Why pursue sustainability?
Firms with the highest sustainability have, on average, an ROA 11 percentage points higher than companies with only average sustainability.LEARN MORE
Firms with the highest sustainability have, on average, a return on assets (ROA) 11 percentage points greater than companies with only average sustainability. The trend is similar for net income.
Notably, firms with average sustainability scores perform worst financially. Why do firms with lowest sustainability outperform the middle-of-the-pack? Researchers suggest it is because they conserve resources that might otherwise go to charity.
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Sustainability contributes to a good reputation and correlates positively with corporate financial performance.LEARN MORE
Researchers pointed out that sustainability improves financial performance by mostly building reputation. They measured sustainability using indicators in formal reporting, reputation ratings, social audits, donation amounts, company principles and values with respect to corporate social responsibility. CFP was deﬁned as a company’s ﬁnancial viability, or the extent to which each company achieved its economic goals.
Researchers also noted that social activities were more closely linked to bottom line benefits than environmental activities.
More recent research by Busch and Friede also found a strong relationship between corporate financial performance and corporate sustainability, whether focused on social or ecological action. They conclude “The business case for being a good firm is undeniable.”
Sustainability works and it’s not only about being green. Social initiatives, such as good managerial principles and fair hiring practices, will help build a positive reputation that can lean to financial gains.
Orlitzky, M., Schmidt, F. L., & Rynes, S. L. 2003. Corporate social and financial performance: A meta-analysis. Organizational Studies, 24(3): 403-441.
Busch, T., & Friede, G. 2018. The robustness of the corporate social and financial performance relation: A second-order meta-analysis. Corporate Social Responsibility and Environmental Management,25 (4). Available at https://doi.org/10.1002/csr.1480.
How to pursue business sustainability effectively?
Firms with consistent sustainability practices demonstrate an average increase of 53% in market performance.LEARN MORE
Researchers defined sustainability as CSR using KLD data in five areas: community, diversity, employee relations, environment and product. Competitors find it difficult to replicate consistent CSR in these areas, giving high performing firms an edge.
Build on your previous successes. Not letting past efforts go to waste will help you remain competitive.