Macro-Economic Crises And Corporate Sustainability

Abstract

How does a macroeconomic crisis affect firms’ orientation towards sustainability? Some might reduce investments in the integration of sustainability principles, focusing scarcer resources on efficiency gains. Others might increase investments as they try to seize opportunities to realize differentiation advantages from sustainable products and processes. This suggests a positive impact of economic crisis on heterogeneity in sustainability performance. We examine the evolution of sustainability performance between 2007 and 2011 in a sample of 2,116 public companies and find that the variance indeed increases for some dimensions of sustainability, namely those related to environmental innovation and human rights in the supply chain. However, the sample variance reduces in other dimensions, showing post-crisis convergence. To explain these mixed results, we examine the effects of firm motives and strategic orientation on the variation of sustainability performance during this period. We find evidence that the interplay between strategy and motives influences firm’s willingness and capacity to respond to macro-economic crises, at least along the dimensions that are most conducive to potential gains from differentiation. We conclude by offering the example of one ongoing research program as illustration for the type of collaborative, engaged and multi-method scholarship that can produce insights in these knowledge domains.