Impact of sustainability practices on the firms’ performance...Organizations are increasingly being pressured by its various stakeholders to focus on sustainability and be accountable

AsiaPacificBusiness&EconomicsPerspectives,Summer2016,4(1).

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Impactofsustainabilitypracticesonthefirms’performance

MariaVictoriaU.SyUniversityofSanJoseRecoletosCebuCity,[email protected]

ABSTRACT

Organizations are increasingly being pressured by its various stakeholders to focus onsustainability and be accountable for their multiple bottom line approach of operations(MBL) encompassing economic, environmental, governance, social and ethical practices.Theemergenceoftheconceptofsustainabilityindicatesasignificantshiftintheenterpriseperspective,prompting firms to reconsider theirwayofdoingbusinessby integrating thefive sustainability initiatives. A sustainable enterprise is one that considers a long-termperspective on the impact of its operations and aligns its business strategies to attain aholistic development leading to a better firm performance. The findings reported in thispaperaimtoexaminetheeffectsofsustainability indicatorsonthefirms’overallbusinessoperations and activities. Using survey data collected from five multinational firmsoperating inCebu’s exportprocessing zone, thispaper empiricallyanalyzes the impactofthe sustainability initiatives adopted by the five companies anchored on the multiplebottom line approach. The results revealed that the sustainability practices had asignificant impact on the overall performance of the firms. The conventional singleobjective of improving the business’s economic performance has been replacedwith theconcept of improving the multiple bottom line of measuring sustainable performance interms of making profit while considering the impact of the firms’ actions on theenvironment and its various stakeholders, thereby making the firm more economicallysustainable in the long run. This study provided valuable insights that can help otherresearchers and professionalswho are interested in studying the impact of sustainabilityinitiativesinthefirm’sperformance.

Keywords: sustainability,multiple bottom line approach, export processing zone, holisticdevelopment,sustainableperformance

INTRODUCTIONThesearchforcompetitiveadvantageisaprimordialgoalformanyfirmstoensure

their ability to create value in the long term amidst the backdrop of a complex globalmarketplace.Organizationsrelentlesslysearchforfundamentalstodistinguishthemfromtheir competitors, since such elements could become resources that generate long-termsustainablecompetitiveadvantages (CollinsandPorras,1994,Gladwinetal.,1995). Thefirms’ adoptionof sustainability strategies grants themanedgeoverother firms thatdonottakeonthesepractices(AdamsandZutshi,2004).Itisassumedthattheseadvantageswill enable the companies to attain acceptable levels of profitability and economicequilibrium.Thisnotionreinforcesthethoughtthattheadoptionofsustainabilitypracticeshasbecomeakeypointinthemanagementagendaofmanyorganizations.


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Atpresent,manybusinessstrategiesaredefinedbytheintegrationofconceptssuchasmanagement quality, environmentalmanagement, brand reputation, corporate ethicsandtalentretention.Suchperceptionsarederivedfromthepracticesofcreatingeconomicvalue, increasing public wealth with adequate mechanisms for its distribution, socialjustification, environmentally sound activities, operations which are ethically conductedandproceduresthatconformtoallapplicablelaws,rulesandregulations.Thesemeasuresare deemed to be effective sustainable approaches paving theway for better corporatemanagementandthusperformance(Orlitzky,etal.,2003).

Thesustainabilitypracticesthatthefirmsdevelopwillfacilitatetheestablishmentofbetter systems of internal control, decision-making and cost saving (Adams, 2002).Through theefficientmanagementof resources, companieswill beable toachieve long-termsustainablecompetitiveadvantage.Fromthefirm’sperspective,sustainabilitycanbedefined as meeting the needs of a firm’s direct and indirect stakeholders, withoutcompromising its ability to meet the needs of future stakeholders (Dyllick & Hockerts,2002). The concept of sustainability provides the context from which researchers canstudy the practices adopted to create value. Value formation refers to both achievingsufficientprofitandtosatisfyingtherequestsofadiversegroupofstakeholders(Lopezetal.,2007).

Despite the fact that more companies seem to demonstrate an increasingcommitment toamoresustainablebehavior, inmanycases, this is stilldonesimplyasamerepaidlipserviceofgreenwashing. Onesignificantreasonforthiscorporaterhetoriccanbeattributed to the fact that companiesdonot really knowhow they can integratesustainablepractices into their operatingprocesses andbusiness strategies. Moreoftenthannot,corporatesustainabilitypracticesarepursuedmorebychancethanwithaclear,welldesignedapproach. Withthisstudy,wedealwiththe issuesathandbyformulatingtwo objectives: (1) to identify the various drivers of sustainability practices adopted bycompaniesbasedonthemultiplebottomlineframework;and(2)todeterminetheimpactofthesustainabilitypracticesintheoverallorganizationalperformance.Thetwoprongedobjectives were addressed by ascertaining the sustainability oriented activities of thecompanies based on the multiple bottom line approach and measuring the outcomesbased on the key indicators denoted in the platform of determining organizationalperformance.

Animprovedunderstandingofthelinkbetweensustainabilityorientedpracticesandorganizationalperformancedoesnotonlycontributetotherecognitionoftheimportanceof these concepts, but also add to the knowledge of measuring sustainability-orientedactivities.However,thereareonlyafewempiricalstudiesmadeonspecificorganizationalperformanceoutcomesinrelationtotheadoptionofsustainabilitypractices.Basedontheforegoing, the researcher sought toderivepragmaticevidencewhichwill reveal that theadoption of sustainability practices does in fact have a significant impact on the overallperformance of the firm and not only advances this contention from a theoreticalstandpoint. The intent of the study was to determine the link between performanceresultsandsustainabilitypracticesinordertoanalyzehowthesepracticesaffectcompanyfunctioning.

Furthermorethisstudyaimedtodeterminehowsustainabilitypracticescanbebothdeveloped and supported. It is critical to uncover the antecedents that help companiesmaintainvarioussustainablepracticesovera longperiodof timetoensureasubstantiveandcontinualgrowthintherealmofsustainabledevelopment.


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OBJECTIVESOFTHESTUDY

Organizationsareincreasinglypredisposedtoincorporatesociety’sexpectationsintotheir operations and strategies, not only to respond to rising pressures from variousstakeholdersbutalsotoconsideropportunitiesforcreatingcompetitiveadvantage.Tothisend, thisstudyseeks to identify those factorswith thepossibility for facilitatingeffectiveintegrationofsustainabilityintocorporatepractices.Theobjectivesofthisresearchare:1)to identify thevariousdriversof sustainabilitypracticesadoptedby companiesbasedonthemultiplebottomlineframework;and2)todeterminethe impactofthesustainabilitypracticesontheoverallorganizationalperformance.

FRAMEWORK

Business sustainability has materialized as a central, multifaceted premise of thepresenttime.Companiesofalltypesandsizesareconcentratingonbusinesssustainabilityasameansofdesigningacontinuingvalueforshareholdersandmanagingtheinterestsofother stakeholders. Business sustainability is a method of facilitating the companies’capabilitiestoformulateandimplementstrategiesthatleadtothecontinuingperformanceof the firm inallareas. Thecontextof sustainability isnotonly intended toensure longtermprofitability and competitive advantageof theorganization, but also contributes totheimprovementofthewellbeingofsocietalmembers.

ThisstudyisanchoredonthepremiseofsustainablemanagementbyAligleri(2011)who defined the concept as a “business approach that considers the pattern oforganization of ecosystems in the decisionmaking processes andmanagement practicescovering assessment indicators in the economic, environmental, ethical, governance andsocialdimensions.”Thisviewimpliesthatthemanagementofsustainabilityisintendedtoenable gains for the firm, society and environment. A core aspect of the sustainabilitymanagement framework is the inclusion of stakeholders and the integration of theirrespectivedemands(SeuringandGold,2013),whichisimpliedtobeacriticalprocessthatassistsorganizations inunderstandingtheirkeyenvironmentalandsocial impacts(Rocha,etal.,2007).

Sustainabilitymanagementpracticesinvolvethe“adoptionofalongtermfocusandamore inclusivesetof responsibilities” thathaveabeneficialeffecton“theecosystems,societies and environments of the future” (Ameer&Othman, 2012). The said practicespermit “long term value creation” by helping companies to “develop opportunities andmanage economic, environmental, ethical, governance and social risks” (Lopez et al.,2007).Formanycompanies,developingsustainabilitypracticestomeetthestakeholders’various expectations has become crucial (Delgado-Ceballos, et al., 2011). Sustainabilitypractices represent a holistic, balanced and long-term approach to conducting businesswithpotential tohave anet positive impact on ecological, social, economic, andethical,governancesystems,andvariousstakeholders.

Therearethreeoverridingprinciplesofbusinesssustainabilitypractices.Thesearevalue creation, accountability assurance and performance enhancement (Brockett &Rezaee, 2013). The value creation principle suggests companies should create themaximumquantity of products and serviceswith the least utilization of scare resources,while maintaining the highest quality and efficiency to generate the highest level ofcustomer satisfaction. A major objective of any firm is the creation of value for allstakeholders in the community. Anaccountability assuranceprinciplemeans conducting


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business in an ethical and socially responsible manner. A proper assurance processrequires timely and deliberate planning, aggressive actions, effective implementation,continuous monitoring and enforceable accountability. The performance enhancementprincipleindicatesachievementofsustainableperformancebasedonthefivedimensions.This will pave the way of enhancing the firm’s positive impacts andmitigating negativeimplicationsonsocietyandtheenvironment.

Recognizing thebroadnatureof sustainability, there isagrowing rangeof specificsustainabilitypracticesbeingimplementedbyorganizations(Hahn&Scheermesser,2006).Due to this, there are variousways in conceptualizing and operationalizing sustainabilityconstructs.Oneofthemostcommonlyusedmeasuresisderivedfromthemultiplebottomlineofeconomic,governance,environmental,ethicalandsocialperformanceindicators.

Figure1.Driversofsustainabilityframework

Economicvigorasacomponentofcorporatesustainability

Economic vigor when operationalized as a component of sustainability entails abusinessapproachthatcreateslongtermshareholdervaluebydealingwithopportunitiesandmanagingrisksarising fromeconomic,socialandenvironmentalchallenges (Wagner,2010). Creating shareholder value by ensuring continual sustainable economicperformance is a major challenge for many firms today. To incorporate sustainabilityprinciples into thecompanies’businessstrategiesandtomakesoundresourceallocationdecisions,managersneed tomeasure the linkbetween social andenvironmental actionswithfinancialperformance.Manycompaniesarecognizantofthecontributionofvariousinvestments and economic decisions in sustainability initiatives to improve shareholdervalueandmaximizingnetgainstoboththecompanyandsociety.

Epstein and Roy (2001) formulated a framework that organized the drivers ofcorporate sustainabilityand financialperformance into fivemajorareas. The frameworkstartswithcorporateandbusinessunitstrategyandmovestothesecondcomponent:thesustainability actions that will be used to implement strategies. Firms can analyze andinstitute the drivers of and causal relationships with the processes to sustainabilityperformance, stakeholder reactionsand long termcorporate financialperformance. Thecorporate financial performance component of the framework then feeds back into thecorporate strategy to improve and challenge strategies and assumptions leading toimprovedfinancialperformance.Theframeworkrequiresthatfirmsimplementadequatesystems, structures and performance mechanisms to enhance corporate financial andsustainabilityperformance(Waddock&Graves,1997).

The systems, structures and measures provide a better understanding of theantecedentsofeconomicperformanceandtheeffectsofthatperformanceonthevarious


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stakeholdersofthefirm.Thisframeworkhelpsmanagerstobetterintegratesustainabilitytenets into their business strategies by setting relevant priorities and by evaluatingbusiness options. A salient feature of the framework is the difference betweenintermediate results and financial outcomes. Intermediate results, such as improvedsustainability performance (e.g. product safety) and positive stakeholder reaction (e.g.,customer satisfaction) must be observed to assess profit outcomes of sustainabilitypractices. The sustainability and financial health of the organization are importantdeterminantsofkeeping investor confidencehigh. This is in consonancewithFreeman’sstakeholder theory (1984), which emphasized the notion that corporations haveresponsibilitiestotheirstakeholdersandother interestgroups. Hence,thebusinesscasefor sustainability is understood to include strategic and profit driven response of thecompanytoenvironmentandsocialissues,whichcausedtheseentitiestopursueprimaryandsecondaryactivities.Corporategovernanceasadimensionofcorporatesustainability

Corporations have traditionally been viewed as self-centered, profit maximizingentities comprising the central tenets of capitalism and freemarket doctrine (Hg, 2007).However, in the aftermath of a series of financial debacles that various economies haveexperiencedbroughtaboutbytheglobalfinancialcrisis,countrieshavetakeninitiativestoimprove their corporate governance policies by establishing more robust measures tostrengthentheirregulatoryframeworksinordertopromoteeconomicstability,publictrustandinvestorconfidence.Variousmeasuresareundertakentoenabletheconvergenceofaset of globally accepted corporate governance practices and the integration of businesssustainabilityintocorporategovernance.Thesedevelopmentshaveonceagainredirectedinteresttoissuesofgoodgovernance,trustandaccountability,intensifyingthediscussionon topicsof corporategovernance (CG)and theethicsofeconomicconduct (Marsiglia&Falautano,2005).

While shareholder value maximization is still a primary goal for businessorganizationsworldwide,theriseinsocialactivismandtheemergenceofnewexpectationshave given rise to other aspects of corporate performance to be scrutinized alongsidefinancialresults.Asfirmsexpand,theyarenotjustplainmoversofeconomicgrowth,butmost importantly, tobalancemultiplebottom-linesandmanage the interestsofmultiplestakeholders(Jamali,2006).Thisiswheretheconceptofcorporategovernancecomesin.Basedon this premise, organizations are expected to realize gainswhilemaintaining thehigheststandardsofgovernanceinternally.

Cadbury (2000)definedcorporategovernanceas “thesystembywhichcompaniesaredirectedandcontrolled.”Thecontrolaspectofcorporategovernance(CG)includesthenotionsofcompliance,accountabilityandtransparency(MacMillanetal.,2004),andhowmanagers exert their functions through compliance with existing laws, regulations andcodes of conduct (Cadbury, 2000). The importance of CG lies in its pursuit at continualrefinementof the laws, regulationsandcontracts thatgoverncompanies’activitieswhileensuring that shareholder rights are protected, stakeholder and manager/executiveconcernsarereconciled,andthatatransparentenvironmentismaintained.Transparencyprinciple calls for a culture where each stakeholder is able to perform his tasks andresponsibilities leading to the firm’s growth and value creation (Page, 2005). Corporategovernancesetsthespringboardindefiningastohowpowerisexertedanddecisionsaremadeinanorganization.


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The Professional Accountants in Business (PAIB) and the Committee of theInternationalFederationofAccountants(IFAC)in2009definedCorporateGovernance(CG)as “the set of responsibilities and practices exercised by the board and executivemanagement (the governing body) with the goal of: a) providing strategic decision, b)ensuringthatobjectivesareachieved,c)ascertainingthatrisksaremanagedappropriately,andd)verifying that theorganization’s resourcesareused responsibly.” In this concept,corporategovernanceencompassesboththeconformanceandperformanceaspects.TheconformanceaspectofCG reflects compliancewithall applicable laws, rules, regulationsandstandards,aswellasaccountabilitytoallstakeholders.TheperformanceaspectofCGemphasizes the importance of policies and procedures in addressing opportunities andrisks,bestpractices,resourceutilization,strategy,valuecreationanddecision-making. Insummary, CG revolves around a set of universal attributes, including ensuringaccountability to shareholders and other stakeholders (Keasy & Wright, 1997), creatingmechanisms to controlmanagerial behavior (Tricker, 1994) andensuring that companiesarerunaccordingtothelawsandanswerabletoallstakeholders(Dunlop,1998).

Socialdimensionofcorporatesustainability

Corporationshavemodified their keygoals fromprofitmaximization to creatingvalue for all stakeholders, including shareholders, while at the same time fulfilling theirsocial responsibilities. This is attributed to the fact that investors are diversifying theirportfolios by putting their money in firms committed to the concept of corporatesustainability.Investorsaredrawntothisventurestyleasitpromisesthecreationoflong-term shareholder value by welcoming opportunities and dealing with risks arising fromongoing economic, environmental and social developments. The social dimension ofcorporatesustainability isanchoredonthepremisethatcompaniescancontributetothesocial well being of communities by interacting with its various stakeholders andaddressingtotheirspecificandevolvingneedsleadingtosecuringalongterm“licensetooperate”andexcellentcustomerandemployeeloyalty(Knoepel,2001).

Social performance practices to support corporate sustainability measure howwellanorganizationhastranslateditssocialgoalsintopractice.It isassessedintermsofthe principles, actions and measures adopted. The social dimension of corporatesustainability involvesmaking an organization’s socialmission a reality, alignedwith theinterestsofsocietybyintegratingacceptablesocialvaluesandfulfillingsocialresponsibility(Brockett & Rezaee, 2012). The social dimension of corporate sustainability challengesorganizationstoadheretothebasictenetofdoinggoodwhichismorethantheso-called“business as usual philosophy.” It entails aligning the company’s values, interests,decisionsandprocesseswiththoseof itsstakeholders. Thesocialaspectofsustainabilityencouragesfirmstotakethenecessaryinitiativestoadvancesocialgoodbeyondtheirownvestedinterestsandcompliancewiththelegalrequirements.

Social performance practices can respond effectively to societal and stakeholderdemandsbyembeddingsocialconsiderations intobusinessoperationsandstrategiesandmust bepursued voluntarily. Social dimensionof corporate sustainability includes threecomponents: (1) identification of an organization’s social responsibility domains; (2)corporatemalfeasances and unethical behavior, and (3) implementation of programs tomanage social issues (McKnight, 2011). Organizations can no longer separate theiractivitiesfromthewidersocietyandenvironmentinwhichtheyoperate.Hence,theyneedto effectively measure their social performance to maintain their sustainability. Social


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sustainability of an organization refers to the consciousness of responsibility for its ownactions as well as an authentic and credible commitment (normally long term) in allbusinessactivities.

Ethicaldimensionofcorporatesustainability

The interdependenceamongsociety,environmentandeconomicdevelopmentarefundamentaltotheconceptofsustainability.Toachievesustainabledevelopment,peoplecharacterizetheinteractionsamongthesethree“pillarsofsustainability.”Thisisbecausecreatingsymmetryamongthepillarscannotbeattainedwithoutaclearunderstandingofhow societal and industrial activities affect the environment or may impact futuregenerations. Hence, there is a need to determine the issues affecting sustainabledevelopment. Practicesgeared towardsattainingsustainabilityare rootedon thenotionthatmankindneedstousenaturalresourcesresponsiblywithdiminishingthequalityoflifeduetolossesinfutureeconomicopportunitiesortonegativeimpactsonsocialconditions,humanhealth andenvironment (Enderle, 1999). This hypothesismakes it clear that themetricsofperformancemustbearticulated toassess theefficacyof theoutcomeofanydecisionconcerningsustainability.

It isacommonpracticeforbusinessmanagers/executivestoaddresstheeconomicpillarofsustainabilityfirstandforemost. Thepillarassociatedwithethicsasadimensionof sustainability is often overlooked. The philosophy of sustainable developmentemphasizesthesupremacyofvaluescharacteristictoallpeopleandbusinessesmanifestedthrough ethical deeds. The ethical dimension of corporate sustainability encompasses asetofmoralprinciples,bestpracticesandstandardsthatguidebusinessbehavior.Itreferstoanentity’scollectivevalues,whichcanbeusedtoassesswhether thebehaviorof thecollective members of the organization is adequate (Rezaee, 2008). Furthermore, theethicalaspectofsustainabilityaimstodeterminewhetherthebusinessisheldaccountableforitsopenness,integrityandbehavior.

Consideringthat lawsarenotadequatetoregulateandmonitortheorganization’sactivities, ethical practices are upheld to include those actions that are expected orprohibited by societal members even though they are not codified into law. Ethicalpracticesrepresentthefullscopeofnorms,standards,andexpectationsthatreflectwhatsocietalstakeholdersperceiveasfair,justandinkeepingwiththerespectorprotectionoftheir moral rights (Carroll & Buchholtz, 2006). Ideal business ethical practices as acomponentofcorporatesustainabilitywill fosterethicalobjectives,whichincludebutarenot limited to adherence to moral principles, trust and integrity and managing theenterprisebasedontherulesofopenness,mutualrespectandaccountability.

Environmentaldimensionofcorporatesustainability

IncreasingsocietalconcernabouttheconditionoftheEarth’secosystemshassetoffindustryandbusinessleaderstomanageinnewwaysbybecomingmoreproactiveintheirresponse toenvironmental issues. Theneed forenvironmental sustainabilityarose fromthe acknowledgment that the wasteful, decadent and inequitable nature of currentpatternsofdevelopment,whenprojectedinthefutureleadstobiophysicalimpossibilities(Beckerman, 1994). Within the context of environmental sustainability, it is possible toalterthegrowthtrendsandestablishaconditionofecologicalandeconomicstabilitythatis sustainable into the future. Sustainability is essentially the relationship between theenvironment and society. The 1987 Brundtland Commission concluded that sustainable


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development must integrate environmental concerns into the mainstream policies oforganizations.

Environmental sustainability isunderstoodas the“maintenanceofnatural capital”comprising of input and output. Environmental sustainability in itself seeks to improvehuman welfare by protecting the sources of raw materials used for human needs andensuring that thesinks forhumanwastesarenotexceeded, inorder topreventharmtohumans (Goodland, 1995). The philosophy of environmental sustainability involvesecosystemintegrity,carryingcapacityandbiodiversity. It requiresthatnaturalcapitalbemaintained as a source of economic inputs and as a sink for wastes. It implies thatresourcesmust be harvested no faster than they can be regenerated. Wastesmust beemittednofasterthantheycanbeassimilatedbytheenvironment(Kahn,1995).

An environmentally sustainable organization is a business that operates in a waythatisconsistentwiththeprincipleofsustainabledevelopment.Thismeansthatthefirmwill conduct its operations inway thatwill not use up natural resources any faster thanthey can be replenished, make and transport products efficiently with minimal use ofenergy and design products which when worn out could be disassembled and recycled(Lawrence andWeber, 2006). Adherence to the notion of environmental sustainabilityrequires companies to undergo three distinct phases in the development of greenmanagement practices. The first stage is pollution prevention, which focuses onminimizing or eliminating waste before it is created. The second phase is productstewardship. Inthispart,managersconcentrateonallenvironmental impactsassociatedwiththefull lifecycleofaproductfromthedesignofthecommodityto its finaluseanddisposal. The third and most important segment is the adoption of clean technology.Organizationsdevelopinnovativenewtechnologies inthispartthatsupportsustainability(Dunphy,etal.,2003).

OrganizationalPerformance

Theconceptoforganizationalperformancerefersnormallytofinancialaspectssuchas profit, return on assets, return on equity and economic value added (EVA). Whilefinancialmeasuresofperformanceareamongthemostwidelyusedbyorganizations,thereare othermore balancedmethods of performancemeasurement systemswhich includebothfinancialandnonfinancialperformancedeterminantsprovidingbetterperspectivesinterms of links between performance systems and organizational strategy (Neely andAdams,2000).

The key to developing a framework to improve organizational performanceanchoredonthemultiplebottomlineapproachistoconstructperformancemeasuresthatareproperlyintegratedanddirectedtowardsachievingorganizationalgoalsandstrategies.Aside fromusing thetraditionalmeasuresofassessingcompanyperformance,Gomes,etal., (2011) suggested that organizations should also consider using softer performanceparameters such as social responsibility. Based on corporate social performance andcorporatefinancialperformance,Fauzi,etal.,(2010)proposedamultidimensionalbottomlineassustainablecorporateperformanceindicators.Thekeyindevelopingasustainableorganizationistoconstructthemultipleorganizationalperformancemeasuressothattheyareproperlyintegratedanddirectedtowardsachievingorganizationalgoalsandobjectives.

In conclusion, allorganizations– regardlessof size, industryor location– stand tobenefitfrombusinesssustainabilitypractices, initiativesandstrategiesbyenhancingtheireconomic, governance, social, environmental and ethical performance. This business


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sustainabilityframeworkfocusesonstrategicdecisionsthatcreatesustainableshareholdervaluewhilemanagingandprotectingtheinterestsofabroaderrangeofstakeholders.

METHODOLOGYThestudyadopted thequantitativemethodof researchspecifically thedescriptive

normativesurvey.Surveyingthefirmsusingthedescriptivemethodwasdeemedasmostappropriate in determining the managerial perceptions on the sustainability constructsused in thisstudy. Thestudyemployednovelconstructs,whichtranscendedbeyondthetri-focal approach of the sustainability framework involving social equity, economicperformance and environmentalmanagement. The current research included twomoreantecedents,namelycorporategovernanceandethics.Thebasicthemeforthisstudywasto examine the precursor/s of organizational activities anchored on themultiple bottomlineconceptofsustainability.Asidefromdeterminingthedriversofsustainabilitypractices,the study likewise was designed to gauge the impact of these practices in the overallperformanceofthecompanies.Insodoing,therespondentfirmswereaskedtomeasurethe extent towhich the practices have contributed to the attainment of their corporateobjectives through a simple method of computing the summary mean for five relatedparameters. Although the constructs were categorized into five metrics of the multiplebottom line approach, each company, which took part in this study, adopted variouspracticesalignedwiththedistinctandspecificnatureofthebusiness.Withinthiscontext,theauthordidnotapplyanycorrelation,regressionorotherformsofinferentialstatisticalanalysis,astheundertakingdidnotintendtoevaluatethecausalrelationshipbetweenthepracticesadoptedanditsconsequencestakingintoconsiderationthediversityofpracticesemployedandtheuniquenessofeachenterprise.

Theprimarydatagatheringprocedureforthisresearchwasthroughtheuseofthequestionnairewithstructured,closedendedquestions. Thesurveyquestionswerebasedon case studies and the academic literature (Olivia&Quinn, 2003) andwere pre testedwithconsultantsandacademics(Reinhardt,etal.,2004).Thequestionnairewiththecoverletter indicating the purpose and significance of the study was emailed to targetrespondents.Unstructuredinterviewswereconductedthroughthetelephonetoreinforceandsubstantiatetheanswersgivenbytherespondents.Therespondentswereassuredontheconfidentialityoftheiranswersbyensuringtheiranonymityinthepresentationofthedata. Insteadofusingthefirms’names,theentitieswerecodedusingletters. Managerswere chosen because they were considered to be familiar with the implementation ofsustainabilitypracticesandperformanceindicators.Secondarydatawereculledfromthereviewofrelatedliteratureandreportssubmittedtotheregulatorybodies.

Thecompanieswereselectedthroughpurposivesampling. A totalof twelve firmswere identifiedbasedontheiryearlysustainability reportssubmitted. Outof the twelvefirms,onlyfiveaccededtotheinvitationtoparticipateintheresearchconducted.AllthesecompaniesareoperatinginthespecialeconomiczonesituatedinLapuLapuCity,Cebu.

The constructs for measuring sustainability practices and its impact on theorganization’s performance were developed based on the literature review related tosustainability and organization performance (Lozano, 2011; Siebenhuner, 2007). Whileperformanceisamulti-dimensionalconcept(Chenhall&Langfied-Smith,2007),thesurveyinstrument was designed to capture the most commonly studied dimensions oforganizational performance. A four-item Likert scalemeasures the extent to which the


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companies adhere to the various constructs of sustainability practices based on themultiplebottomlineapproach.

Italsocapturestheextenttowhichthesustainablepracticesaffectedthecompany’sperformanceanchoredon themultiple-bottom linemodel. Thescales formeasuring theextent of implementation of the sustainability practices and its impact on theorganizationalperformanceweresubjectedtovalidityandreliabilitytests. Theconstructvaliditywasassessedbyusingexploratoryfactoranalysis(EFA)basedonobliquerotation.ThescalereliabilitywastestedbycomputingitsCronbach’salpha.Theresultsofthetestofvalidity of the constructs as indicated by the amount of variance, which exceeded 0.5meansthat theconstructsused,arevalid (Hairetal.,2010). Thealphacoefficientshavetheacceptablevaluerangingfrom0.85-0.89.Thealphavalueforeachconstructwaswellabove the recommended values of 0.70, which is considered satisfactory for appliedresearch(Hair,etal.,2010).

RESULTSANDDISCUSSIONThemanagement for sustainabilityhas as itspremise the incorporationof aspects

relating to the sustainable development in the strategy and operations of companies,representing an emerging challenge for organizations. Lacy et al. (2010) point out thatsustainablecorporatepracticesareopeningnewmarketsandsourcesofdemand,bringingtheneedfornewbusinessmodelsandsourcesofinnovation,whichalterthecoststructureof the industry, so that sustainability permeates from corporate strategy to the set ofoperations of the company. Sustainability practices of companies are measured as acontinuousconstruct–thetotalnumberoforganizationalstrengthsthatareregardedbystakeholdersaspositiveindicatorsofCorporateSocialResponsibility.

Specifically, corporate social responsibility represents the sum of the number ofpositivepracticesacrossfivesustainabilityrelatedareas:environment,society,economics,ethics and governance. These five constructs cover the companies’ relationshipswith abroadarrayofkeystakeholders,aligningcloselywiththeconceptualcomprehensivenessoftheprimaryconcept-sustainabilitypractices.AntecedentsofSustainablePractices

Formanyfirms,developingsustainabilitypracticestoaccommodatestakeholders’various expectations has become crucial (Delgado-Ceballos, et al., 2011). Thesestakeholdersexpectthefirmstoadheretonumeroussustainablepracticesnotjustforthecompanies’entry,butalsoforcontinuingthecompanies’operationsinthefuture.Table1highlightstheantecedentsofvarioussustainablepracticesandtheextenttowhichthesepractices are pursued by the firms based on the multiple bottom line framework ofsustainability.

The economic dimension of corporate sustainability is widely regarded as thegenericdimension(Baedekeretal.,2002).Itencompassesgeneralaspectsofanenterprisethathavetobeconsideredinordertoremaininthemarketforalongtime.Table1revealsthateconomic sustainabilitypracticesareadhered toby the firms toa verygreatextent(µ=3.29).Thesepracticesarepursuedinordertoobtaineconomicsuccessratherthanjustconcentratingonaspectsthatshowfinancialresults.Thefocusofeconomicsustainabilitypractices is internal. The respondents averred that they adapt to innovation andtechnological advancement to continually produce goods or services that theirstakeholders need and want at fair prices, collaborate with trading partners instead of


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outright competition,manage their knowledge resources to optimize business outcomesand ensure sustainability reporting to monitor overall organizational performanceperiodically.Table1.Antecedentsofsustainablepractices(n=15)

AntecedentsofSustainabilityPractices A B C D E ItemAverage1. Economic 3.303.27 3.28 3.33

3.29 3.292. Environmental 3.25 3.01 3.00 2.98

3.12 3.073. Ethical 2.97 3.14 3.05 2.78

3.21 3.034. Governance 2.78 2.98 3.12 3.15 3.24

3.055. Social 3.12 2.87 3.09 2.78

3.14 3.00GeneralAverage 3.08 3.05 3.11 3.00 3.20 3.09

Legend:MeanInterpretation3.26-4.00VeryGreatExtent2.51-3.25GreatExtent1.76-2.50LessExtent1.00-1.75NotAtall

Sutton (2004) defined environmental sustainability as the ability of the firm to

maintain the qualities that are that are valued in the physical environment. The itemaverageof3.07revealsthatthecompaniesinvolvedinthisstudyutilizedvariousavailableapproaches to integrateenvironmental components into theirgoals, strategies, structureand culture to a great extent. The respondents affirmed that their organizationshave aresponsibilitytotheenvironmentbyoperatinginamannerthatprotectstheearthanditsresources. Someoftheenvironmentallyorientedpracticestheyundertakearereductionand proper disposal of wastes, resource conservation through reuse and recycling,promote environmental restoration, producing green products/services and conductingself evaluation on how these activities have contributed to the preservation of the eco-system.

Ethical sustainability practices consist of well-established, basic assumptions andprinciples relating to the cooperation within an organization and the behavior towards(external) stakeholders (Konrad, et al., 2006). According to the respondents, theirorganizationsunderstandthenotionthatalthoughlawsareimplementedtoregulatetheiroperations, but more often than not, these are not adequate. Hence, the firms adoptthose activities and practices that embody the full scope of norms, standards andexpectationsthatreflectwhatthevariousstakeholdersregardasfair, justandinkeepingwith the respect for or protection of stakeholders’ moral rights. These practices areobserved to a great extent as reflected by the item average of 3.03. Some of thesustainable ethical practices carried out by the firms are the establishment andmaintenance of code of ethical conduct, nurturing a culture of respect, fair rules andbehavior within the organization, statement of policy for anti-discrimination based oncolor, race, ethnicity, fair wealth/profit allocation as well as the implementation of a


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control structure that eliminates or mitigates opportunities for individuals to engage inunethicalactivities.

Theconceptofcorporategovernancecomprisesthesystembywhichcompaniesaredirected and controlled (Cadbury, 2000). Sustainability practices pertaining to corporategovernance include but are not limited to the notions of compliance, accountability andtransparency (MacMillan et al., 2004), and howmanagers exert their functions throughcompliance with existing laws, regulations and codes of conduct (Cadbury, 2000).Accordingtotherespondents,theircompaniesdoupholdthesepracticestoagreatextent(µ=3.05)byestablishinganetworkofmonitoringandincentivestoensureaccountabilityoftheboardandmanagementtoshareholdersandotherstakeholders. Othersustainabilitypractices anchored on corporate governance adhered to by the firms based on theresponsesofthekeyinformantsaretheoversightfunction,compliancewithexistinglawsandregulations,transparencyindisseminatingof information,regularconductof internalandexternalauditandmonitoringofvariouscorporateactivitiesbythestakeholders.

Socialsustainabilitypracticesareaimedtopositivelyinfluenceallpresentandfuturerelationshipswithstakeholders.AccordingtoEbner(2008),socialsustainabilityrepresentsthefulfillmentoftheneedsofthestakeholderstoassuretheirloyaltytothecompany.Thisrequires the cohesion of the firm and its ability to work towards the attainment andmaintenanceof thecommongoalsof itsvariousstakeholders. The itemaverageof3.00indicates that the companies upheld such practices to a great extent. Specifically, thesocial sustainability practices pursued by the firms are human resource development,promoting health and safety in the organization, community development andengagement,participatinginoutreachprogramsandthelike.

The general average of 3.09 indicates that the companies involved in the studypursuedthevarioussustainabilitypracticesanchoredontheframeworkofmultiplebottomline toagreatextent. It is indicativeof the fact that thesecompaniesperformbusinesspractices and activities that meet the needs of the enterprise and its stakeholders atpresentandatthesametimeprotecting,sustainingandenhancingthehumanandnaturalresourcesthatwillbenefitthefuturegeneration.Impactofsustainabilitypracticesonthefirm’sperformance

It iswidelybelievedthat thefirms’adoptionofsustainabilitypracticeswillprovidethemcompetitiveadvantagesover firms thatdonotadopt them(Adams&Zutshi,2004;King, 2002). The sustainability philosophy assumes that a company should discard thenarrowversionofclassicaleconomictheoryanddevelopcorporatestrategiesthatincludegoals that go beyond just maximizing shareholders’ interests. This concept implies thatcompanies’ activities must be directed to meet the demands of a wider group ofstakeholders,sincethefirm’ssuccesshingesonthestakeholders’satisfaction(Buchholz&Rosenthal,2005;Michael&Gross,2004).

Based on the foregoing, this study sought to obtain empirical evidence that theadoptionof sustainability practices does affect corporateperformance andwhat are theoutcomesofthesepractices.Forthisstudy,onlythosecompanies,whichhavebeeninthebusinessformorethantwentyyears,havebeenincludedasitismostlikelythattheimpactofsuchpracticescanonlybeshowninthelongterm,whenthepoliciesandpracticeshavebeen integrated into corporate management and are capable of creating competitiveadvantages.


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Table 2 reveals the extent of the impact of the sustainability practices on thecompanies’ performance imposed by the multiple bottom line framework in five areas:economic, environmental, ethical, governance and social. The general average of 3.08indicates that the sustainability practices implemented by the firms had a significantimpactontheorganizations’performanceoutcomes.

Table2.Impactofsustainabilitypracticesonthefirms’performance(n=15)TypeofSustainabilityPractices A B C D E ItemAverage

1. Economic` 3.29 3.32 3.36 3.38 3.34 3.34

2. Environmental 3.15 3.08 3.07 3.12 2.97 3.08

3. Ethical 3.00 2.70 2.97 3.11 3.05 2.97

4. Governance 3.12 2.67 3.14 2.87 2.94 2.95

5. Social 3.18 3.10 3.20 2.94 3.00 3.08

GeneralAverage 3.15 2.97 3.15 3.08 3.06 3.08

Legend:Range Interpretation 3.26-4.00 Verysignificant 2.51-3.25 Significant 1,76-2.50 LessSignificant 1.00-1.75NotSignificant

Specifically,forthoseeconomicsustainabilitypracticesespousedbythefirms,these

activitieshadverysignificantimpactontheperformanceofthecompaniesasrevealedbythe itemaverage 3.34. The adoption of sustainable practices anchored on the economicframeworkofsustainabilitysuchasadopting innovativeproductionprocesses,embracingtechnological advancement, knowledgemanagement, sustainability reporting and othershaveverysignificantcontributionstotherealizationofthefinancialobjectivesofthefirms.This led to increased profitability as a result of the exploitation of new resources andinnovativeproductionprocesses.Thesepractices increasedbusinessvolumeandchangesin resource allocation, as the products/services offered to their clients possess elementsthat differentiated them from those of the competitors. These in turn produceddifferencesinsalesandassetturnover.Throughknowledgemanagement,thecompanieswereabletointroducedifferentiatingattributestotheirproducts,services,processesandorganization.

Environmentally oriented sustainability practices made a significant impact in thecompanies’overallperformanceasshownbythe itemaverageof3.08. Therespondentsaverredthatthesepracticesinitiallymeantthefirmsincuradditionalexpensesandledtoashort-term decrease in profitability. Subsequently, these additional expenditures pavedthewayforbiggerrevenuesasthecompanieswereabletoreducecostsduetoincreaseduse of materials derived from recycling, reduction of resource consumption like water,energyandotherinputstoproduction.Moreover,theadvocacyforgreenproductionandwasteauditledtotheenhancementofthepopularityandreputationofthefirmsasbeing


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primemoversforpreservingandprotectingthenaturalresources.Thisreputationcreatedauniquecorporatebrandtothefirmsleadingtomoresalesandrevenues.

In terms of ethical sustainability practices, these activities are viewed to havesignificant impact on the firms’ performance. The values, norms and code of ethicsadhered to by the firmsdonot only determinebusiness culture and character butmostimportantly,thesearecentraltothesustainabilityoftheorganization(Carroll&Buchholtz,2006).Accordingtotherespondents,goodethicsmeansgoodbusiness.Byproducingsafeproducts,theyreduceproductliabilitylawsuits,whichcoulderodethecompany’sintegrityandreputation.Furthermore,byadheringtothecodeofethics,thefirmswillbeassuredofimprovedmoraleandworkefficiencyamongtheiremployees,whicheventuallywillleadtoenhanceeconomicperformanceforthefirms.Ethicalsustainabilitypracticeswillleadtoimproved employee satisfaction, safe products/services, truthful advertising and moreenvironmentallyresponsiblebusinessactions.

The item average of 2.95 indicates that sustainability practices oriented towardsgovernancehadsignificantimpactonthecompanies’performance.Undertheumbrellaofcorporate governance (CG), the respondents averred that their companies wereencouraged to promote fairness, transparency and accountability in their dealings. Thefirmsinvolvedwereexpectedtocontinuegeneratingprofits,asitisthefoundationofthefirm’s survival while maintaining the highest standards of governance internally.Moreover, the management’s decisions were always aligned with the interests of thevariousplayers insideandoutsidethecompanyasamanifestationoftheboard’sdiligentexerciseofitsresponsibilities.

Lastly, in the area of socially oriented sustainability practices, the itemaverageof3.08 signifies that these activities have significant impact on the firms’ performance.Engaginginthesetypesofpracticesaccordingtotherespondentsarenotmerelydesirablebutessential inestablishing improvedrelationshipswithvariousstakeholderstomaintainthefirms’long-termsustainability.Someofthebenefitsenjoyedbythefirmsasaresultofthese actions are: improved relationships with society, government and communities,fostering reputation and brand value, increased stakeholder involvement, reduction ofemployeeturnoverandimprovedproductivity.

It can be deduced from the findings that the various aspects of sustainabilitypracticesadheredtobythefirmshavesignificantimpactsintheoverallperformanceoftheenterprise.Developing sustainablepractices areperceived to create value for the firm.Valuecreationreferstoachievingsufficientprofitandsatisfyingthedemandsofadiversegroupofstakeholders.However,amongthefivedimensions,itiseconomicaspectofthepracticesthathasthemostsignificanteffect.

CONCLUSIONSustainabilityisnotanewconceptinthebusinessarena. Infact,manycompanies

participateinthepursuitofsustainabilitypracticesandconsidertheseaspotenttoolsforthemtoachievecompetitiveadvantage. BusinesssustainabilityaccordingtoBrocketandRezaee (2012) promotes the protection and value maximization of the interests of thevariousstakeholdersofthefirm.Althoughtherearemanystudiesconductedontheissuesofsustainability-orientedpractices, there isa lackofempiricalevidenceonthe impactofthese activities in the overall organizational performance. To fill this existing gap, thisresearchwasconducted


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This study aimed to determine the antecedents of the sustainability practicesobservedbyfirmsanditsimpactontheoverallperformanceofthecompanies.Theresultsrevealedthatthefirmsoperatedwithinabusinessframeworkconsistingoffiveoverridingdimensionsofeconomic,environmental,andethical,governanceandethicalperformance.Undereachdimension,variousactivitieswereadheredtobythefirmstorunthebusinessethically,governeffectively,andpromotesociallyandenvironmentallyresponsibleactionsto ensure sustainable performance, create long-term value for various stakeholders andgain public trust. Furthermore, the findings indicated that all the five antecedents ofbusiness sustainability had significant impacts on the firms’ performance outcomes.However, among the five dimensions, sustainability practices pertaining to economicviabilityweresupportedthemostandhadaverysignificantimpactasitputthefirmsinabetterpositiontofulfilltheirenvironmental,social,ethicalandgovernanceresponsibilities.Economic viability is the cornerstone of business sustainability, which means thatorganizations can surviveonlywhen theycontinue tobeprofitable, creating shareholdervalue.Althoughtheprimarygoalofeverybusiness istocontinually improveitseconomicperformance, it has also to deal effectively with the other dimensions of sustainabilityframework. Afterall, business sustainabilitydoesnotonlyensure long termprofitabilityandacompetitiveadvantage,butalsotopromotethewellbeingofsocietyasawhole.

This descriptive research has proven to be a useful method in identifying andassessing the companies’ existing sustainability related practices. The first researchobjectivewasextremelyhelpful inascertaining theapplicabilityandrelevanceof the fiveantecedents of the multiple bottom line framework of sustainability in terms of theoperational mandate of the participating firms. The second objective addressed theoutcome/softheutilizationofthepracticesinviewofthedesiredgoalsofthefirmwithinthe sustainability framework sphere. The findingsof the studywere in consonancewiththea-prioriexpectationsof theauthor thateconomicvigorasacomponentofcorporatesustainabilityisacoredeterminantofthefirm’slong-termsurvivalandviability.Lastly,thefindings of the study will provide insights that can help the management of the firmsinvolvedinthisstudyandotherresearchers interestedincorporatesustainabilityonhowtoimproveandinnovatetheirfunctionalactivities.Byintegratingsustainabilitypracticesinthe operating agenda, the companies can create the maximum quantity of goods orserviceswiththeleastutilizationofscarceresources,whilemaintainingthehighestqualityandefficiencytoprovideutmostcustomersatisfactionandstakeholdervalue.

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Impact of sustainability practices on the firms’ performance...Organizations are increasingly being pressured by its various stakeholders to focus on sustainability and be accountable