Corporate Sustainability Performance and the Financial Implications: An Empirical Study of the Nordics

Abstract: Despite firms increasing interest in sustainability, researches have been unable to validate the financial implications of sustainability activities. Based on sustainability performance data from 2004 to 2012, covering 134 unique Nordic firms, we study the relative performance of Nordic firms. Sustainability is measured as environmental, social and governance (ESG) performance separately. Additionally, we study the link between sustainability and financial implications. The empirical results are supported by interview findings from Nordic firms showing superior sustainability performance. Our results indicate Nordic firms as superior within environmental and social performance, but are historically behind their European and international counterparts in governance aspects. Furthermore, the results suggest a positive relation for social and environmental performance and a negative relation for governance performance, when tested against financial performance. Overall, both the positive and negative correlations are stronger for Nordic firms, which would indicate the importance of sustainability in this region. These findings can also be explained by stricter governmental regulations (e.g. Kuisma, 2007) and a higher level of public awareness (Dille, 2014). In addition, ESG performance have been tested against capital constraints, which is broader financial measurement of a firm's ability to access financial capital and enhance its value. Here, we find contradictory results to previous studies conducted on global samples, indicating that Nordic firms may deviate.