The purpose of this study is to investigate the causal interrelations among the four pillars of corporate sustainability, which indicate a firm’s contribution to environmental, social, governance and economic activities. Moreover, this study identifies the critical drivers of corporate sustainability by focusing on the levels of market developments and geographical regions.
Based on corporate sustainability data of 2,725 global companies in 2016, this study uses a combination of analytical techniques including cluster analysis, data mining, partial least square path modeling and importance performance map analysis.
This study finds that companies in European developed markets exhibit the highest-ranking of corporate sustainability. In line with the social impact hypothesis, environmental, social and governance performance positively affects economic performance. Moreover, there is strong evidence of causal relationships and synergistic effects among the four pillars of corporate sustainability. In accordance with the institutional theory, the patterns of causal directions and the critical pillars depend on levels of market developments and geographical regions. Overall, social and environmental pillars are among the most critical drivers of corporate sustainability.
The methodology does not aim to provide a new weighting scheme for calculating the corporate sustainability index.
Corporate managers should consider sustainability practices in all dimensions to benefit from synergistic effects among environmental, social, governance and economic activities. Furthermore, corporate sustainability strategies should not be generalized across countries with different levels of market developments and geographical regions.
This study prioritizes environmental, social, governance and economic pillars of corporate sustainability in emerging and developed markets across geographical regions.
