There is a long-standing debate regarding the link between corporate environmental performance and financial firm performance. Up to the present, this debate has been an important trigger for empirical research. It is often argued, however, that the large body of research concerning this topic has not led to conclusive findings. Mixed results invite a literature study that can clarify the debate and allows for the drawing of conclusions. We focus on studies that examine the impact of corporate pollution as well as corporate initiatives to reduce pollution, and this both within a regulated and a voluntary framework. The literature review reveals that regulation does not enhance the relationship between environmental and financial performance. Legislative actions by governmental bodies merely help in generating environmental awareness among stakeholders as well as in creating a benchmark against which good and bad environmental performance can be defined. It is the stakeholders, enforced by increasing environmental corporate disclosure, who truly force firms to adopt more sustainable business models.
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