Finance and Sustainability – Resources, Capabilities, and Rewards

Abstract

Purpose

This paper proposes the concept of sustainability as a forward looking strategic intent of the organizations, which requires financing capabilities and investment. We structure the relationship between financial capabilities, product-led and process-led innovation approaches and corporate financial performance, in particular, we attempt to answer an important question: is sustainability-corporate performance relationship contingent upon the access and use of the financial resources?

Design/methodology/approach

We used a sample of Top 100 Sustainable global companies and tested several hypotheses regarding the likely financing policies of sustainable firms underlying their product-led and process-led sustainability approaches and financial performance.

Findings

Our results show that investment in R&D and capital expenditures provide a reasonable prediction of financing strategy chosen by the sample companies. Furthermore, our findings show that surplus (deficit) in financial capabilities influence the financing trajectory of the companies. Our results show that financial capabilities of companies, that is, financing choice (conservative vs. aggressive) matter for sustainable development, and sustainability-corporate performance relationship is contingent upon the use of financial resources.

Practical implications

These findings imply that organizations should rethink themselves and be encouraged to evaluate their own progress on the path of sustainability in terms of protection of the environment and the advancement of those communities in which they operate.

Originality/value

This paper develops a classification of global companies’ sustainable development approaches using their investment in R&D and capital expenditures. Furthermore, we also develop classification of companies using their financing capabilities, that is, surplus (deficit) to highlight their impact on the sustainable-corporate performance link.

Citation

Othman, R. and Ameer, R. (2014), "Finance and Sustainability – Resources, Capabilities, and Rewards", Ethics, Governance and Corporate Crime: Challenges and Consequences (Developments in Corporate Governance and Responsibility, Vol. 6), Emerald Group Publishing Limited, Leeds, pp. 19-45. https://doi.org/10.1108/S2043-052320140000006000