AbstractThis study aims to determine the impact of environmental sustainability (ES) on firm financial performance (FFP). The study also examines the mediation of ES in the relationship between integrated management strategies (IMS) and FFP. By employing the content analysis technique for global reporting initiative (GRI) framework, the study collected desired data from the sustainability, corporate social responsibility, and annual reports of the sample firms (1,275 firm‐year observations) listed on the Pakistan stock exchange (PSX) from 2012 to 2016. The study employed at‐test, ordinary least square, and generalized least square estimator with the fixed effect and random effect for estimating the hypothesized relationships. The results revealed that the ES and IMS have a significant positive impact on the FFP (ROA & Tobin's Q). Also, it is observed that ES mediates the relationship between IMS and Tobin's Q. Furthermore, it also noted that the results are more striking after addressing endogeneity. Besides using the unique ES index, the study also contributes to the literature and practice by updating the developing countries' key stakeholders, especially Pakistan.