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Sustainability and Profitability of Large Manufacturing Companies

Author

Listed:
  • Iveta Mietule

    (Research Institute for Business and Social Processes, Faculty of Economics and Management, Riga Technical University Rezekne Academy, Atbrivosanas Aleja 115, LV-4601 Rezekne, Latvia)

  • Rasa Subaciene

    (Department of Accounting and Audit, Faculty of Economics and Business Administration, Vilnius University, Saulėtekio Al. 9, LT-10222 Vilnius, Lithuania)

  • Jelena Liksnina

    (Faculty of Economics and Management, Riga Technical University Rezekne Academy, Atbrivosanas Aleja 115, LV-4601 Rezekne, Latvia)

  • Evalds Viskers

    (Research Institute for Business and Social Processes, Faculty of Economics and Management, Riga Technical University Rezekne Academy, Atbrivosanas Aleja 115, LV-4601 Rezekne, Latvia)

Abstract

This study explores whether sustainability achievements—proxied through ESG (environmental, social, and governance) reporting—are associated with superior financial performance in Latvia’s manufacturing sector, where ESG maturity remains low and institutional readiness is still emerging. Building on stakeholder, legitimacy, signal, slack resources, and agency theories, this study applies a mixed-method approach (that consists of two analytical stages) suited to the limited availability and reliability of ESG-related data in the Latvian manufacturing sector. Financial indicators from three large firms—AS MADARA COSMETICS, AS Latvijas Finieris, and AS Valmiera Glass Grupa—are compared with industry averages over the 2019–2023 period using independent sample T -tests. ESG integration is evaluated through a six-stage conceptual schema ranging from symbolic compliance to performance-driven sustainability. The results show that AS MADARA COSMETICS, which demonstrates advanced ESG integration aligned with international standards, significantly outperforms its industry in all profitability metrics. In contrast, the other two companies remain at earlier ESG maturity stages and show weaker financial performance, with sustainability disclosures limited to general statements and outdated indicators. These findings support the synergy hypothesis in contexts where sustainability is internalized and operationalized, while also highlighting structural constraints—such as resource scarcity and fragmented data—that may limit ESG-financial alignment in post-transition economies. This study offers practical guidance for firms seeking competitive advantage through strategic ESG integration and recommends policy actions to enhance ESG transparency and performance in Latvia, including performance-based reporting mandates, ESG data infrastructure, and regulatory alignment with EU directives. These insights contribute to the growing empirical literature on ESG effectiveness under constrained institutional and economic conditions.

Suggested Citation

  • Iveta Mietule & Rasa Subaciene & Jelena Liksnina & Evalds Viskers, 2025. "Sustainability and Profitability of Large Manufacturing Companies," JRFM, MDPI, vol. 18(8), pages 1-18, August.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:8:p:439-:d:1718912
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    References listed on IDEAS

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    1. Gunnar Friede & Timo Busch & Alexander Bassen, 2015. "ESG and financial performance: aggregated evidence from more than 2000 empirical studies," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 5(4), pages 210-233, October.
    2. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    3. Sang Kim & Zhichuan (Frank) Li, 2021. "Understanding the Impact of ESG Practices in Corporate Finance," Sustainability, MDPI, vol. 13(7), pages 1-15, March.
    4. Salvatore Monni & Francesco Palumbo & Manuela Tvaronavičienė, 2017. "Cluster performance: an attempt to evaluate the Lithuanian case," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 5(1), pages 43-57, September.
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