UNRAVELING THE IMPLICATIONS OF CORPORATE SUSTAINABILITY ON FIRMS' FINANCIAL PERFORMANCE: AN EMPIRICAL EVIDENCE FROM NIFTY-500 FIRMS

Abstract

The notion of "sustainable development" originally appeared in the 1980 World Conservation Strategy and was later popularised by the Brundtland Report (World Commission on Environment and Development, 1987). Over the last decade, "sustainability" and "sustainable development" have become popular catchphrases that are commonly used interchangeably. Responsible business practices encompass making decisions and running operations that have a beneficial social impact and reducing the adverse effects of commercial activity, rapid industrialization, and development actions on the natural environment. Therefore, the operations, practices, commitment, and consistent and transparent reporting from business organizations have become some of the most significant components of corporate sustainability performance (CSP). Hence, corporate sustainability has recently acquired momentum and become increasingly prominent as businesses and organizations recognize the need for environmentally and socially responsible operations and practices. Moreover, investors have also started to consider the sustainability performance of business organizations while investing in them. Business organizations commonly disclose their sustainability practices, approaches, initiatives, and performance in their annual reports or corporate social responsibility (CSR) reports. Exoterically, Corporate Sustainability Assessment (CSA) is measured on environmental, social, and governance (ESG) aspects signifying its importance. It shows the level at which a company embraces these concerns throughout its business activities and seeks to measure its influence on the company and society, referred to as corporate sustainability performance (CSP), often reflected by ESG scores or ratings. This study has been framed in reference to the Indian context by taking corporate sustainability performance proxied by annual ESG scores and financial data of mid and largecapitalized firms listed on the National Stock Exchange (NSE) NIFTY-500. In this study, 253 companies have been taken as the study sample. All the necessary financial (accounting and market performance indicators) and non-financial data (ESG scores) have been extracted from the Bloomberg terminal database for a minimum of five years to a maximum of eleven years for the study.