Womack et al. (1991) defined the tenets of lean manufacturing, which dictate that processes should not have any wasted materials, motion, or work. Efforts to apply lean practices to manufacturing have been linked widely to improved firm performance in numerous empirical studies (Chen et al. 2007; Swamidass 2007; Capkun et al. 2009; Eroglu and Hofer 2011). While profit is typically the motivation for reducing waste by adopting lean practices, prior research has found that lean management may also impact a firm’s environmental performance (King and Lenox 2001a; Rothenberg et al. 2001). Further studies have linked environmental improvements resulting from lean initiatives with changes in firm performance (Porter and van der Linde 1995; King and Lenox 2001b).While these studies generally promote lean as a positive mechanism that in some circumstances improves environmental performance as well as profitability, they do not address the complexities of the relationship between lean manufacturing, the costs associated with environmental damages and a firm’s financial performance explicitly. A number of prior studies provide valuable insights into the potential of lean to improve a firm’s environmental performance; however, they do not present frameworks that can be used readily to predict the financial impacts of lean on environmental damages and firm performance. For example, Porter and van der Linde (1995) utilize a series of case study interviews to explore the relationship between environmental waste reduction efforts and firm innovation levels whereas King and Lenox (2001a) investigate the linkages between ISO 9000 and ISO 14,000 adoption and firm performance. Though insightful, neither of these studies link lean, environmental performance and financial performance in a clear and quantifiable manner. Therefore, the objective of this study is to address this gap by empirically examining and quantifying the relationships between firm leanness, environmental performance, and financial performance. The most closely related study to our work is that of Yang et al. (2011). Their study did find relationships between lean, environmental performance, and firm financial performance. However, an issue we overcome with this new study is that their data was based on a survey sent to the companies measuring the internal perceptions of companies regarding environmental initiatives, lean, and financial performance. Our study does not rely on perceptions or a survey with limited answer choices. Rather, our study examines a sample of manufacturing firms to assess if lean practices are associated with improved environmental and financial performance. We determine financial performance and measure leanness using Compustat recorded financial data. Environmental data is calculated by Trucost for these firms. Having secondary data takes out any potential issues of a firm’s wishful thinking of its performance in environmental or financial realms, and reduces issues related to the person filling out the survey not knowing the information fully.