Does it pay to be sustainable? Looking inside the black box of the relationship between sustainability performance and financial performance

Abstract

The last three decades have witnessed a huge amount of research exploring the linkage between companies' sustainability performance (SP), sustainability disclosure and financial performance (FP). Researchers have applied various methods and techniques to investigate this relationship, yet the results remain equivocal. In this article, we look inside this black box by considering various manifestations of sustainability practices and investigating their link with FP. We apply a manual content analysis technique to analyse the sustainability reports of the 100 best‐performing US firms. Our results reveal that fragmentation in the results is caused by the SP measurement. Additionally, we note that the interlinkages between different SP dimensions and sub‐dimensions are weak and somewhat contradictory. The results help draw important policy implications for the development of an SP reporting framework.

Corporate financial performance due to sustainable development in Vietnam

“…For the nonelectronics industries, the results revealed that board ownership has a significant positive influence on the CSR-CFP relationship and a negative relationship if it is a family business. Hussain, Rigoni, and Cavezzali (2018) have considered various manifestations of sustainability practices and investigated their link with CFP. Authors analyzed the sustainability reports of the 100 best performing U.S. firms and revealed that fragmentation in the results obtained is caused by the ways of sustainability performance measurement as the interlinks between different sustainability performance dimensions and subdimensions are weak and somewhat contradictory.…”

“…Institutional transitions affect the role of financial performance in CSR reporting CFP buffers against external pressures on CSR brought by institutional transitions Hou (2019) Relationship between CSR and CFP in Taiwan Socially responsible firms can achieve financial performance superior to those which do not pursue CSR initiatives Hussain et al (2018) Link between sustainability practices and CFP Interlinks between different sustainability performance dimensions and subdimensions are weak and somewhat contradictory to bias and fragment research results Lu et al (2018) Link between CSR and its material implications including CFP CSR programs can be detrimental to CFP in the short term but conducive to improving it in the long term Busch and Friede (2018) Relation between CSP and CFP The relation is positive regardless of whether firms focus on ecological or social aspects. Strong relation for operational, short-term CFP Marti et al…”

Inclusions in and Exclusions from the S&P 500 Environmental and Socially Responsible Index: A Fuzzy-Set Qualitative Comparative Analysis

“…There is extensive research on the integration of sustainability or CSR into corporate strategic management [18], and particularly on the analysis of the links with economic value creation (including comprehensive reviews and meta-analysis [2,14,[19][20][21][22]); however, the results regarding the relationship between CSR and financial performance remain inconclusive [17,[23][24][25]. In particular, research findings support all the possible hypotheses (non-significant or neutral effects, positive effects and negative effects of CSP on CFP).…”

Company’s strategic success as the basis of its potential sustainability

“…Hussain, Rigoni & Cavezzali investigated the relationship between sustainability performance (SP) and financial performance (FP) of company. As a result, a model of assessing the impact of sustainability performance (SP) on financial performance (FP) was proposed, such a model allows us to assess the financial value of the stability of a company's development [11]. Peculiarities of corporate reporting with the goal of creating a positive image of the company, the advantages of financial and non-financial reporting from the point of view of planning sales volumes are presented in the works of a group of Singaporean scientists [12].…”