Sustainable development principles in firm operations : evidence across industries

Abstract

Purpose: This paper aims to identify the factors that organize which sustainable development principles firms incorporate into their operations, comparing firms from the heaviest-emissions industries (energy, materials and utilities industries) and firms outside them (ex-energy, materials and utilities). Design/methodology/approach: Using the UN Sustainable Development Goals (SDGs) as a framework, this paper conducts an exploratory factor analysis on the sustainable development principles that firms incorporate into their operations from a representative sample (n = 2,832) of firms listed on the NYSE and NASDAQ in 2023. Findings: For firms within energy, materials and utilities industries, this paper identifies five factors: sustainable human needs, human quality of life, renewable energy, healthy infrastructures and pollution reduction. Inter-factor correlations reveal that pollution reduction and renewable energy are negatively correlated with one another and all factors are negatively correlated with human quality of life. For firms outside these industries, this paper identifies six factors: sustainable human infrastructure, supply chain sustainability, economic empowerment, medical development, water protection and renewable energy production. Inter-factor correlations identify positive synergies between four of the six factors around environmental sustainability (sustainable human infrastructure, supply chain sustainability, medical development, renewable energy production) but water protection and economic empowerment are negatively correlated with the other factors. Research limitations/implications: This paper offers a new way of conceptualizing how firms incorporate sustainable development into their operations: firm pursuits of sustainable development resemble an equilibrium between factors that requires trade-offs. Within energy, materials and utilities industries, firms that invest in renewable energy are less likely to invest in pollution reduction and human quality of life. This suggests that although firms are aspiring to become more sustainable, firms may pursue sustainability as a façade to placate stakeholders without significantly altering their production chain and sustainable products for certain factors, such as promoting human quality of life, may be cost-prohibitive, preventing firms from pursuing sustainable revenues in all factors. Practical implications: This paper identifies the prevailing factors that animate firm decisions on which sustainable development principles to integrate into their operations. The pursuit of sustainable development principles is a landscape of mutually exclusive choices, where a greater propensity to incorporate certain sustainable development principles into revenues (e.g. supply chain sustainability) may be linked to lower propensity to incorporate other principles (e.g. economic empowerment). The findings show the need for industry-specific guidelines on assessing firm pursuits of sustainable development and illustrate important nuances in the underlying factors that drive sustainability efforts in each area, comprising a series of competing choices where the pursuit of one factor restricts the pursuit of others. Social implications: This paper finds that although firms are responsive to stakeholder pressure, there are also signs that firms behave in an organized hypocrisy when choosing to integrate certain sustainable development principles into their operations at the expense of others. The results illustrate the utility of the UN SDGs as a framework for assessing how institutions contribute to sustainable development. Originality/value: Concerns about how firms contribute to sustainable development are gaining influence, but there remains little research on which sustainable development principles are adopted by firms in their operations across industries. This paper offers the first systematic examination of factors that drive firm decisions about sustainable development principles in the context of their own operations, using a sustainable finance dataset statistically representative of publicly-listed firms listed on the NYSE and NASDAQ.