Comparative Analysis of Corporate Environmental Performance in Terms of Eco-Innovation: Developing a Dominance Index (DMI) Approach

Abstract

The consequences of climate change have underscored the need for greater environmental responsibility, leading companies to increase their efforts in developing sustainable practices, including eco-innovation strategies. Such initiatives have aroused the interest of academics and professionals worldwide, particularly in the last decade, leading to several studies commissioned to analyze the environmental performance of companies. However, these analyses have relied on complex and difficult-to-replicate methodologies, limiting their reach to users. In this context, the aim of this paper is to develop a dominance-based ranking using dummy variables that allow for a straightforward understanding of which companies, regions, and industries demonstrate the highest degree of environmental performance in terms of eco-innovation, both from a general perspective and for each of the dimensions of eco-innovation. This approach also responds to the methodological challenge of evaluating dummy variables, a frequent feature in datasets describing corporate or individual characteristics, by providing a structured and comparable basis for ranking without the need for subjective weighting. To this end, and for a sample of 4671 listed companies for the years 2020–2022, the Pareto dominance approach is employed, preserving the multidimensional nature of the data and allowing for a more nuanced comparison of alternatives without the need to aggregate multiple criteria into a single index, ensuring a robust and interpretable ranking of eco-innovation leaders. The main results derived from this study show Asian regions and, especially, European regions as leaders in eco-innovation. Additionally, this study highlights the most prominent industries and companies, while also proposing future lines of research that may be relevant for shedding further light on this field of study.