Firm Sustainable Development Goals and Firm Financial Performance through the Lens of Green Innovation Practices and Reporting: A Proactive Approach

Parvez Alam Khan,Shakeb Akhtar,Satirenjit Kaur Johl

doi:10.3390/jrfm14120605

Parvez Alam Khan, Shakeb Akhtar + Show 1 more

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https://doi.org/10.3390/jrfm14120605

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Abstract

The current global economy demands synergy between ecological responsiveness and proactive business models. To analyze these dynamics, the objective of this study is to simultaneously investigate the effects of green innovation practices concerning the sustainable development goals (SDG) and financial performance of firms. This study also advocates for the injection of green innovation reporting into sustainable reporting for greater disclosure. Data from sixty-seven companies from five continents and the top five blue chip firms for each country are collected through content analysis, with the generalized least squares (GLS) approach used to test a causal relationship hypothesis. The results indicate mixed findings, with green product innovation showing positive relationships with returns on equity (ROE) and returns on investments (ROI). At the same time, green process innovation shows negative relationships with returns on assets (ROA) but shows a positive impact on returns on investments (ROI) and firm SDGs. In contrast, green service innovation shows an insignificant relationship with financial performance and SDGs. On the other hand, non-operational green innovation variables and green marketing positively affect returns on assets and investment, showing significant negative impacts on returns on equity. However, green organizational innovation shows an insignificant relationship with firm financial performance and SDGs. In addition, this study also shows that the Australia/New Zealand region is the leader in green innovation reporting, followed by Europe, Asia, Africa, and lastly, North America.

Highlights

This study provides practitioners and policymakers with insights into how to include green innovation reporting as a new variable in integrated or sustainable reporting, which leads to greater transparency and accountability to the policymakers
This study focuses on financial performance and performance with regard to the United Nations’ sustainable development goals (SDG)
The result highlights that all the green operational innovation variables are significantly correlated with SDGs, and none of the green non-operational innovation variables are significantly correlated with SDGs

Summary

Introduction

Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations. In the last three decades, responsible and sustainable investment has been seen as an investment revolution across various economies. The nature of responsible investment has undergone a massive shift due to the integration of environmental, social, and governance factors (ESG) into investment strategies (Duric and Topler 2021; Gifford 2016). The integration of environmental, social, and governance factors into socially responsible investment (SRI) has brought significant market returns to investors (Leins 2020; Vo et al 2019)

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