Sustainability Practices and Corporate Financial Performance: A Study Based on the Top Global Corporations

Abstract

Sustainability is concerned with the impact of present actions on the ecosystems, societies, and environments of the future. Such concerns should be reflected in the strategic planning of sustainable corporations. Strategic intentions of this nature are operationalized through the adoption of a long-term focus and a more inclusive set of responsibilities focusing on ethical practices, employees, environment, and customers. A central hypothesis, that we test in this paper is that companies which attend to this set of responsibilities under the term superior sustainable practices, have higher financial performance compared to those that do not engage in such practices. The target population of this study consists of the top 100 sustainable global companies in 2008 which have been selected from a universe of 3,000 firms from the developed countries and emerging markets. We find significant higher mean sales growth, return on assets, profit before taxation, and cash flows from operations in some activity sectors of the sample companies compared to the control companies over the period of 2006-2010. Furthermore, our findings show that the higher financial performance of sustainable companies has increased and been sustained over the sample. Notwithstanding sample limitation, causal evidence reported in this paper suggests that, there is bi-directional relationship between corporate social responsibilities practices and corporate financial performance.

Sustainable Leadership Practices Driving Financial Performance: Empirical Evidence from Thai SMEs

“…The results are aligned with previous studies linking individual SL practices to aspects of corporate financial performance. Some supporting literature linking these practices to favorable financial performance include amicable labor relations [77], valuing employees [19,78], social responsibility [53,79], plus a strong and shared vision [45,51].…”

Sustainability Reporting and Firm Value: Evidence from Singapore-Listed Companies

“…Using the Dow Jones Sustainability Index (DJSI), Clark and Allen [10] conclude that wealth maximization is associated with sustainability leadership. In addition, according to Ameer and Othman [11], significantly higher mean sales growth, return on assets, income before taxes and cash flows from operations in some sectors are discovered when companies engaged in sustainable practices compared to those who did not, based on data of the top 100 sustainable global companies in 2008. In addition, publishing a sustainability report is found to have positive effects on the firm's market value, which implies that investors attach a positive value to such reports and thus reflecting the anticipation of future cash flows [2].…”

Conceptualizing the Limiting Issues Inhibiting Sustainability Embeddedness

“…The literature supports this finding and describes the establishment of an enabling, shared culture for sustainability as a foundational sustainable leadership practice that is connected to sustainability embeddedness [10,17,33]. Leaders also play an important role in establishing the congruence between employees' concerns (on all management levels) and organizational values and, towards organizational commitment to sustainability [1,17,83,89,92].…”

“…The Past Performance Anchor is proposed as a limiting issue that holds practitioners back and fixed to their business-as-usual practices, as opposed to those practices associated with cultural change and innovation for sustainability [31,49,89]. It is known that when practitioners continue along the paths of business-as-usual and profit maximization it renders the destination of sustainability embeddedness impossible to reach [7,9,90].…”