The Business Horizon of Emeralds

Addis Gedefaw Birhanu () and Tao Han ()
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Addis Gedefaw Birhanu: EM - EMLyon Business School
Tao Han: EM - EMLyon Business School

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Abstract: Whether companies can commit to sustainable business practices and do well economically is captivating the attention of scholars and practitioners. We examine this question by proposing that substantive sustainable commitments may slow firm growth due to intensive resource demands to meet stringent sustainability standards while improving profitability by enhancing their distinctiveness in the market. Further, we contend that this performance tradeoff is shaped by the nature of mandatory and voluntary sustainability-oriented institutions firms are embedded in. Based on a sample of certified B Corps across ten European countries and accounting for the self-selection to certify, our analyses reveal the benefits and costs of firms' sustainability commitments on profitability and growth. Our results also demonstrate that the absence of sustainability disclosure mandates and the prevalence of sustainability-oriented investors assuage this tradeoff by enhancing the positive impact on profit and reducing the negative impact on growth, respectively.

Date: 2024-07-02
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Published in Academy of International Business (AIB) Annual Conference, Jul 2024, Seoul, South Korea

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05615493

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