Abstract

It has been argued by Alexander (2007) that the implementation of morally preferable initiatives such as environmental sustainability fail in contemporary markets because those initiatives require actions on the part of management that will conflict with profit maximization. The purpose of this paper is to investigate the concept of sustainable business and to examine its influence on financial performance and competitive advantage. An attempt to measure the influence of sustainability on financial performance will be undertaken by establishing whether or not there is a statistically significant relationship between sustainable development and financial performance by comparing financial performance ratios of firms that implement sustainability strategies with their industry competitors who do not. The research sample comprises ten companies that were repeatedly listed on “The Global 100 Most Sustainable Corporations in the World” from 2005-2008, representing global-based, publicly-traded organisations. The relationship between sustainability and financial performance is presented through the adaptation of Epstein and Roy’s (2001) sustainability-financial performance framework and investigated further by hypothesis testing. This study suggests that companies which show up repeatedly in the list of the “Global 100 Most Sustainable Corporations in the World” generally do not financially outperform their competition. These results imply that they do not have a sustainable competitive advantage as a result of their sustainability actions providing support for the argument of Alexander (2007) that relying on the current competitive marketplace to broadly embrace and implement sustainability strategies will not work and that the application of light-handed market regulation is required to promote sustainability.