Green accounting as a driver of environmental performance and profitability: Evidence from Indonesian manufacturing firms

Abstract

This study examines the relationship between green accounting, environmental performance, and profitability in Indonesian manufacturing companies within the context of sustainable manufacturing and the Sustainable Development Goals (SDGs). Using a quantitative explanatory approach, the study analyzes secondary data from annual reports, sustainability reports, and environmental performance disclosures of manufacturing companies listed on the Indonesia Stock Exchange during 2021–2025. Green accounting is measured using an environmental accounting disclosure index, environmental performance using PROPER ratings, and profitability using Return on Assets (ROA), with firm size and leverage included as control variables. Given the longitudinal and cross-sectional structure of the data, panel data regression is employed, with pooled ordinary least squares, fixed-effects, and random-effects models considered through appropriate model selection tests. Robustness analysis is also conducted to examine the consistency of the estimated relationships across alternative panel specifications. The findings indicate positive relationships between green accounting and environmental performance, between green accounting and profitability, and between environmental performance and profitability. These findings highlight the relevance of environmental accounting practices in strengthening corporate environmental accountability while supporting financial performance. The study contributes to sustainable accounting literature by integrating environmental and financial dimensions within the Indonesian manufacturing context and provides empirical insights relevant to responsible production and the achievement of SDG 12 and SDG 13.