research. DOI: 10.1016/j.ejor.2026.02.019
Journal information: European Journal of Operational Research Provided by University of Surrey