Sustainable Progress: Exploring the Environmental Impact of Dynamic and Static Working Capital Efficiency in the Context of Operational Profitability

ABSTRACT The environmental impact reduction agenda requires an all‐hands‐on‐deck approach. Proper working capital management (WCM) and operational process efficiency are effective ways for firms to contribute to this cause. This paper examines the impact of dynamic and static WCM on carbon emissions from 2005 to 2022. Using multiple regression analysis, the study demonstrates that dynamic WCM has a positive impact on carbon emissions, and static WCM shows an identical impact. Additionally, gross margin moderates the effect of dynamic and static WCM on carbon emissions. The results suggest that an extended cash cycle contributes to higher carbon emissions, highlighting the importance of efficient WCM in reducing a firm's carbon footprint. The results also indicate that financially stable firms are better positioned to pursue eco‐friendly activities. This study contributes to the discourse on corporate carbon footprint reduction and provides managers with valuable insights into an essential area of management that can enhance firms' environmental responsibility.