Strategic Environmental, Social and Governance Integration, Competitive Advantage, and Development Outcomes: Evidence from family firms in Developing Economies

Abstract

The contribution of the private sector towards sustainable development has been on the rise especially in the developing economies whereby such firms are supposed to deal with the social as well as environmental constraints through the normal business operations. This paper looks into the question whether and how strategic Environmental, Social and Governance (ESG) integration contributes to the competitive advantage and growth of firms. The study is based on a survey with 460 family firms that do business in Pakistan to conduct the test with the help of partial least squares, structural equation modelling, taking the mediation model between strategic ESG integration and development outcomes based on competitive advantage. Findings show a positive correlation between strategic ESG integration and the competitive advantage and development outcomes. In turn, competitive advantage also affects the development outcomes significantly and mediates the relationship between strategic ESG integration, on the one hand, and development outcomes, on the other hand. These findings indicate that ESG efforts have the most significant developmental influence in case they are an essential part of their competitive strategies of firms as opposed to being pursued as an isolated or compliance-driven practice. These findings have significant implications on managers and policymakers who would like to use the strategies of the private sector in the promotion of sustainable development objectives (SDGs).  

Keywords: Strategic ESG integration; Corporate Social Responsibility; Development outcomes; Sustainable Development Goals (SDGs); Developing Economies.