Environmental management and labour productivity: The moderating role of capital intensity

•We focus on the relations between labour productivity, capital intensity and environmental performance.•Evidence is contradictory regarding the relationship between environmental management and labour productivity.•The relationship between environmental performance and labour productivity depends on capital intensity.•Obtaining greater environmental performance in capital intensive firms reduces labour productivity.•We provide empirical evidence based on 2823 plants subject to EU ETS.

Recent years have seen firms improve their environmental practices, although the question still remains as to whether or not investing in such practices is or is not beneficial or simply a matter of image. This study focuses on labour productivity as a measure of performance, and we argue that the impact of greater environmental performance on that productivity is moderated by capital intensity. A sample of 2823 plants provides empirical evidence to support our approach. Specifically, the analyses, making use of estimates based on multiple regression models, reveal that environmental management has a positive impact on labour productivity in organisations with low capital intensity, although that impact becomes negative in cases of high capital intensity.