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Achieving corporate sustainability requires the implementation of management practices that create long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental, and social developments. Corporations that are sustainable create value that, in the long run, exceeds their environmental impact (Figge and Hahn 2004). We examine the extent to which investors incrementally value the long-run benefits accruing from adoption of eco-effective management. We posit that adoption of eco-effective management results in increases in firms' market valuation, and that those increases persist beyond the current accounting period. Our results support this hypothesis. This study has broad public policy implications as accountants, managers, and government policymakers shift their focus toward sustainability and rely on market-based mechanisms to further environmental goals. Data Availability: All data are available from public sources.

The purpose of this study is to assess how identifying, tracking, and monitoring environmental costs can assist an agenda adopted to improve environmental performance. We do so by providing a theoretical discussion and contextual model of eco-efficiency that includes cost management as part of its activities. This approach draws on the quality management literature and the Porter hypothesis, which assumes that pollution is a form of technical inefficiency and that properly designed regulations stimulate firms to develop pollution control innovations. Our paper provides several specific contributions. First, for all stakeholders we provide additional insight into the ongoing debate over the value relevance of environmental cost management by developing a general model of eco-efficient behavior. Second, our models demonstrate that there is room for opportunities to reduce pollution while simultaneously improving the value of the firm. To do so, however, requires a coordinated effort on the part of both the business community and legislators to understand the needs of each and to offer alternatives that will provide benefits for each party.

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