Nexus between corporate sustainability and financial performance

Sammanfattning: To save the planet from previous devastating corporate actions, corporations have enormous responsibilities toward the environment, economy and society. Implementing corporate sustainability practices through establishing effective governance mechanisms can be considered a transformative initiative with potential implications for social and green innovation. Social and green innovation thus shifts companies’ focus from for-profit objectives to the creation of mutual benefit and shared values.Over the past four decades, extensive academic research has been conducted on the topic of corporate sustainability and financial performance. Therefore, conducting research on a similar topic might appear to the reader to be carrying coal to Newcastle. However, the aim of this thesis is not to reproduce previous studies but rather to address the following research question:  What is the nexus between corporate sustainability and financial performance? This thesis identifies that previous literature has produced blended results when explaining the nexus between corporate sustainability and financial performance; they have asserted that firms are solely responsible for sustainability activities and thus financial performance. In this regard, previous literature has argued for institutional pressure and legitimacy requirements to shape corporate behavior. However, I contradict the views of previous scholars and argue that power distance and hierarchy always hamper the relationship. I further posit that corporations are not solely responsible for sustainability activities and thus financial performance. Rather, the nexus between corporate sustainability and financial performance is transformed, modified, and shaped through an interaction of the trajectories of multiple actors, an interaction that I was able to capture through the multi-theoretical approach. In this regard, I propose a comprehensive framework, that is effective under a macro business ecosystem. With this framework, companies that prioritize sustainability strategies would eventually ensure financial performance but after a time lag. In contrast, companies that engage in greenwashing and selfies will always achieve misleading outcomes.The appended articles further examine the nexus between corporate sustainability and financial performance empirically using data from European countries by applying several static and dynamic econometric models under different time spans. The overall empirical result suggests that corporate sustainability practices have a positive impact on financial performance but with a time lag. However, in order to ensure durable long-term corporate sustainability practices, the macro and micro business environments – a network governance relationship – play a crucial role. The consistent and empirically robust results reveal the multiple trajectories of the nexus between corporate sustainability and financial performance. Therefore, the thesis disseminates key messages to policymakers and practitioners about the importance of an effective network governance mechanism.