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Corporate
Corporate sustainability sustainability
performance and firm performance
performance research
361
Literature review and future research agenda
Praveen Goyal and Zillur Rahman
Department of Management Studies, Indian Institute of Technology Roorkee,
Roorkee, India, and
A.A. Kazmi
Department of Civil Engineering, Indian Institute of Technology Roorkee,
Roorkee, India

Abstract
Purpose – The aim of this paper is to present a taxonomy of available literature on the relation of
sustainability performance and firm performance, and to provide a path for future research for this
field of study.
Design/methodology/approach – Research papers were collected on sustainability performance
assessment from various journals available at different online databases. The unit of evaluation was a
full paper published in one of the relevant journals. Papers were classified in different categories and
tabulated under various classes. A total of 101 research paper sources were studied and assessed in
terms of nature of research, level of analysis, and application.
Findings – The review reveals that most of the research in the field of sustainability performance and
firm performance association, analyzed this relationship in developed countries. The result differs in
various cultural and economic contexts and there is no universally accepted direction of this relationship.
Contribution of research has also revealed a pattern of growth in recent years. Financial performance is
used in most of the research as a proxy to firm performance. As discussed, the different research gaps
may be exploited for further research. It also argues that further empirical research in relation of
corporate sustainability performance and firm performance is required in developing countries.
Research limitations/implications – The findings of this paper can be generalized only to the
specific population of online databases selected for this research for a given period of time and not for
the entire universe of the sustainability performance literature. There may be various unexploited
areas for future research in terms of different variables.
Originality/value – This paper fulfils the need of a comprehensive review of corporate
sustainability performance assessment literature. It provides a literature review and bibliography
for the period between January 1992 and March 2011 for the use of both academicians and
practitioners.
Keywords Sustainability performance, Literature, Firm performance, Performance management,
Sustainable development
Paper type Literature review

Introduction Management Decision


Vol. 51 No. 2, 2013
Due to growing interest of various stakeholders’ groups in corporate activities in current pp. 361-379
competitive environment there has been a surge of publications in the area of corporate q Emerald Group Publishing Limited
0025-1747
sustainability performance assessment from both academicians and practitioners. DOI 10.1108/00251741311301867
MD Companies are striving to achieve long-term benefit by adopting sustainability activities
51,2 as core of corporate strategy (Chabowski et al., 2011; Cruz et al., 2006). In fact,
commitment to sustainability issues has become an issue of strategic importance in
current competitive scenario. It is expected from business organizations to be a “better
citizen” (Orsato, 2006). Increasing wave of incorporation of sustainability in corporate
strategy formulation resulted into the need of assessment of its performance. The
362 development of successful, long-term corporate sustainability strategy and its
performance measurement has attracted the attention of researcher for the last two
decades. Within this research stream, the corporate sustainability performance impact
assessment on firm performance is very important. According to Neely et al. (1994),
effectiveness assessment of any strategy and its impact on overall firm is an important
issue that all firms need to assess after implementation of any new strategy. During
positive growth of corporate sustainability performance, firm performance follows the
same path or vice versa, demands a good amount of research. Corporate sustainability
performance mainly focuses on the environmental, social, and economic performance of
sustainable development (Takala and Pallab, 2000; cited in Wagner, 2010).
Sustainable development is defined as “development that meets the needs of the
present without compromising the ability of future generations to meet their own needs”
(WCED, 1987, p. 43). This definition focuses on need of both current and future
generations. It qualifies to be a widely accepted definition of sustainable development in
universal sense, however, it is required to define this concept in specific fields (Seuring
et al., 2003). Business sustainability is defined as “adopting business strategies and
activities that meet the needs of the enterprise and its stakeholders today while
protecting, sustaining and enhancing the human and natural resources that will be
needed in the future” (cited in Labuschagne et al., 2005). It includes the concept of “Triple
Bottom Line” introduced by Elkington (1998), which proposed the need for a proper
balance, among the three parameters environmental, social and economical to achieve
sustainability in organizations. Researchers have used both individual parameters of
sustainability like environmental (Gonzalez-Benito et al., 2005; Sarkis and Cordeiro, 2001)
and social (Lankoski, 2009; Ruf et al., 2001; Hull and Rothenberg, 2008; Klassen and
McLaughlin, 1996) as well as examined combined effect of sustainability parameters on
firm performance (e.g. Wagner, 2010; Lopez et al., 2007; Chang and Kuo, 2008).
Despite the growing interest of research in this area a proper classification of
research is missing. In general, on the basis of extensive literature review the main
objective of this research paper is to provide taxonomy of the existing literature by
conducting a review and develop better insight to sustainability assessment research
and to provide scope for future research in the field. In particular, the aim is to
rationalize, and analyze the studies on the basis of approach and content to highlight
the path, field is following. This article aims at reviewing both conceptual and
empirical literature on the relationship of corporate sustainability performance and
firm performance. Thus, the aim of this paper is to provide a better understanding of
the literature on a single platform by providing various classification schemes of
literature and to provide future scope of research in this field for the help of both
practitioners and academicians.
This paper begins with a discussion on methodology used followed by the
classification of literature on various criteria. In subsequent sections research findings
are presented followed by the discussion and scope for future research.
Methodology Corporate
Conceptually corporate sustainability is classified in three parameters, i.e. social, sustainability
environmental and economical. All research whether conceptual or empirical always
relies on the same classification scheme. Some of these researches have discussed these performance
parameters in isolation like social sustainability (Waddock, 1997; Ruf et al., 1998;
Moore, 2001; Scholtens, 2008) or environmental sustainability (Gonzalez-Benito, 2005;
Sarkis and Cordeiro, 2001; Klassen and McLaughlin, 1996; Jung et al., 2001; Filbeck, 363
2004). On the other hand, some other studies also focused on the combined assessment
of these three parameters (Hahn, 2006; Wagner, 2010; Lopez et al., 2007; Labuschagne,
2005; Balkau and Sonnemann, 2010). Although this classification scheme provides a
sound base to comprehend the theories related to corporate sustainability, but at the
same time this scheme does not serve the purpose of investigating the depth of the
literature in this field. The main objective of this paper is to address the depth of
literature in the field of corporate sustainability assessment. The increasing number of
studies in this field made this important to identify the growth of literature in this field
as well as to identify the potential zone of research. That is why authors have
presented the bibliographic scheme of corporate sustainability literature. The main
objective to adopt this classification scheme is twofold. First, is to provide the state of
existing literature in the field of corporate sustainability performance assessment;
second, is to draw attention of researchers to the possible unexploited areas by
providing future agenda for research. This classification will also help future
researchers and practitioners to recognize the growth of the sustainability performance
assessment in academic literature in last 18 years, as this research paper reviews
literature published in various academic journals from 1992 to March 2011. One of the
important issues in the selection of literature is that reports and publication of various
consultancy firms, working papers, textbooks, master and doctoral dissertations and
government reports also contain literature related to sustainability and available in
abundance. According to Ngai (2005), maximum number of people included both
practitioner and academician use journal to gather the information. Therefore, none of
them was selected for this review purpose. The population to collect literature was
confined in the following online databases:
.
Emerald Full Text;
.
EBSCOS;
.
Elsevier’s Science Direct;
.
JSTOR;
.
Taylor & Francis; and
.
Springer-Verlag.

Content analysis is defined as “the objective, systematic, and quantitative description


of the manifest content of a communication” (Malhotra and Dash, 2009). It is an
important tool that is primarily based on identifying the availability of information in
various disciplines. Various keywords were used in literature search from above
mentioned sources. These include corporate sustainability performance, green, triple
bottom line, environment performance, and CSR. Paper search with the help of these
keywords from all databases is based on the key word detected in the title, abstract,
keyword list and in full text. The study of various research papers after this extensive
MD search came out with 101 papers useful to the purpose. Most of the excluded papers
51,2 were talking about sustainability in different contexts like country, agriculture etc. and
were not found suitable for this purpose.
After the selection of papers, full paper was thoroughly studied for any
categorization. Analysis of literature based on various criteria. All 101 papers were
classified into the following four time periods of publication. The main reason of this
364 distribution was to help the longitudinal study of sustainability literature. These
articles were analyzed on the basis of different criteria (as shown in Figure 1).
(1) Period I: 1992-1996.
(2) Period II: 1997-2001.
(3) Period III: 2002-2006.
(4) Period IV: 2007-March 2011.

Distribution of article in terms of time period


Distribution of articles in different time periods shows the growth of studies on
sustainability assessment in different time spans. This classification provides a basis
to understand the quantitative improvement in the research studies in the study phase.
Period-wise distribution of published articles is shown in Figure 2. Out of total 101
articles only 3.96 percent were published in the period between 1992 and 1996. The
contribution increased in next period (1997-2001) to a considerable level of 19.6 percent.
Publications in next two periods are 31.68 percent and 44.55 percent for 2002-2007 and
2007-2011 respectively. It shows a healthy growth in the number of publications in the
first decade of twenty-first century. Volume of publication in the time interval
2007-2011 is more than ten times than the time interval 1992-1996 (Figure 2).

Figure 1.
Flow chart for literature
classification
Corporate
sustainability
performance

365
Figure 2.
Distribution in terms of
time period

Distribution of articles in terms of countries


Country-wise classification of literature is very crucial to identify the seriousness of
research for this critical issue across the globe (see Table I). Future research could be
focused on the unexploited part of the globe to sensitize the issue of sustainability
assessment. In the study period 1992-2010 maximum number of articles related to
sustainability performance are publication of authors based in USA, UK, Spain and

Country 1992-1996 1997-2001 2002-2006 2007-2011 Total

Australia – – 1 1 2
Belgium – – 1 – 1
Brazil – – – 1 1
Canada 2 – – 1 3
China – – – 1 1
Egypt – – – 1 1
Finland – – – 2 2
France – – – 2 2
Germany – – 8 3 11
India – – 1 1 2
Italy – – 1 1 2
Japan – – – 1 1
Korea – – – 1 1
Malaysia – – 1 – 1
Netherlands – 2 1 2 5
Philippines – – – 1 1
Portugal – – – 1 1
Saudi Arabia – – 1 – 1
Slovenia – – 2 – 2
South Africa – – 1 – 1
South Korea – 1 – – 1
Spain – 1 3 7 11
Switzerland – – – 2 2
Taiwan – – – 4 4
Thailand – – – 1 1
UK – 4 4 2 10 Table I.
USA 2 12 7 9 30 Country-wise distribution
MD Germany. There is crunch of research studies from other countries especially
51,2 developing countries like India (see Figure 3).

Distribution of Article in terms of application area


In the distribution of articles in terms of application area it is found that most of the
articles published in the sustainability performance measurement are related to the
366 manufacturing industries (see Table II). Among 101 articles only 11 articles (four each
for hotel industry and banking and financial services, two for retail and one for

Figure 3.
Distribution in terms of
country

Time interval/industry 1992-1996 1997-2001 2002-2006 2007-2011 Total

Banking and finance – 1 2 1 4


Chemical – 2 1 – 3
Pharma – 1 1 – 2
Oil and gas – 2 – – 2
Electronics – – 2 – 2
Electrical – – 2 – 2
Furniture – – 1 – 1
Construction – – 1 1 2
Energy – – 1 – 1
FMCG – – 3 – 3
Food – – – 4 4
Hotel – 1 1 2 4
Mining and mineral – – 1 – 1
Multi industry 3 12 12 27 54
Package and printing – – – 1 1
Pulp and paper 1 – 2 – 3
Petro chemical – – 1 – 1
Process – – 1 – 1
Retail – 1 1 – 2
Table II. Steel – – 1 1 2
Application area-wise Telecommunication – – – 1 1
distribution Tourism – – – 1 1
telecommunication) are available for sustainability assessment of service industries. Corporate
Maximum numbers of studies fall under the category of “Multi-Industry”. Multi sustainability
industry term here refers to a combination of different industries. This term is used for
those studies where researchers did not provide the detail of sample (Ann et al., 2006; performance
Gallego, 2006; Henri and Journeault, 2008). In these studies the researcher has collected
data from secondary sources or from some rating agencies.
367
Distribution of articles in terms of issue coverage
This classification delineates the distribution of research papers in terms of their scope
in context of sustainability dimensions. Three categories suggested by Seuring and
Muller (2008) were considered here. The first category is for studies based on social
issues, the second category stands for studies based on environmental issues and third
and last category is for the studies including both social and environmental issues,
hence, this category was named as sustainability issues. This classification shows the
movement of research from isolation to integration of these issues (Figure 4).
Distribution of articles on the basis of issue coverage clearly depicts that in the time
period of 1992-1996 most of the research papers based on environment and social
issues of sustainability in isolated way. Number of researches on sustainability
assessment is very few, especially initial numbers are negligible. However, there is a
sharp growth of research in this area of late. Yet, more research is required to
understand the subject matter better in different business environments.

Distribution of articles in terms of journals


Articles related to sustainability assessment are widely published in various reputed
journals in earlier mentioned databases. There are, in total, 56 journals that published
papers related to the issue studied in the given time frame. The maximum number of
papers are published in the Journal of Business Ethics. The list of journals, along with
number of articles, is shown in Table III.

Figure 4.
Distribution in terms of
issue coverage
MD Journal name No. of articles
51,2
Academy of Management Journal (AMJ) 1
Academy of Management Review (AMR) 1
Accounting & Finance (A&F) 1
Accounting Organization & Society (AO&S) 2
Benchmarking: An International Journal (BAIJ) 1
368 Building & Environment (B&E) 1
Building Research & Information (BR&I) 1
Business Ethics: A European Review (BEER) 1
Business Strategy & the Environment (BS&E) 6
Corporate Governance(CG) 3
Corporate Social Responsibility & Environmental Management (CSREM) 4
Ecological Economics (EE) 5
Ecological Indicators (EI) 1
Eco-Management & Auditing (EM&A) 2
Environment & Resources Economics (E&RE) 1
European Business Review (EBR) 1
European Financial Management (EFM) 1
European Journal of Operational Research (EJOR) 1
European Management Journal (EMJ) 3
Hospitality Management (HM) 1
Industrial Management & Data Systems (IMDS) 2
Industrial Marketing Management (IMM) 1
Int. J. Business Governance & Ethics (IJBGE) 1
Int. J. Production Economics (IJPE) 2
International Journal of Bank Marketing (IJBM) 1
Journal of Management Studies ( JMS) 1
Journal of Business Ethics ( JBE) 11
Journal of Business Finance & Accounting ( JBFA) 1
Journal of Business Research ( JBR) 1
Journal of Cleaner Production ( JCP) 6
Journal of Environmental Economics & Management ( JEEM) 1
Journal of Environment Management ( JEM) 2
Journal of Management ( JOM) 2
Journal of Marketing ( JOM) 1
Journal of Operations Management ( JOOM) 3
Journal of Retailing & Consumer Services ( JRCS) 1
Journal of Services Research ( JOSR) 1
Journal of Strategic Information Systems ( JSIS) 1
Journal of World Business ( JOWB) 1
Long Range Planning (LRP) 2
Management Accounting Quarterly (MAQ) 1
Management Decision (MD) 2
Management & Environmental Quality: An International Journal (MEQIJ) 2
Management Science (MS) 1
Management Auditing Journal (MAJ) 1
Omega 2
Quantitative Research in Accounting & Management (QRAM) 1
Resource Conservation & Recycling (RC&R) 1
Scandinavian Journal of Management (SJOM) 1
Strategic Management Journal (SMJ) 3
Structural Change & Economic Dynamics (SCED) 1
Sustainable Development (SD) 2
Technology in Society (TIS) 1
Table III. The Service Industries Journal (TSIJ) 1
Journal-wise distribution Tourism Management (TM) 1
Distribution of articles in terms of methodology adopted Corporate
This classification scheme provides more transparency to the paper for its reader. This sustainability
classification criterion will help the future researchers to understand changes in the
methodologies adopted for the sustainability performance assessment. This performance
classification permits a holistic picture of various research approaches used for
sustainability performance assessment (Marasco, 2008). In the distribution of articles,
in terms of methodology adopted, it is found that there is a lack of theoretical research 369
in all time intervals between 1992 and 2011. Very few studies are published on the
aspect of conceptualization of sustainability assessment and its impact on both
financial and non-financial performance of firm (Table IV).
Among the articles, identified very few studies mentioned their sampling technique.
Out of 101, only seven studies have mentioned regarding their sampling technique,
which includes random sampling (5) and convenience sampling (2). Hence, based upon
this finding random sampling method is the most appropriate method for data
collection purpose (see Figure 5).

Conclusion and future scope


This paper aimed to discuss the present research scenario of sustainability assessment
methodology and its impact on both firm value and consumer value addition in both
sectors (Manufacturing and Services). In spite of the existing quality of research in this

1992-1996 1997-2001 2002-2006 2007-2011

Univariate (%) 40 52.63 35.9 40.68 Table IV.


Multivariate (%) 60 36.84 33.33 47.45 Methodology-wise
Theoretical (%) 0 10.53 30.77 11.87 distribution

Figure 5.
Distribution in terms of
methodology
MD area there is plenty of scope for learning the subject. In this study we identified 101
51,2 research articles published between 1992 and March 2011 in various refereed journals
available online. A significant growth is observed in research related to sustainability
assessment both empirically and theoretically. The major conclusion drawn from the
study is that, despite lots of rigorous efforts the association between corporate
sustainability performance and firm performance is still not well understood. More
370 study on this association in a different environment is necessary to reach more reliable
and conclusive results. The area of study is so broad that there is no any accepted
framework in general.
Another important observation is that most of the researchers considered financial
performance as the substitute of firm performance. That is why generalization of
existing result is very little. According to Poolthong and Mandhachitara (2009), it is
necessary to measure the return on investment in both financial and non-financial
terms on these activities. Third, most of the studies have been rated by independent
agencies or some other proxy like awards or certification has been under taken to
determine the status of sustainability performance. Finally, the most important
observation is that the maximum number of research has focused on developed
countries. Nevertheless, research focus is increasing in developing countries, although
at a very slow pace. The body of research is very limited in case of developing
countries like India.

Developing trends in the literature


The study of the association of corporate sustainability assessment and firm
performance discloses certain trends developing in the literature. First, research is
showing a movement from the individual measurement of social or environmental
performance to combined measurement of sustainability performance especially in
developed countries. Both independent researchers as well as consultancy firms are
talking about the holistic sustainability performance assessment of firms.
A second trend involves the inclusion of service firms in this area. Although the
number of studies are very few but a growth pattern can be seen in the contemporary
research. Researchers are trying to analyze the contribution of service companies in the
sustainable development of planet. Third, some of the studies try to go by other way
and include firm performance on the basis of non-financial parameters in addition to
financial performance to figure out more reliable results. Some of the studies also used
various new financial performance measurement tools like Tobin’s Q ratio, EVA with
traditional tools.

Agenda for future research


Based on the outcome of this review, avenues for future research should be on the basis
of following guidelines.

Type of environment and perspectives


Assessment of sustainability at company level is requirement of time (Shrivastava,
1995). There is a need to concentrate on assessment of sustainability performance of
within and cross study in different industry setup (both manufacturing and service)
and their relationship with firm performance. This is necessary to analyze whether
sustainability performance is helpful in value addition for end consumer of firms as it
is the ultimate aim of corporate sector. As stated earlier most of the studies are from Corporate
developed countries. According to business system theory (Whitely, 1992) different sustainability
countries have different business systems. We cannot generalize findings of developed
countries to developing countries without validation of research in these countries. performance
(Rettab et al., 2009). Thus, this review study clearly reveals a timely need to focus on
research in developing countries to check the reliability and validity of the outcomes
from developed countries as well as to generalize the results. Apart from this, there is 371
requirement to study the developed framework on this relation in different cultural and
legal environment to enhance their generalisability (see Figure 6).

Methodology
Methodology-wise, our findings suggest that existing studies are both quantitative and
qualitative in nature, therefore, to extract more detailed and thorough information on
the impact of corporate sustainability performance on firm performance a proper
combination of both quantitative and qualitative methodologies are required. As most
of the studies shown in above dealt with secondary data of corporate sustainability
performance assessment, empirical research should be directed towards the
assessment of corporate sustainability performance. Existing literature on
association of corporate sustainability performance and firm performance mainly
focused on financial performance of the firm. Therefore, further impact assessment on
other non-financial performance indicators is necessary to reach a more conclusive
outcome.

Implications for management


Apart from academic use, the classification and positioning of the growing number of
studies in this field will help practitioners develop a comprehensive understanding of
the strategic importance of sustainability issues in different ways. Nowadays, it is
becoming more demanding of managers to deliver better corporate sustainability

Figure 6.
Proposed framework for
future research
MD strategies. This article will enhance managers’ awareness regarding stakeholders’
51,2 interest in the company activities. Consequently, this will lead to the inculcation of
current and demanding sustainability issues in the strategy formulation.
The classification and bibliography presented in this paper will assist managers
and academic researchers alike in getting acquainted with the issues faced during
previous endeavors. Although, it is not surprising that a majority of sustainability
372 related studies were conducted in developed country context, it is imperative that
global business organizations promote research on sustainability assessment issues in
the developing countries. Similarly, sustainability assessment of service sector cannot
be ignored due to the increasing contribution of service sector to the global economy.
Moreover, these studies lend insights to the use of non-financial performance measures
for evaluating performance due to sustainability. Almost all studies have focused on
“mere financial” effect of sustainability through historical data. However, the authors
feel that the inclusion of primary collected data based on subjective and behavioral
parameters will add to the robustness of the measurement model.
In the end, we can conclude that sustainability performance assessment has
attracted good amount of research especially in last decade. If we go for a trend
analysis of the research publications we can surely forecast a good amount of research
in this area in future.

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About the authors


Praveen Goyal has received his MBA in Marketing. He is currently pursuing his PhD in Business
Administration at the Indian Institute of Technology, Roorkee. He has authored several articles
related to corporate sustainability and CSR. His areas of interest are service marketing, strategic
management, and CSR. Praveen Goyal is the corresponding author and can be contacted at:
praveeng23@gmail.com
Zillur Rahman has received his MBA and PhD in Business Administration. Currently he is
working as an Associate Professor at the Department of Management Studies, Indian Institute of
Technology, Roorkee. His research interests are business strategy and international marketing
and he has several publications in reputed national and international journals. He was the
recipient of the Emerald Literati Club Highly Commended Award in 2004, and Emerald/AIMA
Research Fund Award in 2009.
A.A. Kazmi has received his ME Degree in Environmental Engineering from Asian Institute
of Technology, Bangkok. He got his Doctorate (Environmental Engineering) from University of
Tokyo. Currently he is working as an Associate Professor at the Department of Civil
Engineering, Indian Institute of Technology Roorkee. His major fields of interest are
sustainability, water and wastewater treatment and solid waste management.

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