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Disentangling the Bidirectional Relationships Across the Corporate Sustainable Development Indicators
Khine Kyaw1, Julio Pindado2,3, Chabela de-la-Torre2
1NTNU Business School, Norwegian University of Science and Technology, 7030 Trondheim, Norway.
Social Indicators Research
|March 7, 2022
Summary
Corporate sustainable development, encompassing economic, environmental, and social factors, follows a virtuous cycle. These interconnected indicators positively influence each other, demonstrating that "doing good" also means "doing well" for businesses.
Area of Science:
- Business and Management
- Environmental Science
- Economics
Background:
- Understanding the interplay between economic, environmental, social, and governance indicators is crucial for corporate sustainable development.
- Previous research often overlooks the dynamic and bidirectional nature of these sustainability relationships.
- Addressing endogeneity and dynamic processes is essential for accurate analysis of corporate sustainability.
Purpose of the Study:
- To disentangle the complex relationships among the four key indicators of corporate sustainable development.
- To account for the potential bidirectionality and dynamic nature of the sustainability process.
- To analyze the endogeneity problem within corporate sustainability indicators.
Main Methods:
- Utilized panel data from 734 U.S. companies spanning from 2004 to 2016.
- Employed the system generalized method of moments (GMM) for robust estimation.
- Controlled for the dynamic nature and endogeneity of sustainability indicators.
Main Results:
- Confirmed a distinct dynamic nature in corporate sustainability processes, with current indicator levels influenced by the prior two years.
- Found bidirectional and positive relationships among economic, environmental, and social indicators, indicating synergy rather than competition.
- Demonstrated that these three indicators are tightly interconnected within a firm's sustainable development.
Conclusions:
- Corporate sustainable development operates as a virtuous circle, where economic, environmental, and social performance mutually reinforce each other.
- Practitioners and regulators should adopt a simultaneous approach to these indicators for effective sustainability promotion.
- Long-term sustainability policies are recommended, supporting the notion that firms can achieve profitability through sustainable practices and vice versa.
Keywords:
Corporate sustainable developmentDynamic panel dataEconomic indicatorEnvironmental indicatorGovernance indicatorSocial indicatorMore Related Videos
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