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When Does Corporate Sustainability Performance Pay off? The Impact of Country-Level Sustainability Performance

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  • Xiao, Chengyong
  • Wang, Qian
  • van der Vaart, Taco
  • van Donk, Dirk Pieter

Abstract

There has been considerable debate on and research efforts into the question as to if, and if so when, improving corporate sustainability performance is not only beneficial for social and environmental wellbeing but also for the financial wellbeing of a firm. So far, the literature has reported mixed results on the relationship between corporate sustainability and financial performance. Drawing on instrumental stakeholder theory, we develop a focal hypothesis arguing that the financial effect of corporate sustainability performance is negatively impacted by country-level sustainability performance because stakeholders will take a firm's sustainability improvement for granted in countries with good social and environmental performance. We test this focal hypothesis in a cross-country setting drawing on the 6th International Manufacturing Strategy Survey. The current study supplements these data with secondary data drawn from the Human Development Index and the Environmental Performance Index. The results support our hypothesis that firms in countries with higher levels of sustainability performance generally find it more difficult to capitalize on corporate sustainability performance than do their counterparts in countries with relatively low levels of sustainability performance. This outcome helps to explain the mixed findings in the literature. Moreover, our study suggests that sustainability management can be a source of competitive advantage for firms located in emerging and developing countries, where in general the level of sustainability performance is relatively low.

Suggested Citation

  • Xiao, Chengyong & Wang, Qian & van der Vaart, Taco & van Donk, Dirk Pieter, 2018. "When Does Corporate Sustainability Performance Pay off? The Impact of Country-Level Sustainability Performance," Ecological Economics, Elsevier, vol. 146(C), pages 325-333.
    • Handle: RePEc:eee:ecolec:v:146:y:2018:i:c:p:325-333
    DOI: 10.1016/j.ecolecon.2017.11.025
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