RESEARCH IN MANAGEMENT AND ACCOUNTING Tjoa & Widianingsih

Vol. 5 No. 2 December 2022

GREEN ACCOUNTING, ENVIRONMENTAL PERFORMANCE, AND

PROFITABILITY: EMPIRICAL EVIDENCE ON HIGH PROFILE
INDUSTRY IN INDONESIA

Eveline Viendra Tjoa1

Luky Patricia Widianingsih2
Ciputra University
evelinetjoa04@gmail.com1
luky.patricia08@gmail.com2

ARTICLE INFO ABSTRACT

Article history:
Received: 19 September 2022 This study aims to determine the effect of green accounting and
Revised: 29 November 2022 environmental performance on the profitability of high-profile
Accepted: 5 December 2022 industry companies listed on the Indonesia Stock Exchange
(IDX) for the 2017-2021 period. The company's activities have a
significant impact on the environment. A series of actions are
needed to prevent further damage. On the other hand, financial
aspects must also be considered when companies carry out social
and environmental responsibilities to maintain sustainability.
Keywords: The independent variables of this study are green accounting and
Green Accounting; Environmental environmental performance; the dependent variable is
Performance; Profitability profitability. This study also uses a control variable, namely
firm size. The population of this study is high-profile industry
companies listed on the IDX in 2017-2021. Samples were taken
using the purposive sampling method. The number of samples in
this study was 69 companies with a total of 255 observation
data. The data analysis technique used is a multiple linear
regression test with SPSS 25 program. The results of this study
are that green accounting does not affect profitability, the
DOI: environmental performance has a positive effect on profitability,
https://doi.org/10.33508/rima.v5i2.4158
and firm size has a negative effect on profitability.

INTRODUCTION Greenhouse gas emissions in Indonesia

The world is experiencing various have increased by 157% from 1990 to 2018
environmental problems, one of which is the and are projected to continue to increase
increase in the earth's temperature caused (Climate Transparency, 2021). Given the
by increasing greenhouse gas emissions large enough impact, it is necessary to carry
(Robinson, 2022). Greenhouse gas emissions out activities to prevent climate change. In
are the result of various human activities. this regard, the Indonesian government has
The energy sector was the most significant established a regulation, Law Number 32 of
contributor to global greenhouse gas 2009, concerning Environmental Protection
emissions in 2016, with 73.2% of the total and Management. The law explains that
emissions of 49.4 billion tons of CO2 (Ritchie, every activity or business must manage and
2020). The energy sector includes energy use preserve the environment and disclose it
in industry, transportation, and buildings. appropriately and transparently. The
The agriculture, forestry, and land use government also requires public companies
sectors are the second largest contributor to to publish sustainability reports containing
greenhouse gas emissions after the energy financial, economic, social, and
sector, with a percentage of 18.4%. environmental performance as stated in the

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Financial Services Authority Regulation environmental-related transactions as part

Number 51/POJK.03/2017 concerning the of company reports (Lako, in Lestari, Nadira,
Implementation of Sustainable Finance for Nurleli, & Helliana, 2019). Green accounting
Financial Services Institutions, Issuers, and motivates companies to make management
Public Companies. Companies should pay decisions by considering its effects on the
more attention to environmental aspects by environment so that companies can have a
enhancing environmental performance due better management system by fulfilling
to the growing significance of these stakeholders' interests (Carandang & Ferrer,
considerations to the government and other 2020).
stakeholders (Kalash, 2021). Companies This study discusses the effect of green
must be environmentally and socially accounting and environmental performance
responsible due to their operational on profitability. Green accounting and
activities that affect their surroundings. environmental performance were chosen as
Social responsibility refers to endeavors to independent variables because these two
support an organization's commitment to variables relate to the company's
sustainable development and charitable environmental aspects from different
work (Widianingsih, Triyuwono, Djamhuri perspectives. The green accounting variable
& Rosidi, 2022). Sustainability goals can looks at the costs incurred by the company
only be achieved through the participation to maintain environmental sustainability.
of the whole community in government The disclosure of environmental costs in the
policies (Arifianti & Widianingsih, 2022). financial statements measures green
The existence of high awareness of accounting in this study. The environmental
sustainability has changed people's views performance variable describes the
and given rise to new ideas for overcoming company's compliance with environmental
problems. Elkington (1997), with the triple management regulations as measured by
bottom line concept, explained that the company's rating in the Company
companies must pay attention to the welfare Performance Rating Program in
of society (people) and the environment Environmental Management (PROPER).
(planet), not only emphasizing increasing Based on the Regulation of the Minister of
financial profits (profit). This concept is the Environment and Forestry of the Republic
basis for companies to set sustainability of Indonesia Number 1 of 2021 concerning
goals and generate profits (Wardhani, the Company Performance Rating Program
Widianingsih & Karundeng, 2021). The in Environmental Management, PROPER is
triple bottom line concept has now been a government policy to assess the
developed into a 5P concept, as stated in the performance of companies in managing the
2030 Agenda for Sustainable Development environment. This study uses control
(Sustainable Development Goals). The variables to reduce bias and make research
Indonesia Climate Change Trust Fund (2021) results consistent. The control variable used
reveals that the 5P concept consists of 5 in this study is the company's size, which
interrelated components, namely human describes the size of the company as seen
(people), earth (planet), prosperity from its total assets. The dependent variable
(prosperity), peace (peace), and partnership in this study is profitability. Profitability is
(partnership). Increased attention to an aspect that the company considers when
economic, social, and environmental aspects deciding to carry out environmental
demands adjustments in various fields, management activities. Profitability in this
including accounting. Green accounting is study is measured by the ratio of return on
seen as a form of adaptation of accounting assets (ROA). ROA is a profitability ratio
science to social and environmental used to determine the company's financial
demands to deal with crises. Green performance (Permatasari & Widianingsih,
accounting emphasizes reporting on 2020). ROA is also an indicator often used in

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previous studies to measure the profitability LITERATURE REVIEW

of high-profile industrial companies such as Stakeholder Theory
mining, manufacturing, elemental and According to Freeman (2015),
chemical industries, and food and beverages. stakeholder theory is a series of suggestions
The object of research used in this study stating that company management is
is a high-profile industrial company. responsible for acting in the stakeholders'
According to Roberts (1992), high-profile interests. Firms may also have obligations
industry companies have consumer beyond traditional economic theory. One of
visibility, high political risk, and fierce the cornerstones of this theory is the
business competition. High-profile industry ecological principle, which says that
companies were chosen as objects in this companies should act with a concern for the
study because the company's operational environment.
activities have a higher impact on the Clarkson (1995) defines a stakeholder as
environment and society (Hackston & Milne, a person or group with a right or interest in
1996). The activities of high-profile a company's past, present, and future
industrial companies significantly influence activities. Stakeholders are divided into two,
the environment; therefore, these namely primary stakeholders and
companies also have a responsibility to secondary stakeholders. Primary
maintain the environmental sustainability. stakeholders are parties who contribute
Research conducted by Nisa, Malikah, sustainably to the sustainability of the
and Anwar (2020) found that green company. Primary stakeholders include
accounting significantly affects the employees, suppliers, customers, investors,
profitability of mining companies as and the government. Secondary
measured by ROA. Putri, Hidayati, and stakeholders are parties who have a
Amin (2019) also found similar results that relationship with the company but do not
green accounting affects the profitability of hold an important position in the
manufacturing companies. Both studies also sustainability of the company. Secondary
prove that environmental performance stakeholders consist of the mass media and
affects profitability. Different results were specific interest groups.
shown in several other studies. Research
conducted by Angelina and Nursasi (2021) Legitimacy Theory
did not find the effect of green accounting Legitimacy is the result of validation
and environmental performance on the carried out by an organization as well as
profitability of manufacturing companies in actions taken by other organizations that
the primary and chemical industry sectors. affect norms and values (Dowling & Pfeffer,
Murniati and Sovita (2021) revealed that 1975). Legitimacy is important for analyzing
environmental performance has no effect on the relationship between the company and
ROA and environmental disclosure has a the environment, as well as being a limit to
negative effect on ROA. the company's actions. Companies that have
Based on the description that has been regulations also have a dependence on
proposed, researchers are interested in acceptance by the environment. Therefore,
examining the effect of green accounting the company will carry out legitimacy to
and environmental performance on bridge its activities with the environment to
company profitability. This study aims to (1) maintain sustainability.
determine the effect of green accounting on According to Suchman (1995),
profitability and (2) determine the effect of legitimacy is a general perception that views
environmental performance on profitability. a company's activities in accordance with
the norms, values, and beliefs built by
society. Legitimacy theory states that
corporate responsibility to the environment

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means that the company is willing to take reporting them to related parties.
the desired action by expecting a guarantee Bebbington (1997) says that environmental
for the company's sustainability (Reverte, accounting has been studied since the 1970s
2009). Environmental performance and as part of the broader scope of social
disclosure prove that the company has accounting. Green accounting is necessary
complied with applicable norms and can for creating sustainability, but its
increase public trust and maintain company implementation can also provide challenges
continuity (Murniati & Sovita, 2021). for companies.
Disclosure of environmental costs is
Profitability reporting on costs generated as a form of
Financial performance is the company's company participation in environmental
performance in the financial statements, management (Tunggal & Fachrurrozie,
which is reflected in its ability to meet 2014). Disclosure of environmental costs is
targets. Good financial performance is one also in line with Article 66, paragraph 6 of
thing that encourages investors to invest in Law no. 40 of 2007 concerning Limited
companies (Putra & Wirawati, 2020). This Liability Companies, that companies are
financial performance can be done through also required to report CSR activities in their
financial information contained in the annual reports. Environmental costs include
company's financial statements the cost of environmental facilities, the cost
(Kurniawandi, 2021). Financial ratios are of recycling waste, and the cost of research
tools to assess and evaluate the company's and development of materials (Handayani,
financial conditions and achievements in Kusumaningtias, 2013).
(Rosaline & Wuryani, 2020).
Profitability comes from the word Environmental Performance
"profit," which means earnings or gain. The Environmental performance shows the
profitability ratio measures the company's company's efforts to preserve the
ability to generate profits from its environment (Rosaline & Wuryani, 2020).
operational activities (Weygandt, Kimmel, According to Hernádi (2012), environmental
& Kieso, 2015). The profitability ratio used performance is a fundamental thing that
in this study is ROA. ROA shows the companies need to minimize their
comparison between company profits and environmental impact. Companies limiting
assets owned. The more significant ROA negative environmental impact will result in
number indicates that the company has a good environmental performance
good and efficient ability to manage assets (Chasbiandani et al., 2019). Environmental
to support its operational activities, while a performance can be said to be an action to
low ROA number indicates that the combine attention to the environment in the
company has unproductive assets company's operating activities and
(Setyoningrum, 2020). interactions with stakeholders that exceed
the company's organizational
Green Accounting responsibilities (Widianto & Sari, 2020). The
Green accounting is a company company's environmental performance
disclosure regarding the recognition, level can be seen from its rating on PROPER.
recording, and reporting of environmental PROPER, as stipulated in the Regulation of
activities to make decisions by report users the Minister of Environment and Forestry of
(Lako in Lestari et al., 2019). Hernádi (2012) the Republic of Indonesia Number 1 of 2021,
also defines green accounting as is a program that assesses the company's
environmental accounting that connects efforts in environmental management. The
financial and environmental aspects, PROPER rating is classified based on the
emphasizing analyzing company activities level of environmental management into
that cause environmental changes and five colors: gold, green, blue, red, and black.

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A gold rating is given to companies that profitability. These results are also
have demonstrated excellence in supported by the research of Ningtyas and
environmental management, while a black Triyanto (2019) and Nisa et al. (2020). Based
rating is given to companies that do not take on this explanation, the hypothesis in this
care of the environment. The PROPER study is:
rating is assessed based on two criteria: H1: Green accounting has a positive effect
compliance with regulations and other on profitability
activities that exceed the required
compliance (beyond compliance) and Effect of Environmental Performance on
regulations relating to water pollution, air Profitability
pollution, waste management, and land Environmental performance is a form
damage control. Activities that exceed the of company legitimacy to be accepted in
required compliance include applying society. The better the company's efforts to
environmental management, including manage the environment, the better its
environmental management systems, reputation. Companies whose activities
community empowerment, social impact the environment will show a good
innovation, and so on. image to stakeholders, so the company's
profitability will also increase. Rosaline and
Company Size Wuryani's research (2020) proves that
Company size shows the condition of environmental performance positively
the company and groups the size of the affects profitability. Similar results were
company based on the number of assets, the proven in the research by Putri et al. (2019).
number of sales, the number of employees, The positive influence between
and so on (Puspitaningrum & Indriani, environmental performance and
2021). The size of the company is related to profitability was also found in Tahu's
its profitability. The larger the company, the research (2019) which revealed that good
greater the number of assets owned, and the company environmental performance
higher the profit that can be generated from would increase investor interest in investing
these assets (Brigham & Houston, in and public interest in buying company
Lorenza, Kadir, & Sjaruddin, 2020). Large products so that company profitability
companies have lower business risk than increases. Based on this explanation, the
small companies because large companies hypothesis in this study is:
have easier access to the capital market to H2: Environmental performance has a
obtain funds that can be used for business positive effect on profitability
development and increased profits
(Sukmayanti & Triaryati, 2019). Conceptual Framework

Effect of Green Accounting on Profitability Green

Accounting H1
The implementation of green
accounting by companies can improve the Environmental H2
Profitability
company's reputation and public trust. Performance
Environmental disclosure will enhance the
Company
company's image and encourage consumers
Size
to use the company's products or investors
to invest. A good company is a company
that can balance its profitability with Figure 1. Research Model
responsibility towards society and the
environment. Research by Chasbiandani et RESEARCH METHOD
al. (2019) proved that disclosure of This research uses quantitative or other
environmental costs positively affects data that can be quantified and then
processed statistically (Yusuf, 2016).

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Quantitative data in this study are ROA data The ROA indicator measures
and company size, while data on green profitability. The higher the ROA, the better
accounting and environmental performance the company can manage assets to generate
variables are quantified data. profits. The following formula measures
The population used in this study are ROA:
companies classified as high-profile 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑅𝑂𝐴 = × 100%
industries listed on the IDX for the 2017- 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
2021 period. Sampling in this study was The total asset measures company size. The
conducted by non-probability sampling greater the total amount of assets, the larger
using the purposive sampling method. the company's size.
Purposive sampling is a sampling method The following formula measures
based on specific criteria (Hartono, 2018). company size:
The criteria for selecting the sample in this 𝐶𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑖𝑧𝑒 = ln(𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠)
study include the following: Observational data were processed
1. High-profile industry companies listed using the SPSS 25 program. The analytical
on the Indonesia Stock Exchange for procedures used in this study were
2017-2021. descriptive statistical analysis, classical
2. PROPER participants in 2017-2021. assumption test, multiple linear regression
3. Companies that issue annual and analysis, and hypothesis testing.
financial reports for 2017-2021. The regression equation of this study is
4. Companies that do not experience as follows:
losses during 2017-2021. 𝑌 = 𝛼 + 𝛽1 . 𝑥1 + 𝛽2 . 𝑥2 + 𝛽3 . 𝑥3 + 𝑒
Y = Dependent variable
Based on these criteria, the sample (profitability)
companies in this study amounted to 69 𝛼 = Constant
companies. The number of observational 𝛽1 , 𝛽2 , 𝛽3 = Regression coefficient
data in this study is 255 data. 𝑥1 = Independent variable (green
Green accounting is measured by accounting)
indicators of environmental cost 𝑥2 = Independent variable
components in financial statements using a (environmental
dummy variable. Companies that report performance)
environmental costs are assigned a score of 𝑥3 = Control variable (company
1, while companies that do not are assigned size)
a score of 0. E = Error term
Company rating indicators measure
environmental performance in PROPER. RESULT AND DISCUSSION
The PROPER rating is categorized into five Descriptive Statistics
colors: gold, green, blue, red, and black. A The green accounting variable has the
gold rating is given to companies with good lowest value of 0, the highest value of 1, an
environmental performance, while a black average of 0.11, and a standard deviation of
rating is given to companies with poor 0.308. The environmental performance
environmental performance. variable has the lowest value of 2, the
The value of the company according to highest value of 5, an average of 3.07, and a
its PROPER rating is as follows: standard deviation of 0.476. The firm size
Gold =5 variable has the lowest value of 26,790, the
Green =4 highest value of 32.485, an average of 29,722,
Blue =3 and a standard deviation of 1.441. The
Red =2 profitability variable has the lowest value of
Black =1 0.001, the highest value of 0.527, an average
of 0.069, and a standard deviation of 0.069.

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Table 1. environmental performance variable is

Descriptive Statistics Output 0.476. The significance value for the firm
Variable N Minimum Maximum Mean Std.
Deviation
size variable is 0.489. The significance value
Green 255 0 1 .11 .308 of these variables is greater than 0.05, so it
Accounting can be said that there is no
Environmental 255 2 5 3.07 .476
Performance heteroscedasticity or variance inequality in
Company Size 255 26.790 32.485 29.72171 1.441313 this study.
Profitability 255 .001 .527 .06856 .08722
Valid N 255
(listwise) Multiple Linear Regression Analysis
Regression analysis aims to determine
Classic Assumption Test the relationship between the dependent and
The normality test is the initial stage of independent variables and predict the
analysis that aims to filter the data by average dependent variable from the
observing the distribution of the residual independent variable owned (Gujarati, in
values of the tested data (Ghozali, 2018). The Ghozali, 2018). Based on the value of B in the
residual value is said to be normally table, the regression equation of this study
distributed if the significance value is more becomes:
significant than 0.05. The significance value 𝑌 = 0,991 − 0,022𝑥1 + 0,044𝑥2 − 0,009𝑥3 + 𝑒
of the normality test carried out is 0.063. A positive constant indicates that the
This number is more significant than 0.05, so effect of green accounting, environmental
it can be said that the residual data in this performance, and firm size on profitability
study are typically distributed. is unidirectional. The negative regression
The multicollinearity test was coefficient of the green accounting variable
conducted to determine whether there was indicates that the effect of green accounting
a relationship between the independent on profitability is not unidirectional, which
variables in the regression model (Ghozali, means an increase in the green accounting
2018). The multicollinearity test examined variable will result in a decrease in the
tolerance and variance inflation factor (VIF) profitability variable. The positive
values. Multicollinearity does not occur if environmental performance variable's
the tolerance value is more than 0.10 and the regression coefficient indicates that
VIF value is less than 10. The tolerance and environmental performance's effect on
VIF values for green accounting variables profitability is unidirectional, which means
are 0.804 and 1.243, for environmental an increase in the environmental
performance variables are 0.699 and 1.431, performance variable will increase the
and for firm size, variables are 0.799 and profitability variable. The regression
1.251. The tolerance value of these variables coefficient of the negative company size
is greater than 0.01, and the VIF value is less variable indicates that the effect of company
than 10, so it can be said that there is no size on profitability is not unidirectional,
multicollinearity or relationship between which means that an increase in the
independent variables in this study. company size variable will result in a
The heteroscedasticity test tests the decrease in the profitability variable.
inequality of variance on the residuals of Table 2.
one observation with another (Ghozali, Multiple Regression Analysis Output
Model Unstandardized Standardized t Sig.
2018). Spearman's test carried out the Coefficients Coefficients
heteroscedasticity test. A significance value B Std. Beta
Error
of more than 0.05 indicates that the study
1 (Constant) .203 .089 2.272 .024
does not have symptoms of Green -.022 .015 -.097 -1.416 .158
heteroscedasticity. The significance value Accounting
Environmental .044 .011 .303 4.116 .000
for the green accounting variable is 0.991. Performance
The significance value for the Company Size -.099 .003 -.188 -2.764 .006
a. Dependent Variable: Profitability

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Hypothesis Test The first hypothesis of this study is that

The coefficient of determination is used green accounting has a positive effect on
to see the effect of the independent variable profitability. The results of hypothesis
on the dependent variable. The coefficient of testing indicate that green accounting does
determination can be seen from the adjusted not affect profitability, which means H1 is
R square (R2) value. Adjusted R2 shows the rejected. This study proves that reporting
percentage of the effect of the independent environmental costs in financial statements
variable on the dependent variable. The does not affect the size of the company's
adjusted R square value of 0.058 means that ROA.
the effect of green accounting, These results are compatible with
environmental performance, and company Angelina and Nursasi (2021) research in the
size on profitability is 5.8%. The remaining research method, the characteristics of the
94.2% means that profitability is influenced research object used, and the results. The
by other variables not examined in this object of the research is a manufacturing
study. company in the primary and chemical
The F-test was carried out to measure industry sectors. This result is incompatible
the feasibility of the regression model with the research of Nisa et al. (2020), which
(goodness of fit) by testing the hypothesis states that green accounting positively
together (Ghozali, 2018). The calculated F affects company profitability. This research
value obtained is 6.239, while the F table uses the same methods and characteristics
value is 2.641. The significance value is 0.000. of the research object as Angelina and
The calculated F value is greater than the Nursasi's (2021), but this study uses mining
table F value, and the significance value is companies as research objects. The
less than 0.05, so it can be concluded that the similarity of the characteristics of the
research model used is appropriate to research object showed different results in
describe the relationship between green previous studies. This study uses the exact
accounting, environmental performance, characteristics of the research object as the
and company size on profitability. two previous studies but with an expanded
The t-test was conducted to determine sector. The results of this study are
the effect of each independent variable generalizations from several sectors studied
individually on the dependent variable with the same characteristics, and it is found
(Ghozali, 2018). The green accounting that green accounting does not affect
variable has a t-value of -1.416 and a profitability.
significance value of 0.158. The significance This result also occurs because most
value is greater than 0.05. It can be said that companies do not report environmental
green accounting does not affect costs. The average value of green accounting
profitability. The environmental shows the number 0.11. This figure means
performance variable has a t-count value of that the companies studied do not report
4.116 and a significance value of 0.000. The t environmental costs in the financial
value is positive, and the significance value statements. Furthermore, Angelina and
is less than 0.05. It can be said that Nursasi (2021) revealed that reporting
environmental performance has a positive environmental costs is voluntary, meaning
effect on profitability. The firm size variable that companies are not required to report
has a t-count value of -2.764 and a environmental costs in financial statements.
significance value of 0.006. The t-count is This result is also supported by the
negative, and the significance value is less explanation of the Indonesian Institute of
than 0.05, so it can be said that firm size has Accountants (2014) contained in the
a negative effect on profitability. Statement of Financial Accounting
Discussion Standards (PSAK) 1, which says that several
companies that are closely related to the

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environment also present reports on the from the results of descriptive statistics, the
environment that are separate from the average value of environmental
financial statements. Such environmental performance and profitability variables in
reporting is not regulated by Financial the research of Nisa et al. (2020) are 3.81 and
Accounting Standards (SAK). The absence 13.291, while the average values of
of accounting standards for green environmental performance and
accounting is why companies, especially profitability variables in this study are 3.07
those studied, do not report environmental and 0.069. The increase in the environmental
costs, so this study does not find any effect performance variable's average value causes
of green accounting on profitability. the profitability variable's average value to
It is important for company increase, so it can be concluded that
stakeholders to know about environmental environmental performance positively
costs to show that companies still pay affects profitability.
attention to the environment in their Companies that show excellence in
operational activities, but many companies environmental performance have better
still do not report these environmental costs. profitability than companies that do not
This result contradicts stakeholder theory, comply with environmental regulations.
which states that companies are responsible High profitability is obtained from high
for carrying out and reporting actions that profits, and the company's income
lead to stakeholders' interests. The results of influences high profits. This significant
this study prove that the company has not income comes from the number of people
carried out its responsibility to report who use or consume goods and services
environmental costs even though most from a company. The results of this study
companies have carried out activities indicate that the better the environmental
related to the environment. People do not performance, the more people who use a
consider reporting environmental costs company's products, and the higher the
before buying a company's products, so company's profitability. This finding is also
green accounting does not affect company supported by a survey conducted by Clutch,
profitability (Rosaline & Wuryani, 2020). a business data provider platform. The
This is contrary to the legitimacy theory, survey conducted in 2019 shows that people
which says that companies are obliged to are more concerned with environmentally
carry out activities related to the friendly business practices and social
environment as legitimacy so that the responsibility than the price of goods or
company's sustainability is maintained. The services offered by companies. The survey
results of this study prove that reporting also found that 75% of respondents prefer to
environmental costs does not guarantee the shop from companies with the same views
company's sustainability. as them so that people concerned about the
These results are compatible with the environment can increase the profitability of
results of the research done by Putri et al. companies that also show concern for the
(2019), Chasbiandani et al. (2019), and Nisa environment.
et al. (2020), who also found that This result is in line with stakeholder
environmental performance had a positive theory and legitimacy theory. The theory
effect on profitability. The similarity of states that good environmental performance
research methods and characteristics of the will improve the company's image to attract
research object influences the similarity of stakeholders such as the public and
these results. Research by Putri et al. (2019) investors to increase company profitability.
and Chasbiandani et al. (2019) was This study proves that the companies
conducted on manufacturing companies, studied have balanced their business
while the research of Nisa et al. (2020) was activities with environmental activities. The
conducted on mining companies. Judging descriptive statistical analysis results

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explain that the companies studied have an not affect the size of the company's
average blue PROPER rating and none have profitability.
a black PROPER rating. 2. Environmental performance has a
The results of hypothesis testing positive effect on profitability. The
indicate that firm size has a negative effect better the company's compliance with
on profitability. This study proves that the environmental regulations and
greater the number of company assets, the environmental management activities,
lower the company's ROA. Conversely, the the higher the profitability.
smaller the company's assets, the higher the 3. Firm size has a negative effect on
company's ROA. profitability. A greater number of
These results align with Brastibian and company assets can reduce its ability to
Rinofah (2020) research, which used generate profits.
pharmaceutical companies as the Suggestions that can be given for
population. Judging from the results of further research include the following:
descriptive statistics, the average value of 1. Further research is expected to be able
firm size and profitability variables in to add variables with other variables
Brastibian and Rinofah's research (2020) is not examined in this study because the
25,439 and 12,653, while the average value adjusted R2 value of this study was only
of company size and profitability variables 5.8%. Variables that can be added are
in this study is 29,722 and 0.069. The average CSR disclosures which are also related
value of the company size variable that to the environment and affect the
increases causes the average value of the company's profitability.
profitability variable to decrease, so it can be 2. Further research is expected to increase
concluded that company size has a negative the research population from other
effect on profitability. sectors, such as companies
According to Wakhidati and Idayati participating in PROPER or Asia
(2022), large company assets do not Sustainability Reporting Rating
guarantee high profitability either because (ASSRAT), which are also related to the
an increase does not match the increase in environment.
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