Increasingly, firms engage in environmental certification programmes to reconcile external constituents and ensure financial viability. Some firms decouple the formal programme from core operations to obtain the signalling benefits of certification without investing scarce resources and time on costly substantive environmental actions. Despite growing awareness that adoption can lead to a ceremonial or superficial behaviour, the efficaciousness of decoupling for enhancing financial performance has been left largely unexplored. This study advances existing literature by moving beyond the act of certification to focus on practice variations at the firm level. The study joins the literatures on sustainable entrepreneurship, the resource-based view (RBV) of the firm and signalling theory to explain how signal fit strengthens the certification resource signal and enables firms with superior performance. Regression analyses confirmed that only those small and medium-sized enterprises (SMEs) that reported the compounded signal of high fit reported enhanced financial performance. Implications are discussed.
Keywords: signalling, decoupling, firm performance, small and medium-sized enterprises, SMEs, environmental certification