Academic journal article Business: Theory and Practice

Determination of Economic Indicators in the Context of Corporate Sustainability Performance

Academic journal article Business: Theory and Practice

Determination of Economic Indicators in the Context of Corporate Sustainability Performance

Article excerpt

Introduction

Corporate economic performance indicators are going to remain one of the main interests of owners and investors. However, together with the information about corporate governance, the environmental and social factors, it creates a complex picture of any company and it has its significance for other key shareholders, it brings transparency and sustainability into business (Kocmanova et al. 2011). The goal of this article is to define the most significant economic indicators of corporate performance influencing the corporate sustainability. Corporations are attempting to reach long-term benefits by implementing sustainability related activities into the very core of corporate strategy (Chabowski et al. 2011; Cruz et al. 2006). In general it can be concluded that corporations implement these sustainability techniques because they either feel obliged to do so, they want to do so or they are forced to do so (Van Marrewijk 2003).

1. Theoretical approach to corporate sustainability performance

The need for alternative performance measurement systems which would take the corporate influence on interest groups into account has increased in the time of crisis. According to Kruse and Lundbergh (2010) one of the reasons why corporations should consider their environmental and social performance as well is the fact that investors generally invest less money into corporations that do not follow this trend because they consider the level of risk higher. Based on the definition of sustainability performance published in the Report of the World Commission on Environment and Development (1987) established by the UN, corporate sustainability performance (CSP) is defined as corporate strategy which uses the best business techniques to fulfill and balance the needs of both the current and the future stakeholders. This presents a complex task of providing competitive product in a short-term period and at the same protecting, maintaining and developing human and natural resources necessary for the future. CSP therefore measures the extent to which a corporation implements economic, environmental, social and corporate governance factors into its activities and to what extent it considers the impact of its activities on its surroundings. (Artiach et al. 2010; Labuschagne et al. 2005). CSP involves the triple-bottomline concept which suggests balance of three aspects--environmental, social and economic--to reach sustainability in organizations (Elkington 1998).

The connection of economic and sustainability performance is a subject of many theoretical and empirical studies. Kirchhoff (2000), Feddersen and Gilligan (2001), Fisman et al. (2008) state that economic benefits are reached by companies with high level of CSP by using brands and advertisements informing about the sustainability of their products. This way they support product differentiation. Turban and Greening (1997) show that high level of CSP allows companies to hire more innovative and motivated employees which is again reflected in the economic results. On the other hand there is the neoclassical approach stating that companies have only one social responsibility and that is increasing their profit (Milton Friedman). According to this approach CSP decreases economic performance because activities increasing CSP are costly (Friedman 1962; Alexander, Buchholz 1978; Becchetti et al. 2005). Investing into CSP means higher costs of improving conditions for the employees, donations, costs of supporting the community, introducing ecological processes and also opportunity costs of giving up socially irresponsible investments. From this point of view, investing into CSP goes against the interests of investors because re-allocation of investors' resources of the particular company onto other stakeholders takes place (Aupperle et al. 1985; McGuire et al. 1988; Barnett 2007). Ullmann (1985) states there is no direct connection between CSP and economic performance. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.