The Influence of Sustainable Business on Firm Performance

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Sustainable business is one of the key topics that refer to the ability of organizations to make the world a more sustainable place. The acceptance of this tendency and its integration in practice is a subject of research of many academic articles that consider the associated challenges and impacts (Dentchev et al., 2018).

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Considering that the state of the planet and climate is likely to deteriorate under the negative impact of businesses, the identified topic was chosen to better understand the trends and gaps that exist in the related evidence. This paper aims to present the literature review to clarify how sustainable business can impact firm performance and corporate behavior. The following questions are formulated to guide this literature review:

  • What are the models that are applied by sustainable companies?
  • What are the benefits of business sustainability with regards to corporate behavior?
  • In what ways sustainable business influences firm performance?

Sustainable Business Models

The critical review of the literature shows that sustainability models develop rapidly, which means that more ambitious levels of sustainability can be achieved. The study by Dyllick and Muff (2015) introduces the typology of business suitability models, focusing on the transitions of companies from a usual business organization to true sustainability.

Based on the analysis of available articles, the mentioned authors state that the business sustainability 3.0 model implies an outside-in perspective and value creation regarding common good. Compared to the 3.0 model, Dentchev et al. (2018) discuss a generalist approach to sustainability, paying attention to the opinions of various authors. The main idea of the generalist approach is that the adoption and scalability correlate with a company’s mission, products, environmental impact, and other factors.

Another sub-theme that is presented by Dentchev et al. (2018) is the technology-centered approach that involves waste management, social and sustainable manufacturing, as well as circular business. The model focused innovation and entrepreneurship implies changes in the social sector and more attention to resolving social conflicts and resources mobilization (Dentchev et al., 2018). The role of corporate behavior in achieving sustainability within an organization is also clarified in the literature.

Namely, Dyllick and Muff (2015) state that pro-environmental leadership and employee motivation can bring positive results. In turn, Nicolăescu et al. (2015) stress that the culture of sustainability acquires a robust structure and standards, while the constant betterment tends to become an integral characteristic of sustainable business.

Sustainable Business and Corporate Behavior

The evidence shows that the creation of a culture of sustainability improves corporate behavior. According to the case study that was conducted by Nicolăescu et al. (2015), those companies that adopt social and environmental policies are more likely to be responsible for their decisions and job performance. At the same time, they are more likely to engage stakeholders in sustainability procedures. The related benefit of sustainability is associated with the greater disclosure of information and proper measurement.

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Dyllick and Muff (2015) add that the strategies that are needed for the effective sustainability implementation at the corporate level are not yet fully researched. There is a gap between the need to employ sustainability and engage employees and stakeholders. Therefore, future research should be initiated to develop strategies for improving corporate behavior through sustainable and viable contributions.

Corporate social responsibility is regarded as an integral part of any company that strives to acquire or support its reputation and market position. It means that companies build their behaviors according to ethical and conscious strategies in a long-term period (Galpin et al., 2015).

In this connection, sustainable business helps in contributing to the necessary social changes and environmental improvements. Galpin et al. (2015) suggest that strong sustainability should be considered from its impact on general human welfare and pollution. The key question that is posed by the literature is how to make sure that profitability is not compromised for sustainability.

Sustainability and Firm Performance

The impact of sustainable business on firm performance is another firm that is extensively researched by scholars. The overall tendency is that there is a positive influence of sustainable practices on how companies perform their missions (Galpin et al., 2015; Nicolăescu et al., 2015). However, the challenges include the constant disputes between economic, social, and environmental features. The establishment of a balance between the mentioned issues requires a lot of time and efforts from leadership and management (Nicolăescu et al., 2015; Zhang et al., 2019).

The organizational conduct also depends on the values and attitudes that are adopted by every individual who is involved in a firm’s performance. For the overall success, each of the employees should be explained the role of sustainability and motivated to implement it in his or her work. To remain competitive in the conditions of dynamic markets, companies need to adjust their operational routines and sustainability approaches.

Using a narrative synthesis approach, Galpin et al. (2015) revealed that the organizational structure that incorporates sustainability is advantageous for firm performance. However, sustainability efforts should be chosen in accordance with the organizational factors, including but not limited to finances, mission, goals, and strategy. For example, the strategy of engaging customers is useful for sustainable businesses since clients prefer being reassured that they buy ethical products and services (Galpin et al., 2015).

More to the point, they want to select the brands and participate in further research to have more options for purchase. Among the organizational outcomes of following sustainable approaches, there are higher customer loyalty and new opportunities for growth. It is possible to mention s Hewlett-Packard (HP) as the company that practices waste management across its product life cycle (Galpin et al., 2015). Zhang et al. (2019) add that green innovation is widely leveraged by state-owned enterprises (SOEs) compared to private firms. Therefore, the need for governmental control and more elaborate policies seems to be evident.

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Summary

This literature review synthesized the results of five scholarly articles from peer-reviewed journals to shed light on the topic of sustainable business and firm performance. It was found that there are several models that are adopted by companies to initiate social and environmental projects. There is an evident shift from traditional business focused on an economic aspect towards the pro-environmental organization.

It was also discussed that sustainability improves corporate behavior, which requires involving stakeholders and employees by means of strong leadership. Regarding firm performance, sustainable business leads to long-term planning and paying more attention to finding a balance between social, economic, and environmental goals.

Accordingly, all the research questions were successfully addressed, and the areas for further research were identified. Namely, the ways to enhance corporate behavior through sustainable strategies should be discussed. In addition, global and local policies for encouraging greater sustainability should be studied, with the emphasis on stakeholder and customer engagement.

References

Dentchev, N., Rauter, R., Jóhannsdóttir, L., Snihur, Y., Rosano, M., Baumgartner, R., & Jonker, J. (2018). Embracing the variety of sustainable business models: A prolific field of research and a future research agenda. Journal of Cleaner Production, 194, 695-703.

Dyllick, T., & Muff, K. (2015). Clarifying the meaning of sustainable business: Introducing a typology from business-as-usual to true business sustainability. Organization & Environment, 29(2), 156-174.

Galpin, T., Whitttington, J.L., & Bell, G. (2015). Is your sustainability strategy sustainable? Creating a culture of sustainability. Corporate Governance, 15(1), 1-17.

Nicolăescu, E., Alpopi, C., & Zaharia, C. (2015). Measuring corporate sustainability performance. Sustainability, 7(1), 851-865.

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Zhang, D., Rong, Z., & Ji, Q. (2019). Green innovation and firm performance: Evidence from listed companies in China. Resources, Conservation and Recycling, 144, 48-55.

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BusinessEssay. (2022) 'The Influence of Sustainable Business on Firm Performance'. 22 November.

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BusinessEssay. 2022. "The Influence of Sustainable Business on Firm Performance." November 22, 2022. https://business-essay.com/the-influence-of-sustainable-business-on-firm-performance/.

1. BusinessEssay. "The Influence of Sustainable Business on Firm Performance." November 22, 2022. https://business-essay.com/the-influence-of-sustainable-business-on-firm-performance/.


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BusinessEssay. "The Influence of Sustainable Business on Firm Performance." November 22, 2022. https://business-essay.com/the-influence-of-sustainable-business-on-firm-performance/.