Corporate sustainability

Author: Malin Maurer, January 10, 2024

1  Understanding of Corporate Sustainability

The understanding and perception of the Corporate Sustainability (CS) concept from both an academic and a practical point of view is the subject of this chapter. The existing differences and characteristics of CS will be discussed, and related concepts will be described and distinguished. 

1.1     Definition and Characteristics

The understanding of CS differs depending on the academic or practice-orientated perspective. Thus, this chapter seeks to contribute to a better understanding of the concept by analysing and explaining the definitions and characteristics within the different perspectives. It is also important to differentiate CS from other related concepts.

1.1.1    Practitioner perspective

Since the 1990s, companies have become increasingly aware of their impact on society and the environment. They are expected to essentially contribute to sustainable development, providing or developing solutions to global problems such as climate change.¹⁰ CS is considered a company’s ambition to contribute to sustainability in the business context, translating sustainability and sustainable development into a corporate context, considering not only economic but also environmental, and social aspects in assessing a corporation’s performance.^1,2,21 Due to this connection, both terms, CS and sustainable development, are often used interchangeably.²² See Chapter 3.3.1.1 for more information on the background of sustainable development.

A central assumption of CS is recognising that pursuing economic objectives alone is insufficient or obstructive to achieving sustainability. Although focusing on economic goals can foster short-term gains, it does not support long-term resilience and success. Therefore, all three dimensions – environmental, social and economic – must be addressed simultaneously.^23,24 This integrated approach of recognising all dimensions is grounded in John Elkington’s (1998) Triple Bottom Line (TBL) framework, which seeks to emphasize the need to balance economic prosperity, ecological integrity and social justice.^2,25,26 Sustainable corporate development can only be achieved if all three dimensions are considered.^19,22,26,27 The following section briefly elaborates on the different dimensions. Further information on the TBL framework is provided in Chapter 3.3.1.2.

Ecological dimension

The ecological dimension addresses a company’s impact on its natural environment, focusing on the impacts of corporate activities on the (natural) environment, e.g., resource use, emissions (into air, water, ground), waste and the impact on ecosystems and biodiversity.^28,29 The ecological dimension can be measured through impact analysis and evaluation. The main target should be to reduce the negative impact of business activities (e.g., production processes, products, investments) on the environment, preserve ecosystems, and use resources efficiently and sparingly.^2,28-30Thus, environmentally sustainable companies do not use more resources than they need to produce and deliver their products and services. Furthermore, they pay attention to the emissions they produce and try to reduce their impact on the environment.²³

Economic dimension

The economic dimension emphasizes the importance of financial sustainability for companies to be profitable over the long term.²⁹ In classical economic theory, a company’s primary goal is to achieve continuous growth in the value and profitability of the company.^2,31 Companies that manage this dimension efficiently will likely succeed, leading to financially rewarding results.²⁹ While corporate profitability remains a priority in this dimension, a CS perspective also considers social and environmental factors.^2,31 This includes aspects like innovation and technology, knowledge management or processes.²⁹ According to Dyllick and Hockerts (2002), economically sustainable companies can always ensure financial solvency while providing shareholders a return.²³

Social dimension

The social dimension of CS is concerned with the social impact of a company’s activities on its employees, stakeholders and the community in which it is embedded.²⁹ It encompasses the reduction of negative impacts as well as the consideration and response to corresponding demands from society. This is also closely related to the issue of corporate legitimacy, which is not discussed further here. Other relevant aspects of the social dimension include addressing social grievances and equity issues, such as interregional or intertemporal equity.² Examples include consideration of employee interests, occupational health and safety, training, and the company’s impact on society/stakeholders outside the company.^2,28,31 Next to reducing negative impacts, socially sustainable companies add value to the community they are embedded in.²³

CS focuses on how companies can (strategically) pursue the three dimensions equally. However, doing so often requires navigating trade-offs. Figure 1 illustrates the sustainability triangle (see Chapter 3.3.1.3) extended by the main challenges arising from the simultaneous considerations and the trade-offs. As a classical entrepreneurial task, economic effectiveness is usually considered a company’s primary business goal to achieve the best economic outcome.^2,31 Nevertheless, in the context of CS, economic effectiveness is not the only challenge companies must tackle. If companies want to act sustainably, addressing one dimension without impacting the other two is rarely possible. The challenges companies face can be categorized into effectiveness and efficiency-related issues. According to Schaltegger et al. (2016), effectiveness strives to improve a single dimension, such as eco-effectiveness or socio-effectiveness, while efficiency describes the relationship between different dimensions, such as eco-efficiency, socio-efficiency and eco-justice.³² Together, they present and systematize the main challenges for companies regarding CS. The ecological challenge seeks to increase eco-effectiveness; the socio challenge aims to increase socio-effectiveness, and the “economic challenge to environment and social management” (p. 191) to increase the socio- and eco-efficiencies.² In the following, the criteria are briefly explained:

• Eco-Effectiveness: Measuring the degree of absolute environmental compatibility, i.e., how well the desired goal of minimizing negative environmental impact has been achieved. According to Schaltegger and Burritt (2005), this indicates how successfully a company meets the ecological challenge.^2,18
• Eco-Efficiency: Economic-ecological efficiency is “the ratio of an economic (monetary) to a physical (ecological) measure” (p. 192).² In this approach, the economical parameter is included as the value added, the ecological one as the (harmful) environmental impact, whereby the environmental impact is regarded as the sum of all direct and indirect environmental impacts caused by a product or service ² Examples, according to Schaltegger and Burritt (2005) are: value added (in $ or Euro)/per tonne of emitted CO2 or contribution margin of a product (in $ or Euro)/contribution to greenhouse effect (in CO2 equivalents).²
• Socio-Effectiveness: The criterion provides information on how much negative societal effects have been reduced. Beyond this, the criterion can also assess how much the positive impact has been increased.^2,18
• Socio-efficiency: Indicates the relation of economic value added to the company’s (negative) social impact concerning its products, processes, and activities.² Examples include the ratio of value-added [EUR]/personal accidents [number] or value-added [EUR]/sick leave [days].¹⁸
• Eco-justice: Provides information on “the ratio between environmental and social objectives or indicators, e.g., environmental impacts relative to poverty” (p. 91).³²
• Integrative Sustainability: The main objective for companies should be to satisfy the three dimensions of sustainability simultaneously.² Doing so requires equal consideration and improvement of eco-effectiveness, socio-effectiveness, eco-efficiency and socio-efficiency.^2,18

In the corporate context, sustainability is often implemented based on ESG criteria. The criteria refer to environmental (E), social (S), and governance (G) sustainability issues within corporations. They present an instrument and framework to assess, analyse, measure, and evaluate efforts to implement CS.³³ In doing so, the ESG criteria consist of different indicators, functioning as a basis for further evaluation and assessment and as the foundation for rating agencies to evaluate a company’s sustainability performance.³⁴ Further information on the practical implementation of sustainability into businesses is provided in Chapter 4.

1.1.2    Academic perspective

The following section explores the academic perspective on the CS concept, paying particular attention to the understanding and definitions published in the scientific literature.

In this context, CS emerges as a complex and holistic concept that is difficult to grasp. In the last decade, CS has been studied by scholars from different disciplines, such as economics, politics, law and the natural sciences, which underlines the complexity of the concept.^8,35,36 Despite this, Ashrafi et al. (2020) conclude that in the academic CS debate, there is less disagreement among researchers about the definition of CS due to its roots in the sustainable development debate.²¹ In contrast, other scholars criticise the lack of a unified definition, which they attribute to researchers who prefer to use more specific and less complex terms.^8,21 Therefore, although CS has been studied extensively and various researchers have contributed to a better understanding of this complex concept, establishing a common definition has not yet been possible.^10,17 However, some definitions are more widely used than others. One of the earliest and still most cited definitions was published by Dyllick and Hockerts (2002). It states that CS can be defined as:

“[…] meeting the needs of a firm’s direct and indirect stakeholders (such as shareholders, employees, clients, pressure groups, communities etc.), without compromising its ability to meet the needs of future stakeholders as well” (p. 131).²³

They thus applied the idea of sustainable development from the Brundtland Report to the business level.²³ To date, numerous further definitions have been proposed, some similar to existing ones, while others take different approaches. The following discussion provides a brief overview of the academic discourse on CS, highlighting the similarities and differences between these definitions.

Table 1 and Table 2 provide an (alphabetical) overview of the most commonly used and referenced definitions in the literature on CS. These definitions are based on the literature reviews by Meuer et al. (2020), Montiel and Delgado-Ceballos (2014), and Linneluecke and Griffiths (2013). These reviews focus on analysing different published definitions and the relevance of the articles based on how often they were quoted.^8-10 The definitions listed here are a small selection to illustrate the variety of existing definitions. Building upon the three reviews mentioned above, the publications and definitions listed were compared and supplemented by further definitions or authors mentioned more than once during the literature search.

Table 1: Definitions of Corporate Sustainability

Author(s)	Definition of CS
Ashrafi et al. (2019)	“Corporate sustainability (CS) is most widely used to refer to an organization’s approach to creating value in social, environmental, and economic spheres in a long-term perspective, supporting greater responsibility” (p. 1).37
Ashrafi et al. (2020)	“[C]an be understood as the application of sustainable development at the corporate level, including the short-term and long-term economic, environmental, and social aspects of a corporation’s performance (p. 7).21
Dyllick and Hockerts (2002)	“[…] meeting the needs of a firm’s direct and indirect stakeholders (such as shareholders, employees, clients, pressure groups, communities etc), without compromising its ability to meet the needs of future stakeholders as well” (p. 131).23
Hahn and Figge (2011)	“Companies should pursue environmental, social, and economic goals alike in order to achieve long-term prosperity of the firm (organizational target level) or to contribute to the long-term prosperity of society and humankind (societal target level)” (p. 331).7
Hahn et al. (2015)	“[C]orporate sustainability refers to a set of systematically interconnected and interdependent economic, environmental and social concerns at different levels that firms are expected to address simultaneously” (p. 299).38
Linneluecke and Griffiths (2013)	“[R]efers to firm engagement with social and environmental issues in additional [sic] to their economic activities” (p. 383).9
Lozano et al. (2015)	“Corporate activities that proactively seek to contribute to sustainability equilibria, including the economic, environmental, and social dimensions of today, as well as their inter-relations within and throughout the time dimension while addressing the company’s system (including Operations and production, Management and strategy, Organisational systems, Procurement and marketing, and Assessment and communication); and its stakeholders” (p. 34).39
Montiel (2008)	There are two ways of defining and conceptualizing CS: –               Ecological sustainability: primarily with the environmental dimension of business –               Tridimensional construct: Includes environmental, economic, and social dimensions. (p. 254).16
Montiel and Delgado-Ceballos (2014)	“[W]e propose using ‘corporate sustainability’ for the tridimensional construct” (p. 123).8
Rasche et al. (2023)	“Corporate Sustainability focuses on managing and balancing an enterprise’s embeddedness in interrelated ecological, social and economic systems so that positive impact is created in the form of long-term ecological balance, social welfare and stakeholder value” ( p.8).40
Schaltegger and Burrit (2005)	“‘[C]orporate sustainability’ links the general approach of sustainability with sustainability at the corporate level” (p. 185).2
Steurer et al. (2005)	“For the business enterprise, SD means adopting business strategies and activities that meet the needs of the enterprise and its stakeholders today while protecting, sustaining and enhancing the human and natural resources that will be needed in the future” (p. 274).41
Van Marrewijk and Werre (2003)	“Corporate Sustainability […] refers to a company’s activities […] demonstrating the inclusion of social and environmental concerns in business operations and interactions with stakeholders (p. 107).42
Wilson (2003)	“[…] [C]orporate Sustainability is an alternative to the traditional growth and profit-maximization model. While corporate sustainability recognizes that corporate growth and profitability are important, it also requires the corporation to pursue social goals, specifically those relating to sustainable development […]” (n.p.).43

In the academic debate, various other terms are used to refer to CS. These include ecological sustainability, environmental/social sustainability, environmental responsibility, CSR (corporate) sustainable development, sustainability, sustaincentrism, sustaincentric orientation, business sustainability, and sustainable corporation/organization.^9,17,44 Corresponding examples can be found in Table 2.

Table 2: CS-related Definitions with different terms

Author(s)	Term	Definition
Bansal (2005)	Corporate Sustainable Development	“Organizations must apply these principles [annotation: economic prosperity, social equity, and environmental integrity] to their products, policies, and practices in order to express sustainable development” (p. 199).26
Bansal and DesJardine (2014)	Business Sustainability	“[B]usiness sustainability can be defined as the ability of firms to respond to their short-term financial needs without compromising their (or others’) ability to meet their future needs [emphasis added by the authors]” (p. 71).44
Bowen (1953)	Social responsibility	“[…] [O]bligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of objectives and values of our society” (p. 6).45
Elkington (1997)	Triple Bottom Line, Sustainable Development	“Sustainable development involves the simultaneous pursuit of economic prosperity, environmental quality, and social equity. Companies aiming for sustainability need to perform not against a single, financial bottom line but against the triple bottom line” (p. 397).25
Gladwin et al. (1995)	Sustaincenterism	“ […] [P]rocess of achieving human development […] in an inclusive, connected, equitable, prudent, and securemanner [emphasis added by the authors]” (p. 878).24
Hall and Vredenburg (2003)	Sustainable Development Innovation	“[…] [S]ustainable development innovation (SDI) must incorporate the added constraints of social and environmental pressures as well as consider future generations” (p. 61).46
Hart and Millstein (2003)	Sustainable Enterprise	“A sustainable enterprise, therefore, is one that contributes to sustainable development by delivering simultaneously economic, social, and environmental benefits – the so-called triple bottom line (p. 56)47.
Marshall and Brown (2003)	Environmentally Sustainable Organization	“In terms of environmental sustainability, an ‘ideal’ sustainable organization will not use natural resources faster than the rates of renewal, recycling, or regeneration of those resources” (p. 22)48
Shrivastava (1995)	Ecological Sustainability Development	“I suggest four ways that corporations can contribute that corporations can contribute to ecological sustainability through (a) total quality environmental management(TQEM), (b) ecologically sustainable competitive strategies, (c) technology-for-nature swaps, and (d) the reduction of the impact that populations have on ecosystems [emphasis added by the author]” (p. 938).49
Valente (2012)	Sustaincentric orientation	“A sustaincentric orientation is defined as an ongoing process of equitably including a highly interconnected set of seemingly incompatible social, ecological, and economic systems through collaborative theorization of coordinated approaches that harness the collective cognitive and operational capabilities of multiple local and global social, ecological, and economic stakeholders operating as a unified network or system” (p. 586).50
WCED (1987)	Sustainable Development	“Sustainable development seeks to meet the needs and aspirations of the present without compromising the ability to meet those of the future” (n.p.).5

An analysis of the various definitions reveals that different approaches are used in defining CS.⁸ The first approach is the three-dimensional approach, which addresses ecological, economic, and social aspects, such as Dyllick and Hockerts (2002) or Hahn and Figge (2011). The second one is the bi-dimensional identifies CS in terms of the social and ecological dimensions, such as Hall and Vredenburg (2003) (see Table 2). The third one is the one-dimensional approach uses CS synonymously for environmental issues, such as Montiel’s (2008) or Shrivastava’s (1995) definitions of ‘Ecological Sustainability’^8,16,46 Van Marrewijk (2003) posits that the term ‘CS’ can assume different meanings depending on the specific area and type of application.^42,51 Definitions can differ, for example, in terms of how sustainability dimensions are considered.¹⁰ All three approaches have been used in research, although much of the literature, particularly at the beginning of the research debate, has strongly focused on the environmental dimensions. ⁸Further information on the development of the academic debate is provided in Chapter 2.2

The definitions listed above in Table 1 and Table 2 can be divided into those published in practitioner journals and those published in academic ones. While practitioner definitions try to provide guidelines on how organisations can integrate CS, academics use broader and more complex definitions.⁸ Examples of practitioner definitions include those of Marshall and Brown (2003), Hart and Milstein (2003) or Markevich (2009).^47,48,52 Academic definitions include Gladwin et al. (1995), Shrivastava (1995) and Bansal (2005).^24,26,49 In their definitions, authors such as Gladwin et al. (1995), Shrivastava (1995), and Elkington (1997) attempt to specify certain criteria or steps that companies should fulfil in order to achieve sustainable development.^24,25,49 These definitions are more descriptive than those presented in Table 1. According to Meuer et al. (2020), a classification of different definitions according to ‘level of ambition’, ‘level of integration’ and ‘specificity of sustainability’ is also possible.¹⁰ The ‘level of ambition’ refers to “how ambitious firms should be in setting certain objectives” (p. 328) according to the respective definition of CS.¹⁰ The ‘level of integration’ criterion refers to the extent to which “firms should integrate sustainability into their operations” (p. 328).¹⁰ The last criterion, ‘specificity of sustainability’, considers to which extent the different definitions include the four dimensions, “[…] the environmental, the social, the economic and the intergenerational […]” (p. 328), based on the WCED definition of sustainable development.¹⁰ However, the fourth dimension, the intergenerational one, is hardly mentioned in the existing definitions.¹⁰ Instead, the focus is on considering the ecological, social and economic dimensions. Derived from and considering these categories, Meuer et al. (2020) classify the studied definitions into two groups: (1) CS as a type of business practice that is part of the business model or strategy and (2) CS as a new management paradigm and a way of doing business.¹⁰

Although no definition is commonly used, most seem to point in similar directions. According to Figge and Hahn (2011), there seems to be a consensus that CS considers ecological, social and economic aspects equally.⁷ This consensus is particularly confirmed by the definitions listed in Table 1. The presented definitions are a small selection to illustrate the variety of existing ones. Building upon the three reviews mentioned above, the publications and definitions listed were compared and supplemented by further definitions or authors mentioned more than once during the literature search. However, the many definitions also clarify that CS is still an evolving and relatively new concept.²¹

1.2  Related Concepts

Regarding the question of what companies are responsible for and the relationship between business and society, several theoretical frameworks are available that provide a conceptual framework for these ambitions.^4,53 CS is a holistic approach frequently associated with related concepts such as CG, CSR, CC, or Corporate Philanthropy (CP).^27,53-56 All these terms are frequently associated with the responsibility of companies in different ways, mostly focused on the interconnection with their social roles.^56,57 Concepts associated with the interconnection of the environmental dimensions are, however, primarily directed towards environmental management systems and measuring the impact on the environment.⁸

This link between the corporation’s responsibilities and their perceived role within society has played a central role in more and more companies since the beginning of the 20th century as social commitment and a sense of responsibility for the impact of their business activities are increasingly becoming part of (external) expectations.⁵⁸ “Today’s corporations are increasingly implementing responsible behaviours as they pursue profit-making activities” (p. 59).⁵⁹ In contrast to the holistic CS concept, concepts such as CSR, CC or CP focus on the fulfilment of social responsibility, whereas the CG concept addresses the control mechanisms necessary to implement all the other concepts.^54,56

1.2.1 Corporate Governance

CG and CS are two key concepts in modern corporate management.⁵⁴ CG focuses on the legal and structural framework governing corporate control and management, while CS emphasises integrating sustainability into the corporate strategy. Both concepts are relevant for companies seeking long-term success and lay the foundation for sustainable corporate processes and activities.⁵⁴ CG sets the rules for operations, business relationships, and decision-making, including corporate strategy, risk management, goal setting, performance measurement, and ensuring effective audit and accounting mechanisms. It provides a framework for controlling and managing the organisation through its processes, structures, and established systems and also monitors, regulates, and directs all business activities.^54,60-62These guidelines consequently serve as a foundation for the management of the company and the decision-making processes.⁶² Most established governance structures within a company are based on or aligned with national or international guidelines such as the G20/OECD Principles of Corporate Governance – the global standard –  or the German Corporate Governance Code. Like Germany, most countries have their own Code of Corporate Governance (an overview of several codes can be found here: https://www.ecgi.global/publications/codes).^63,64 Generally, CG structures are based on transparency, accountability, responsibility, and fairness.^54,65

In recent years, sustainability has become an increasingly significant concern for businesses, and thus, there is a need to integrate sustainability into management and anchor it in the corporate strategy. This transformation requires changes at all company levels, including processes, products, services, and the internal corporate culture.⁶⁶ Adapting and adjusting governance structures following this shift is becoming increasingly apparent as established mechanisms significantly impact how sustainability is achieved and implemented within the company.⁶⁷ Consequently, a growing convergence between CS and CG, known as ‘sustainable corporate governance’, links both concepts. Companies are, therefore, organising the control mechanisms of their processes so that profit and financial interests are taken into account while at the same time changing the processes to reflect the principles of sustainability, which reflect the values of the company and its stakeholders.⁶⁷ This development is emphasized by the recently introduced Corporate Sustainability Reporting Directive (CSRD), which draws attention to the growing interconnection between CG and CS.⁶⁸ While the CSRD does not require companies to implement sustainable corporate governance, it does mandate that companies disclose information about their existing governance structures transparently. For example, the general European Sustainability Reporting Standard (ESRS) 2, Appendix A, Application Requirements, Section 2, ‘Governance’, which is mandatory for all companies, defines several disclosure requirements relating to CG. These include GOV-1, ‘The role of the administrative, management and supervisory bodies’, and GOV-2, ‘Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies’.⁶⁸ This encourages the integration of sustainability into existing corporate governance frameworks.⁶⁹ Consequently, a well-structured CG supports the successful integration of sustainability into a company and can help to ensure that a company is led and organized responsibly and sustainably. A poorly designed CG, on the other hand, can threaten the firm’s long-term success, existence, and sustainability performance.⁷⁰ More information on CG is provided in the corresponding WIKI entry.

1.2.2 Corporate Social Responsibility

Since the 1950s, the CSR concept has been addressing the role and responsibility of companies in and for society.^71,72Carroll (1979) defines CSR such that “the social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time” (p. 500).⁶¹ To this day, this definition is one of the most frequently quoted ones.^16,72 It is visualized in Carroll’s (1991) ‘Pyramid of Corporate Social Responsibilities’ (Figure 2), which has been regarded as the basis for CSR implementation since the early 1990s and categorises CSR into four main areas of responsibility: economic, legal, ethical and discretionary (philanthropic) responsibilities.^22,72,73 Carroll (1979) emphasises that these categories are not mutually exclusive and that all corporate activities can be assigned to one or more categories.⁷²

CSR refers to the voluntary integration of social and environmental concerns into a company’s business activities and stakeholder interactions.^22,74 While CSR initially appeared to focus solely on social issues, it is now widely recognized as encompassing environmental issues that impact the corporation’s surroundings.^22,40 CSR focuses on voluntary actions beyond legal obligations to benefit society and the environment.⁷⁴ A key issue of CSR is the responsibility of companies.⁴⁰ CSR is often perceived as an approach that focuses on a company’s management practices and thus adopts an application-oriented perspective.^22,40 In recent years, the convergence of CSR and CS has become apparent.^4,40,51 While CS originally emphasized environmental concern and later expanded to include social issues, CSR has taken the other trajectory. Initially centred on social issues, scholars gradually began considering environmental aspects, albeit to a lesser extent than CS.^16,22,40 Both concepts strive to integrate the ecological, economic and social dimensions into the corporate strategy. A more profound discussion about the discourse of responsibility (CSR) and sustainability (CS) is found in Chapter 3.4.2. Further information on the CSR concept is provided in the corresponding WIKI entry.

1.2.3 Corporate Citizenship

The concept of CC emerged in the 1980s in the U.S. as companies sought to shed light on their voluntary community engagement in response to the growing social and economic challenges affecting their competitiveness.⁷⁵ While this engagement remains voluntary, society increasingly expects companies to engage in activities beyond profit-making.⁷⁶Consequently, more and more companies implement CC strategies into their business activities.^77,78 In this way, CC defines the role of companies in society, emphasising activities that benefit communities and thus allow companies to act as good (corporate) citizens.^79,80 According to Carroll (1998), a ‘good corporate citizen’ is expected to be profitable, obey the law, engage in ethical behaviour, and give back through philanthropy.⁷⁶ Philanthropic responsibility includes various social, educational, recreational, and cultural purposes.^79-81

CC activities include non-economic social issues and often refer to specific programs or initiatives that address social and environmental issues.⁸² External objectives may be pursued for the benefit of society, but companies may also support internal objectives such as employee retention or brand reputation.⁸² The most common CC instruments include corporate volunteering, corporate foundations, corporate giving and cause-related marketing.^31,56 By doing so, CC aligns with the concept of CSR, addressing companies’ social and philanthropic responsibility.^76,78,80,83 While CC primarily focuses on societal contributions, CSR encompasses broader ethical and responsible actions while also including environmental aspects, albeit to a lesser extent than social ones.^74,76,83 In contrast to CC and CSR, CS takes a holistic approach, equally considering social, environmental and economic aspects and emphasizing the overall impact of a company’s activities.^78,84-86 Nevertheless, companies also use CC projects to support sustainability goals and implement measures that enable the adaptation of business activities.^82,84,87 This can include social initiatives throughout the supply chain, implementing measures to reduce CO2 emissions and plastics, and enhancing the organisation’s internal understanding of sustainability.⁸² One relevant difference between the two concepts is the mandatory nature. While CC remains voluntary, CS is increasingly being made mandatory (e.g., through the CSRD).^78,82,88 Nevertheless, the influence of CS on CC increases as, e.g., the materiality analysis carried out as part of the CSRD serves as the basis for CC measures in some DAX 40 companies.⁸² Consequently, CC activities are becoming increasingly derived from sustainability-related topics within the core business operations of major corporations. Prominent examples of companies that have integrated CC into their official sustainability or corporate strategies include DHL, Merck, SAP, and Siemens.⁸² Sustainability and the pursuit of CS can encourage companies to change their perception of themselves as corporate citizens and adapt their behaviour accordingly. The pressure to declare long-term sustainability as a corporate goal and thus to adapt the company holistically in this direction can also contribute to considering CC.^88-90 More information on the concept of CC can be found in the respective WIKI entry.

1.2.4 Corporate Philanthropy

Philanthropy is one of the oldest forms of corporations taking on social responsibility. People in business have practised philanthropy since the 17^th century, but it is only in the last few decades that the concept, as known today, has gained significant relevance for companies.^78,91,92 As shown in Chapter 3.1.2.2, Carroll (1991) places philanthropic responsibility at the top of the Corporate Social Responsibility Pyramid, emphasizing the obligation of businesses towards society and describing the goal of philanthropy to improve society’s quality of life.^72,73,93

In line with this, CP can be seen as the highest level of a corporation’s social responsibility.^78,94 As a key aspect, CP focuses on doing good and giving something back to society, especially through ethical conduct, diversity initiatives or environmental protection. CP is expressed through “voluntary and unconditional transfers of cash or other assets by private firms for public purposes” (p. 344), including donations, corporate volunteering, and pro bono work.⁹⁵ These activities seek positive societal (and environmental) change, often without expecting direct returns.⁹³ However, scholars debate whether altruistic motives or profit motives drive CP.⁹⁵ While the answer to this question may not be clear, companies today have little chance of being competitive if they do not act philanthropically.⁹⁵ ‘Strategic philanthropy’ bridges CP and business strategy by addressing community issues that benefit the firm’s position.⁹⁴Although a link between CS and CP has not yet been established, CP plays an important role in addressing socio-economic issues under the sustainability dimensions and ESG criteria, more precisely aligning with the ‘S’ and helping their local communities.⁹³ See the corresponding WIKI entry on the concept of CP for more information.

1.2.5 The relationship between the different concepts summarised

Figure 3 briefly illustrates the relationship between CS and the concepts described in this chapter. It is clear that CS influences and is influenced by all the concepts described. An important role is played by the CSR approach, which is moving closer and closer to CS and increasingly addresses environmental and social issues. The CC and CP concepts actively contribute to the implementation of CSR through practical measures and approaches. CG is necessary to implement the necessary strategies, measures, and objectives and integrate them into the company. 

Table 3 summarises the different approaches, comparing their objectives, emergences, origins, main focuses and implementation.

Table 3: Differentiation of CS, CP, CC, CSR and CG

	Objective	Emergence	Origin	Main focus	Implementation
CS	Balancing “[…] economic prosperity, environmental quality, and social equity”(p. 397).25	1990s43	Environmentalism.4,10,25,96	Translating sustainability to the corporate context.2	Embedding in the corporate strategy and business model.54
CG	Set of rules and processes to manage, control and direct all business activities.54	Mid 1980s65	Anglo-American codes of good corporate governance65	Governance, Compliance54,65	Framework for controlling and managing the organisation is based on the principles of transparency, accountability, responsibility and fairness.54,60-62,65
CSR	Aligning corporate action with societal interests beyond profit orientation.74	1950s71	Role and responsibility of companies in and for society.72	Fulfilling demands and expectations of society through voluntary activities.75	Voluntarily integrating social and environmental concerns into business activities and stakeholder interactions.22,74
CC	Acting as a good corporate citizen through activities that are beneficial for society.79,80,97	1990s91	Corporate Philanthropy and Community involvement53	Being a good corporate citizen, giving back to society, the environment and stakeholders.76,98	Programs or initiatives aimed at social and charitable goals align with business goals and values.82 Corporate giving/volunteering/impact investing and activism82
CP	Doing well by doing good to improve competitiveness and image.93	1980s95	Improving the society’s quality of life.93	Doing well by doing good, focusing on specific charitable activities for society.93	Voluntary cash transfer (such as donations, sponsoring, volunteering, pro bono work).58,95

2   Historical Development of CS

The following chapter examines the concept’s general development and the development within the academic debate.

2.1 The CS Concept

Within the past decades, sustainability has gained relevance, both in the practitioner field and in academia.¹⁰ The following chapter will give a brief overview of the historical background of CS and the development of the concept. 

The historical background of the CS concept can be traced back to the beginnings of the CSR concept, as it is known today, as early as the 1940s, when the debate on CR arose because companies tended to prioritise their profit optimisation, frequently at the expense of society.^4,9 A famous example of contemporary criticism of the existing economic markets and their influence on society is Karl Polanyi’s work The Great Transformation, published in 1944.⁴After these first discussions, the question of a company’s (social) responsibility received increased attention in the 1950s.⁴ An important milestone in this development marks the 1953 publication of Howard R. Bowen’s book The Social Responsibility of the Businessmen. Bowen is regarded as a pioneer of today’s understanding of CSR, as he was the first to argue that a company’s primary responsibility should be to align its actions with the interests of society and that companies should go beyond the pursuit of profit maximisation and integrate social goals into their decision-making processes and business strategies.^9,79 Bowen (1953) defined the social responsibility of companies as the “[…] obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of objectives and values of our society” (p. 6).⁴⁵ This book is widely regarded as the starting point for the discourse on contemporary CR, particularly with regard to their social impact and the subsequent influence and role of corporations in society. This subject has become a central concern. This focus on the necessity to include societal goals and values serves as the foundation for the concept of CSR.⁷⁹

The growing environmental awareness of the population, known as the ‘environmental revolution’ or ‘environmentalism” in the 1960s, 1970s, and 1980s, resulted in a shift in CR’s focus from purely social to including environmental concerns.^4,10,25,96 Various environmental disasters, such as the Cuyahoga River fire in 1969, the Seveso disaster in Italy (1974), the OPEC oil crisis of 1973-74, the Son Carlos de la Rapita gas explosion in Spain (1978) or the Exxon Valdez oil spill (1989), but also droughts in the Sahel from the 1960s to the 1980s, continuing tropical deforestation or the realization of the destruction of the ozone layer, have raised public concern.^25,96,99,100Simultaneously, the growing recognition of climate change caused by rising CO₂ emissions from increased production and consumption of goods led citizens to demand stronger environmental protection from politicians and companies to reduce their environmental impact.^25,96 The expectations of firms’ responsibilities thus shifted from the social perspective, which focused particularly on the impact on society and stakeholders, to include the ecological perspective. The demand from customers and stakeholders for more environmentally friendly products and services exerted pressure on companies. Responsible businesses perceived an economic advantage, resulting in companies re-examining their business activities and identifying solutions to existing problems in a manner that would ensure greater responsibility.^{10,96,101,102}

In the 1970s, a series of influential conferences and non-profit organizations shaped the understanding of sustainability and sustainable development to this day, significantly contributing to the emergence of CS and serving as the basis for numerous concepts, frameworks, and recommendations that ultimately influenced this process. The most relevant contribution influencing today’s understanding of sustainability is the WCED’s 1987 publication Our Common Future(Brundtland-Report) and its definition of sustainable development (see Chapter 3.3.1.1).¹⁰³

The report emphasized the need to consider future generations and intergenerational justice and shed light on the necessity of considering economic, social and environmental aspects.^2,5,103 Although the concept of sustainable development received its widespread attention through the Brundtland Report, it was already discussed 15 years earlier at the United Nations Conference on the Human Environment (UNCHE), which was held in Stockholm in 1972. At this conference, sustainable development had its first major international recognition, and the conference was the first to make the environment a central concern by trying to avoid environmental catastrophes by limiting industrial pollution and protecting the environment.^6,104 The most significant contribution of the UNCHE was the creation of the United Nations Environment Program (UNEP) and the Action Plan for Human Environment, concerned with three categories: 

“a) Global Environmental Assessment Programme (watch plan); b) Environmental management activities; (c) International measures to support assessment and management activities carried out at the national and international levels” (n.p.).¹⁰²

The conference also addressed the interests of its participants concerning social aspects such as poverty reduction, securing education, and access to safe drinking water and medical aid.⁶

In the same year as the Stockholm conference, the Clube of Rome published its highly influential report, ‘Limits of Growth’. This non-profit organization aims to “[…] identify holistic solutions to complex global issues and promote policy initiatives and action to enable humanity to emerge from multiple planetary emergencies” (n.p.).¹⁰⁵ The publication mentioned above is the Club of Rome’s endorsement and support of the call for a more sustainable world from a scientific point of view. As one of the study’s key results, the report warned that “if the present growth trends in world population, industrialization, pollution, food production, and resource depletion continued unchanged, the limits to growth on this planet would be reached sometime within the next one hundred years” (p. 23).¹⁰⁶ This prognosis called for urgent and substantive action to prevent such disastrous outcomes. 

Yet, it was not until the 1992 United Nations Conference on Environment and Development (UNCED) in Rio de Janeiro, Brazil (commonly referred to as the ‘Earth Summit’) that many of the WCED’s recommendations were translated into concrete, binding agreements, aiming to unite environmental and developmental concerns of the different countries.²⁷ Important conference results are the Rio Declaration on Environment and Development, Agenda 21, Forest Principles, the Convention on Biodiversity, the Convention on Climate Change, and the Convention to Combat Desertification.¹⁰⁷ Before the Earth Summit, Swiss businessman Stephan Schmidheiny was asked to promote sustainable development among business leaders worldwide. To this end, Schmidheiny founded the Business Council for Sustainable Development (BCSD). Their book Changing Course provided a comprehensive guide to business adaptation for sustainability.¹⁰⁸ In this book, the authors formulated comprehensive plans and strategies based on the WCED’s initial objectives for sustainable development, equally considering economic, environmental, and social goals.^2,43,109 It presented sustainable development as both a cost for businesses and an opportunity.¹⁰⁹ The book, presented at the 1992 Earth Summit, led to the conference’s recognition of the need for sustainable development as one of the world’s greatest challenges, laying the groundwork for future global cooperation.^23,27,110 After this publication, the concept of sustainable development began to reach more businesses, marking an important turning point where the notion of sustainability moved from the global political level to the corporate world, leading to the formation of the World Business Council for Sustainable Development (WBCSD,) building “a platform for [businesses] to respond to sustainability challenges” (n.p.).^2,108 The goal of the WBCSD was, and still is, facilitating the dialogue between the political and corporate levels to reach sustainability.²³

John Elkington extended the discussion on sustainability in the corporate context by introducing the TBL in his book Cannibal with the Fork in 1997. The TBL model takes on an accounting perspective, suggesting a framework for evaluating the performance of companies, not only their financial results but also their environmental and social impact.^75,111 Elkington’s TBL model has played a key role in “changing the narrative on sustainability” (p. 69).¹¹⁴ It has contributed to anchoring this debate into the corporate context, leading to the emergence of CS as a central concept for many businesses today.^23,112 More information on the TBL framework can be found in Chapter 3.3.1.2. Between the Earth Summit, the publication of the TBLs model and the status quo of CS, other important events have occurred that have directly and indirectly impacted or continue to impact the perception and application of CS in the business world. Two examples include the 2030 Agenda for Sustainable Development (with the 17 Sustainable Development Goals) and establishing the UN Global Compact. These have made a significant contribution to influencing how companies conduct their business.¹⁰

Today, the perception of CS is more and more shifting from being primarily voluntary and recognized as a competitive advantage to becoming increasingly mandatory. This shift has been driven partly by the growing obligation to disclose corporate activities concerning sustainability. For example, since 2019, the Non-Financial Reporting Directive (NFRD) requires large companies in the EU to provide information on their environmental, social, and employee-related issues, as well as on respect for human rights and the fight against corruption and bribery.¹¹³ The CSRD, which came into force on January 5^th, 2023, strengthens and mostly replaces the existing NFRD by expanding the disclosure requirements to include further information on environmental, social, and governance factors.^113,114 With this obligation, at least at the EU level, large companies must pursue a sustainability strategy, as failure to meet these requirements can result in severe penalties. It is expected that the disclosure of activities will significantly change the perception of CS in practice as more and more companies are induced to implement measures and strategies in the coming years to promote their sustainable orientation. However, it is currently unclear how the companies are affected by these new disclosure regulations.¹¹⁵

Figure 4 provides a brief overview of the most important historical background events and major milestones in the evolution of the CS concept, highlighting the most influential events and contributions of the past decades that have influenced the current perception of the concept in the practitioner community. What began with the social responsibility of companies towards society and their stakeholders was then expanded by the demand to include the environmental perspective. After the Earth Summit and the introduction of the TBLs model, several key events have directly and indirectly shaped the perception and application of CS in today’s business world.

2.2                Evolution of CS Research

The academic debate on CS emerged in the 1990s due to the Brundtland Report and the growing awareness of global problems such as climate change.^9,16 Thus, the academic debate surrounding CS is still relatively young compared to other disciplines.⁸ Early CS research focused primarily on the impact of businesses on their natural environment and has since expanded to include societal issues.^9,17 This development was driven by the expectation that companies should contribute to solving environmental and social problems.¹⁰ Overall, CS research has undergone many changes and developments in recent years.⁵⁵ A key aspect of the academic debate centres on how companies’ economic, ecological and social efforts interrelate and influence each other and how they relate.³⁵

Various publications, such as those by Linneluecke and Griffiths (2013), Montiel and Delgado-Ceballos (2014) and Burbano et al. (2023), have analysed the development of the academic debate on the CS topic in recent years and identified influences, motor themes and focal points.^7-10,17 Based on these literature reviews, and following Burbano et al. (2023) in particular, the development of the academic debate can be categorised into three main phases: (1) 1953 – 1994, (2) 1994 – 2008, and (3) 2008 – today. A summary and overview of each phase is provided below.

Phase 1: 1953 – 1994

Some scholars see the roots of the CS debate in the debate surrounding corporate social responsibility in the 1950s.⁸ In particular, the book Social Responsibilities of the Businessman, published by Bowen in 1953, contributed to the emergence of the academic debate. With this publication, Bowen questioned what responsibility should be attributed to companies within society. A further impetus for the debate surrounding the responsibility and role of companies was Davis’s publication The Case for and Against Business Assumption of Social Responsibilities in 1973.⁹ Linneluecke and Griffiths (2013) identify this publication as groundbreaking for further research in CSR and CS. Other pioneering publications in this area were the works of Carroll from 1979 and 1991. In 1979, Caroll first introduced ‘The Social Performance Model’, which he translated into the Pyramid of the Social Responsibilities of Companies in 1991. (see Chapter 3.1.2.2). He used both models to contribute to defining the social responsibilities of companies.^9,72 Especially the Pyramid approach is still used today. 

In his book Strategic Management – A Stakeholder Approach, Freeman (1984) emphasised the stakeholders’ role and influence on companies’ decision-making processes and strategies.⁹ Freeman argues that the needs and expectations of stakeholders must be considered and understood to develop appropriate strategies and theories for dealing with them.⁹As companies are part of a bigger system, they have “obligations to a wide variety of social and non-social entities” (p. 438).¹¹⁶ Hence, the resulting debate on stakeholder theory is still regarded as the basis for numerous research projects on CSR and CS, which is why Freeman (1984) can be attributed a major influence on its development.⁹ More information on stakeholder theory can be found in chapter 3.3.2.3.

Phase 2: 1994 – 2008

In addition to the conceptualisation of social responsibility and stakeholder management from the 1950s onwards, another development strand can be traced back to the environmental debate.^7-10 As a result of the ‘environmental awareness’ movements in the 1970s and early 1980s and the highly influential Brundtland Report in 1987, the number of publications dealing with the question of CR related to the numerous global problems and the impact of their activities on ecological problems, human health and the environment increased significantly.⁹ According to the Brundtland Report, companies are central in combating negative effects on the population and the environment and achieving food safety and a sustainable economy.⁸ Over time, companies have been increasingly forced to respond to this pressure and implement environmental regulations.⁹ The research on the second phase, therefore, focussed on understanding how companies can benefit from sustainable development and how they can integrate this approach into their business activities.²¹

This phase is considered the primary emergence of the academic debate on CS. Since the mid-1990s, there has been a steady and increasing growth in CS-related publications. In 2001, for the first time, CS-related publications were on par with publications focusing on social and environmental-related issues, but since then, these contributions have increasingly overtaken contributions related solely to environmental or social issues.⁸This development is due in particular to initiatives by the Academy of Management (AoM), which has strongly promoted CS research. With the founding of the Organizations and the Natural Environment section on the one hand and the publication of the special editions of the Academy of Management Review (AMR) Ecologically Sustainable Organizations in 1995 and the Academy of Management Journal (AMJ) special issue in 2000, Management of Organizations in the Natural Environment, on the other, the AoM has made a significant contribution to the further development of the academic debate. It has led to CS being regarded as a legitimate management and organisational research field today.³⁵ Contributions in these special editions such as Shrivastava (1995), The Role of Corporations in Achieving Ecological Sustainability (AMR), Gladwin et al. (1995), Shifting Paradigms for Sustainable Development: Implications for Management Theory and Research (AMR) or Bansal and Roth (2000) Why Companies Go Green: A Model of Ecological Responsiveness (AMJ) are still among the most influential and most frequently cited works in the field to this day.^9,16 Other publications, which are also among the most cited and used as a basis in numerous research projects, were also published during this period. These include van Marrewijk (2002), Dyllick and Hockerts (2002), and Steurer et al. (2005).^10,55 Publications during this period focused on research related to the environmental dimension, such as ecology and environmental sciences, as well as environmental engineering and environmental economics.¹⁰This research helped to broaden the sustainability debate, particularly by examining the link between businesses and their ecological environment and emphasising the importance of the interrelationship between the three dimensions of sustainability.⁹ Additionally, the performance of companies regarding environmental and economic issues and how this relates to corporate competitive advantage and the financial performance of companies has been increasingly examined.^9,35 However, companies are also assessed on their sustainable behaviour, i.e. how and whether they adopt environmental and/or social strategies.⁷

Phase 3: 2008 – 2024

According to an analysis by Montiel and Delgado-Ceballos (2014), there has been a sharp increase in CS-related publications that take into account both environmental and social aspects, especially since 2008.⁸ With growing awareness of the role of businesses in tackling global problems such as climate change, and public pressure to recognise this responsibility, the number of academic publications on CS, including in high-impact management journals, has increased further, particularly since 2014, as outlined by Meuer et al. (2020).¹⁰ Previously, according to Montiel and Delgado-Ceballos (2014), CS-related publications were mainly published in sustainability/environmental journals and not so much in top academic journals.⁸

This trend is also reflected in the literature searches carried out in common literature databases such as the Web of Science. Here, searches for keywords such as ‘corporate sustainability’ show a significant increase, with a strong and continuous upswing since 2018.¹¹⁷ According to Meuer et al. (2020), current research focuses on how companies can integrate CS into their business model and what long-term benefits this generates. Hahn et al. (2015) and Burbano et al. (2023) see the focus of the debate mainly on ecological issues, primarily regarding how CS is related and can be linked to ecological systems and their limits.^17,35 This observation is also supported by the publication trend surveyed by Montiel and Delgado-Ceballos (2014), which shows a significant increase in publications in the field of environmental issues since around 2012.⁸ Burbano et al. (2023), for example, have identified “Climate Change, Eco-Innovation and Environmental Disclosures” (p. 9; emphasis in original) as the main drivers of today’s research.¹⁷ Another aspect of central importance in today’s research is the consideration of the influence of ecological and social performance on the financial performance of companies.^9,35 According to Hahn et al. (2015), CS research has helped to deepen the understanding of when and how companies respond to sustainability challenges and when and how this pays off financially.³⁵ Linneluecke and Griffiths (2013) summarise that research on CS has so far “ […] focused on stakeholder management and debates on the impacts of the uptake of sustainability practices on firm financial performance” (p. 389).⁹ Meuer et al. (2020) posit that today’s research focuses on how sustainability can be integrated into companies and how this can generate long-term benefits. Over all the years of research in the field of CS, the Resource-Based View Theory (RBV), the Stakeholder Theory and the Institutional Theory have been the most frequently applied theoretical foundations.^8,35 A brief overview of the three theories and their application in CS research can be found in Chapter 3.3.2.

An existing deficit in the current academic CS debate is the lack of a common understanding of the concept’s meaning.^8,10,35 The lack of a standardised understanding impacts the wider academic debate and generation of knowledge, as well as assessing whether companies are sustainable. This and other criticisms of the CS concept are further examined in Chapter 5.

3   Overview of Theoretical Approaches

The following section examines the theoretical approaches relevant to the CS debate. First, the different frameworks on which CS is based are explained before the theories applied in CS research are presented. 

3.1                 CS Frameworks

Today’s understanding of sustainability/sustainable development is based on the definition of the Brundtland Report and Elkington’s TBL model.^5,25 As CS is regarded as the approach of integrating sustainability into the business context, it is necessary to take a look at the frameworks on which the CS concept is based. These are (1) sustainable development, (2) the Triple Bottom Line, and (3) the concept of sustainability.

3.1.1          Sustainable Development

The concept of sustainable development is based upon the WCED publication Our Common Future, also called Brundtland Report, in 1987, which defines sustainable development as a development that “seeks to meet the needs and aspirations of the present without compromising the ability to meet those of the future” (n.p.).⁵ Although several other definitions of sustainability and sustainable development exist, the Brundtland Commission’s definition remains one of the most cited.²⁷ The Brundtland definition of sustainable development recognizes “that the environment, the economy and the society are mutually dependent and interrelated” (p. 11).⁶ Sustainable development seeks generational justice, balancing the use of resources, considering investments, technological development and institutional change.⁶ Hence, the definition focuses on not only the equal consideration of the three sustainability dimensions but also these further principles: the global perspective, linking environment and development and the consideration of inter- and intragenerational.^2,6 With that, the global and temporal notions of the concept are put in focus. Intragenerational justicerefers to “the needs of the present generation” (p. 2), which refers to all people on the globe and goes along with the responsibility of wealthy countries to support and compensate poorer countries.⁶ Intergenerational justice ensures that future generations can satisfy their needs equally and have the same opportunities to choose their lifestyle.⁶

Considering this, it is important to note that sustainable development, as defined in the Brundtland Report, refers to the balanced use of resources and investments, technological development and institutional change, all directed towards current and future generations. To make this possible, the current generation must use the available resources in such a way that they are also available for future generations. In particular, “the fair distribution of natural resources, economic goods and basic social goods” (p. 2) plays a key role here.⁶ The Brundtland Commission furthermore posits that government regulators and policymakers cannot solely achieve sustainable development but that industries – and with that companies – play a crucial role and are important drivers of economic development.^5,43

By pointing out the need to balance the three dimensions, the concept of sustainable development shows companies the areas they should focus on when pursuing sustainability. Furthermore, it stresses economic, social and environmental sustainability as a common goal for all: corporations, governments and society.^5,43

3.1.2           Triple Bottom Line

The TBL model of Elkington (1997) takes on an accounting perspective, suggesting a framework for evaluating the performance and success of companies, including not only their financial results but also their environmental and social impact.¹⁰⁷ The approach seeks to balance the ecological, social, and economic dimensions equally.^5,25 Furthermore, Elkington stresses the need for a long-term rather than a short-term view of businesses and that firms, in order to develop and perform sustainably, need to simultaneously pursue “[…] economic prosperity, environmental quality, and social equity” (p. 397).^25,112 Elkington’s TBL model has played a key role in “changing the narrative on sustainability” (p. 69) and can thus be seen as one of the pillars of today’s understanding of sustainability and how it relates to businesses.¹¹² The ecological dimension of sustainability requires a responsible and moderate use of natural resources to survive in the long term.¹⁰⁷ The economic dimension focuses on the long-term preservation of economic systems, guaranteeing economic growth. Long-term economic activity is only possible if the necessary resources are preserved. Therefore, the economic dimension is securing (non-)renewable resources, avoiding debt and irreparable damage that would prevent continuous growth.^107,118,119 The social dimension encompasses all aspects that affect the quality of people’s lives. These are extensive and diverse, including questions of distributive justice, respect for human rights and basic needs, education, health, and safety. Additionally, the impact of the environment and the economy on communities must be considered.^107,120

3.1.3            The Concept of Sustainability

While Carl von Carlowitz already introduced the idea of sustainability in his 1713 published book Sylvicultura Oeconomica, it took more than 300 years for the concept of sustainability to receive the attention and recognition it has today. In his book, Carlowitz discusses how forests should be treated sustainably and highlights that continuous and steady use of natural resources (here: wood) requires balancing deforestation and regeneration rates to ensure a continuous and sufficiently renewable supply.⁶

Over the years, different models of sustainability have been developed: (1) The Three Pillars of Sustainability, (2) The Sustainability Triangle, (3) The Venn Model of Sustainability, and (4) The Nested Model of Sustainability. Although their approach differs regarding how the dimensions are related, interacting, or influencing each other, they all agree that sustainability is only possible in the long term if all dimensions – social, ecological, and ecological – are considered.⁶ Each model will be briefly described in the following.

• The Three Pillars of Sustainability

The three-pillar sustainability model (Figure 6) is one of the most frequently used models to depict the different dimensions of sustainability.¹⁰⁷ By presenting the three dimensions as pillars, the model emphasises their joint importance, as sustainability is supported by three pillars rather than one. The pillars, which stand side by side, thus form the foundation for sustainability, which is presented as the roof to be supported.⁷⁵ The model also demonstrates that the previous focus, which was exclusively economic in nature, has expanded to encompass the other two pillars, which must also be considered. Nevertheless, the model is no longer viewed uncritically in the present day.¹⁰⁷ First, the model is considered simplistic and, therefore, not operationalizable because its visualization does not make dependencies or possible trade-offs between the different pillars clear or visible. Secondly, it is noted that the construct would collapse if one of the pillars were not considered.⁷⁵ However, other authors have pointed out that the construct might remain intact even if one or more pillars are omitted, thus conveying a false picture of sustainability.¹⁰⁷

• Sustainability Triangle

The Sustainability Triangle (Figure 7) has been created as an extended version of the three-pillar model to emphasize the need for an equal consideration of each dimension. The model highlights the balance of the three dimensions and emphasises that all are equally relevant.¹⁰⁷ However, it also stresses economic, social, and ecological trade-offs. Therefore, the dimensions are arranged along the sides of the equilateral triangle, symbolizing their equal importance and different orientations. This visual representation underscores that sustainability is achieved by the coexistence of these dimensions in the corners of the triangle, emphasising their interconnectedness, where actions in one area influence the other two.¹⁰⁷ Some other models develop this approach further, for example, by using the inner area of the triangle for further differentiation, similar to the overlapping areas in the Venn diagram, to show that the individual areas can be separated from each other but are still connected.^20,121

• Venn Model of Sustainability

The Venn Model (Figure 8) can be traced back to Barbier’s publication The Concept of Sustainable Economic Development in 1987.²⁰ Unlike the three pillars (1) and the sustainability triangle models (2), the Venn Model stresses existing overlaps between the dimensions.¹²² Thus, this type of illustration is intended to emphasize a close connection between the individual dimensions. Further values are assigned to the overlaps between two dimensions, which capture the core value of the respective connection¹⁰⁷: 

• Environmental + Social = Bearable
• Economic + Environmental = Viable
• Social + Economic = Equitable

Consequently, sustainability can only be achieved if the interests of all three dimensions are taken into account simultaneously, represented by the area in the model where all three dimensions overlap.²⁰ However, Barbier (1987) notes that it is impossible to maximise all three dimensions at all times and that trade-offs arise. Additionally, the model emphasises the challenges within the overlapping areas, blurring the boundaries between the three pillars of sustainability and highlighting trade-offs.^20,107,123 In other words, choices must be made between different approaches and goals.¹²³ The OECD takes a similar view, limiting sustainability challenges to the interaction between two dimensions.¹²⁴ Thus, for example, social and ecological goals can be achieved at the expense of economic ones.^20,123

• The Nested Model of Sustainability

The Nested Model of Sustainability (Figure 9) places the three dimensions in a hierarchical order, embedded in one another. In comparison, the three dimensions are given equal weight in the other models, and no dimension is considered superior or inferior. The nested model emphasises the superordinate role of the ecological dimension as a crucial survival determinant.¹²⁵ The hierarchical conceptualization of the model recognizes that the three dimensions are not “distinct but complementary dimensions of sustainable development” (p. 332).¹²⁶ The model assumes that an intact environment is necessary to enable both a sustainable society and a sustainable economy. Consequently, the environmental dimension is given a position within which the social and economic dimensions are embedded.^75,125Thus, society and the economy can only exist within the carrying capacity of environmental systems, while society depends on intact environmental systems and the economy on the environment and society.⁷⁵

However, the model also emphasises the existence of trade-offs between the ecological, social, and economic dimensions and highlights that while human and physical capital can be replaced by, e.g., machines, natural resources are not substitutable with human-made capital, showing that “the absolute limits of these trade-offs are dictated by the need to maintain a functioning life-support system” (p. 622).¹²⁵

The first three models can be assigned to the concept of weak sustainability, whereas the fourth model can be assigned to the concept of strong sustainability. Weak sustainability supposes that natural resources can be replaced by human and physical capital: As the dimensions are of equal value in the first three models, it is assumed that substitutability is possible. In strong sustainability, it is assumed that substitutability is limited. It is only possible between human and physical capital and within different natural resources. However, it is impossible to substitute natural resources with human or physical capital. Therefore, the ecological dimension is superior to the other two in that it defines the boundaries within which the social and economic dimensions can exist.^41,127 Although the sustainability models described are the most widespread and frequently used today, they are also criticised. For example, it is critically noted that in practice, the application of the models is often focused on one of the dimensions rather than on the parallel fulfilment of all three goals, which leads to conflicts.

3.2                 Theories applied in CS research

Research on CS has been frequently based on the theoretical perspectives of the (N)RBV, institutional, and stakeholder theories.^8,9,21,35 These theories will be briefly discussed in the following section to strengthen the academic perspective on CS.

3.2.1            The (Natural) Resource-Based View Theory

In the past, the RBV was used “to provide a better understanding of how firms’ capabilities can be used for the advancement of CS-related strategies within the firm” (p. 126).⁸ In this context, the term ‘capabilities’ refers to a company’s capacities and internal resources, which, if these are used correctly, can generate a competitive advantage. To do so, the RBV of a firm can contribute to providing explanations on how precisely these resources should be used.¹¹⁶ According to Barney (1991), there are four indicators a resource should fulfil to provide a sustained competitive advantage: is that resource valuable, is it rare, is it imperfectly imitable, and are there substitutes for that resource?¹²⁸

However, focusing on CS, it is necessary to consider how the available internal as well as natural resources can be utilised to promote CS strategies.⁸ Throughout the years, the awareness about the impact of companies on their natural environment has risen, leading to the realization that, even though the RBV considers various resources, it does not consider the interaction between corporations and the natural environment. In this context, it became evident that natural resources such as sustainable raw materials or renewable energy can also be considered part of a firm’s resources.¹⁷ Due to this increasing awareness, Hart (1995) expanded the foundational concepts of the firm’s RBV.^8,129This approach, labelled the natural resource-based view (NRBV) of the firm, enhances the RBV by addressing the ecological relationships between organizations and the natural environment.²¹ According to the NRBV, three key strategic capabilities are providing a source of competitive advantage: (1) pollution prevention, (2) product stewardship, and (3) sustainable development. Hence, sustainable development is regarded as one of the strategic capabilities and an important aspect for companies to consider if they want to create competitive advantages. Hart and Dowell (2011) stress that sustainable development “is not restricted to environmental concerns but also involves focusing on economic and social issues” (p. 1466).¹³⁰ That being said, studies based on RBV or NRBV examine how and under which conditions addressing environmental and social issues can result in sustained competitive advantage.¹³⁰ For example, Hart (1995) examined how the environmental dimension might become a source of revenue growth.¹²⁹Furthermore, Shrivastava (1995) researched the effect of including environmental technologies in strategic management and how this can create competitive advantages.^21,49

3.2.2            Institutional theory

Institutional theory has been and still is widely used and applied to studies in the scientific debate of CS as the theory offers a framework that helps scholars analyse the (social) context in which firms operate, providing a deeper understanding of which forces contribute to the relationship between business and society.^4,26 The grounding of research on institutional theory can be effective in explaining the development, diffusion, and institutionalization of various CS practices as corporations strive for legitimacy. Moreover, it can be used to explicate how external pressure, such as fines and penalties, mimicry of other successful companies, media attention or scrutiny from activists, and community concerns, are crucial in shaping how CS-related practices are adopted within companies.^8,26Thus, institutional theory provides insights into how firms respond to social and environmental issues to gain and maintain legitimacy through the demands of their institutional environment.²⁶ Bansal (2005) summarizes three reasons why institutional theory is relevant to corporate sustainable development²⁶:

1. A company’s commitment to CS is highly influenced by the individual values and belief systems of those responsible for the decision-making²⁶,
2. Promoting the communication of actors with different perspectives on sustainable development to establish norms and common and common beliefs.
3. Regulations and agreements influence how CS is institutionalized within corporations. 

In summary, CS, management scholars have based their research on institutional theory to examine different influences, scenarios or questions. For example, Jennings and Zandbergen (1995) studied how companies accept and implement CS.¹³¹ Other authors conducted studies on the “adoption of environmental actions and policies by corporations” (p. 9)¹¹, sustainability reporting, third-party ratings or green innovations (e.g., Jensen and Berg 2012, Aguilera-Caracuel & Ortiz-de-Mandojana, 2013 or Delmas and Montes-Sancho 2011).^8,132-134

3.2.3            Stakeholder theory

Based on Freeman’s (1984) book Strategic Management – A Stakeholder Approach, stakeholder theory argues that corporations must meet their stakeholders’ interests and demands and consider them in the decision-making and strategic processes to achieve their objectives and be profitable in the long term.^4,9 As companies are part of a bigger system, they have “obligations to a wide variety of social and non-social entities” (p. 438).¹¹⁶ Stakeholder theory hence helps to explain the relationship between corporations and their internal and external stakeholders.¹⁷

As the theory keeps the stakeholders’ interests in mind, it can be used “to explain firms’ drivers for undertaking CS strategies” (p. 124).⁸ Hence, stakeholders are highly influential in adopting and implementing CS-related strategies to achieve sustainable development objectives.^135,136 In the academic debate of CS, scholars applied stakeholder theory to different CS-related topics such as environmental marketing, pro-environmental response or the inclusion of the environment as a stakeholder entity. Furthermore, stakeholder theory has been used to evaluate the firms’ drivers for integrating sustainability into their corporate activities and how their stakeholders influence this. E.g., Sharma and Henriques (2005) evaluated how environmental practices in the Canadian forestry industry were possible due to stakeholder pressure.¹³⁶ Conversely, Kassinis and Vafeas (2006) evaluated how stakeholder pressure and environmental performance are connected.^8,137 It “provides a base for understanding the actions of corporations necessary to carry out their missions concerning the multi-stakeholders with whom they interact and hold responsibilities” (p. 5).²¹

4   Discourses within the field of CS research

CS is a wide academic field with lots of different perspectives and discourses. The following chapter will briefly outline some of the main discourses that arose throughout the different phases of the academic debate. Burbano et al. (2013), Bansal and Song (2017), and Linneluecke and Griffiths (2013) identified the most important debates in CS research. After a short general overview, three of them will be briefly presented below: First, the differentiation between the two constructs of responsibility and sustainability; second, the influence of a company’s social performance (CSP)/ environmental performance (CEP) on its financial performance; and third, the role of paradoxes and tensions in CS.

4.1                 Overview

Throughout the years, CS research has been characterized by various discourses that dominated the academic debate in the different periods of CS research, as presented in chapter 3.2.2. Table 4 provides an overview of the most relevant discourses based on the literature review of Burbano et al. (2023) and Linneluecke and Griffiths (2013).

Table 4: Relevant Discourses in CS Research

Period	Focus	Important research questions	Relevant Publications
1953-1994	Social Responsibility of Firms, Stakeholder Theory	What influence do stakeholders have on firm strategy?What is the relationship between external stakeholders (i.e. governments and consumers) and companies?What is the responsibility of firms towards civil society?How can businesses act responsibly?	Bowen (1953), Carroll (1979), Freeman (1984), Brundtland-Report (1987)
1994-2008	Environmental awareness and ecological responsibility, GHG emissions, Organizational and Financial Performance, ESG criteria	How is CS(R) linked to financial performance?What is the relationship between firms and the natural environment?How are economic, social and ecological issues interconnected?How can the environmental and economic performance of firms be reconciled?How can firms comply with environmental regulations?How can ESG criteria be included in business strategy?How can CS be implemented into the core strategy?	Gladwin et al. (1995), Shrivastava (1995), Special Issues AoM (1995, 2002), Dyllick and Hockerts (2002), Hart (1995), Van Marrewijk (2003)
2008-today	Integration of ecological and social aspects, Certification, Reporting and disclosures, Innovations, Environmental concerns, Corporate Governance	How does the board of directors/individuals influence achieving sustainability goals?How can disclosures and reporting contribute to better CS performance?What is the role of regulations and governments?How does CG influence the implementation of CS?How can trade-offs be managed?How can exploring supply chains contribute to a better understanding of the larger business systems?	Hahn and Figge (2011), Hahn et al. (2015), Meuer et al. (2020), Burbano et al. (2023),

Three important discourses in the debate surrounding CS (responsibility versus sustainability, financial performance and the role of paradoxes) are briefly described below.

4.2                 Responsibility versus Sustainability

As presented in previous chapters, the debate around CS is rooted in discussions on a company’s responsibilities, particularly towards social issues. Thus, the focus shifted from solely addressing social issues (CR) to including environmental ones (CS). Over time, scholars increasingly used the terms responsibility and sustainability synonymously to address similar risks and opportunities.⁴ Despite their different origins, the two concepts began to blur, resulting in an unclear understanding of the construct.⁴ However, a clear understanding of the construct and underlying assumptions is crucial for the evolution of an academic debate. Hence, the difference between responsibility and sustainability is an important discussion in CS research.⁴

(Corporate) Responsibility Research

As early as the 1950s (as shown in Chapter 3.2), researchers on CR focused on the (negative) effects of markets on social issues such “as labour disputes, gender inequality, product recalls, consumer issues, and fair trade” (p. 108).⁴Environmental concerns were initially framed as a subset of social issues, e.g., in cases where environmental issues negatively impact society.⁴ In CR research, companies were viewed as societal actors, among many other stakeholders, and should keep their stakeholders’ interests in mind when seeking to achieve their goals.^4,9

CR research is based on values and norms. Early discussions revolved around why managers should be accountable to broader stakeholder groups and the assumption that companies’ task is to serve society and give something back.^4,95Business managers were challenged to consider the consequences of their entrepreneurial activities. The need for CR was then increasingly justified in normative theory and ethical and welfare economic theories, according to which managers have a moral obligation to respond to social problems and contribute to solving them.⁴ CSR initially emphasized moral responsibilities but has since evolved into a more descriptive and practical approach, integrating tools for management application.^10,40 Modern responsibility research frequently relies on CSP evaluations using databases like KLD or MSCI, analysing human rights, workplace diversity and CG metrics. Studies also utilize corporate reports and surveys to measure and interpret business impact.^4,16 Various constructs, including CSP, Corporate Citizenship (CC), and Corporate Philanthropy (CP), further enrich the field.

Corporate Sustainability Research

CS research, emerging in the 1990s, as shown in Chapter 3.2, focused on the environmental impacts of corporate activities and the disruption of natural systems. Scholars place society within these natural systems, making it a part that, according to Bansal and Song (2017), contributes to or is affected by environmental issues (p. 108).⁴ Sustainability in this context was often conceptualized as environmental/ecological management, contrasting “environmental protection with economic development” (p. 108).⁴

Scholars adopted systems theory, positioning businesses within broader ecological and social systems, where each action influences interconnected systems. Therefore, CS research can be grounded in system theory, as everything influences everything, such as each corporate action influencing the social and/or environmental systems.⁴ Montiel (2008) emphasised that CS operates as a nested system, where businesses are part of society, which in turn is embedded within the environment.¹⁶

Initially centred on environmental issues, the scope of CS research gradually expanded to include social considerations, reflecting the growing acknowledgement of societal integration within the ecological system. Thus, CS seeks a system-level change to balance the corporation’s three dimensions and the systems into which it is integrated.⁴⁰ Since the end of the 20^th century, CSR and CS (or corporate responsibility and sustainability, respectively) have increasingly converged due to their shared perspective on companies being situated in a broader context. Over time, CR scholars integrated environmental concerns, and sustainability researchers incorporated social issues.^4,16 However, while CR research adopts a normative perspective and focuses on ethical responsibilities, CS research takes a systemic approach, addressing the interconnectivity of ecological, social, and economic systems. Despite their distinct origins, both constructs aim to balance these dimensions for long-term profitability and societal well-being.^4,16 Several scholars, including Bansal and Song (2017) and Van Marrewijk (2003), have examined the evolution and relationship between CR and CS.^4,51 In their publications, these authors have focussed on developing the understanding, differentiation and relationship between CSR and CS. They conclude that there is still no consensus in the academic debate on whether the concepts should be used separately or synonymously, but they all point out that the two concepts are converging.

While some authors, such as Linneluecke and Griffiths (2013) or Montiel and Delgado-Ceballos (2014), advocate for unifying the concepts under the term of CS, others, like Bansal and Song (2017), Burbano et al. (2013), Ebner and Baumgartner (2006) or Steurer et al. (2005) see the two constructs as separate concepts. Somewhat similarly, some other scholars see the two concepts as the same on a theoretical level but point out differences in their practical application.²⁷ For example, Van Marrewijk (2003) proposes that CSR focuses on community engagement (e.g., stakeholder dialogue and sustainability reporting), while CS should prioritize value creation and environmental management.^27,51 Table 5 provides an overview of the most relevant differences between the two constructs.

Table 5: Differences between Corporate Responsibility and Corporate Sustainability

	Corporate Responsibility	Corporate Sustainability
Conceptual Roots	Normative theory	System theory
Paradigm	Existing business paradigm	Eco-centric paradigm
Background	Harms of markets on society, concern on social issues	Harms of economic development on natural systems, concern on environmental issues
Theoretical foundation	Ethics and normative welfare economics	Ecology, sustainable development
Associated concepts	CSR, CC, CP	Ecological sustainability, ecocentric values, ecocentrism
Assumptions	Firms serve the general needs of society.	Firms are part of a larger system in which each action influences the other systems.
Relevant authors	Bowen (1953)45, Freeman (1984)135	Gladwin et al. (1995)24,49, Shrivastava (1995)47, WCED (1987)5

4.3                 CS and the Financial Performance

For over 40 years, scholars have studied the link between corporate financial performance (CFP) and corporate social or environmental performance (CSP/CEP), focusing on how (environmental or social) sustainability activities impact the firm’s profitability.^138,139 Research on the CS-CFP relationship is a prominent area in CS literature.⁹ For example, Burbano et al. (2013) identified financial performance as a key theme of the CS debate between 2009 and 2013.¹⁷

Not only during this period but also before, different studies have examined the CS–CFP relationship; however, most of them have focused on either social or environmental issues, with few offering a holistic sustainability perspective.¹⁴⁰Notable meta-analyses by Margolis and Walsh (2003) and Orlitzky et al. (2003) link CS with economic performance.^{4,138,141,142} Over time, the debate has evolved from questioning whether CS pays off to now asking whenit pays off to be sustainable.¹³⁸ Thus, a strategic perspective on the CS-CFP relationship might be necessary as a corporation’s strategic orientation influences its financial performance, as studies have shown that for CS to be successfully integrated, it needs to be integrated into a “firm’s values, goals, and daily routines and operations” (p. 412).¹³⁸

Authors like Aupperle et al. (1985), Margolis and Walsh (2003), Bansal and Roth (2000), McGuire et al. (1988), and Orlitzky et al. (2003) have focused on the relationship between CSP and the CFP, while Albertini (2013), Dowell et al. (2000), or Russo and Fouts (1997) examined the relationship between CEP and CFP.^4,141-147 Despite extensive research, findings are mixed. For example, Dowell et al. (2000), Margolis and Walsh (2003), and Orlitzky et al. (2003) identified a positive relationship between CSP/CEP and CFP, while Alexander and Buchholz (1978) or McWilliams and Siegel (2001) were not able to identify any significant influence on financial performance, and Aupperle et al. (1985) concluded that CSP negatively influences the CFP.^{9,138,141,142,146,148,149}

In those cases where a proven positive relation between CSP and CFP has been found, the authors concluded that the results “show that it [pays] to be green or good” (p. 112), hence generating a competitive advantage for companies.⁴These results framed the orientation towards building a ‘business case’ that presents CS as a construct that encourages “innovation, building reputation, and attracting skilled employees” (p. 113).^4,141 Since the emergence of CS research in the 1990s, the discourse on the ‘business case for corporate sustainability‘ has accompanied the academic debate on CS.^4,150 It focuses on the relationship between social/environmental and the financial performance of companies, examining how CS can generate a competitive advantage for companies.^23,151 Accordingly, the ‘business case’ is widely used to justify managerial decisions and investments and to “seek justification for sustainability strategies within organizations” (p. 27).^151,152 The debate aims to provide managers with arguments to act socially and/or environmentally responsible, not only for moral reasons but also because it pays to be sustainable, contributing to making profits. See the WIKI entry on The Business Case of Sustainability for more information.

4.4                Paradox Approach

Much of the academic research to date has adopted an instrumental approach and investigated how integrating sustainability and balancing the three sustainability dimensions can create benefits for companies and how CS or the CSP/CEP can positively impact CFP. However, this approach neglects how companies can initially achieve such a balance. Integrating sustainable practices into the firm’s activities goes along with trade-offs and tensions where managers have to address and evaluate interests and issues of all three dimensions.⁸⁶

Considering this, the paradox perspective has been gaining ground in the academic debate since around 2007. It contrasts the instrumental business case logic described in Chapter 40, which primarily seeks to reduce or avoid tensions to achieve a better CFP. Instead, it provides an alternative approach companies can use to engage with the tensions between the three sustainability dimensions actively.^17,86,153 According to Hahn et al. (2018), the paradox perspective can be defined as follows:

“A paradox perspective on corporate sustainability accommodates interrelated yet conflicting economic, environmental, and social concerns with the objective of achieving superior business contributions to sustainable development”(p. 237).¹⁵³

This perspective recognises and emphasises the existence of tensions between the individual dimensions and provides a theoretical basis for developing strategies to address social and environmental problems, even if they are conflicting.¹⁵³ The paradoxical perspective thus creates

“[…] [a] leeway for more substantive corporate contributions to sustainable development by purposefully balancing and combining instrumental initiatives—where addressing sustainability issues yields business benefits—with moral initiatives—where firms address environmental and social issues in their own right” (p. 237).¹⁵³

In contrast to the business case or different trade-off approaches, the paradox approach embraces tensions between the sustainability dimensions, incentivising companies to implement sustainability-related measures that are not only geared towards economic profit.^86,153  In the academic debate, research is still dominated by economic logic and publications on paradoxes in the context of CS are comparably young, with the first articles dating back to 2007.^86,141Since then, publications on the paradox approach have slowly increased. In 2015, Van der Byl and Slawinski (2015) identified only eight articles, namely from Berger et al. (2007), Wijen and Ansari (2007), Gao and Bansal (2013), Vilanova et al. (2009), Scherer et al. (2013), Hahn et al. (2014), Hahn et al. (2015), and Slawinski and Bansal (2015). However, a follow-up literature search in relevant databases such as Google Scholar, Web of Science or Scopus has shown that between 2015 and 2024, various articles were published in the debate on the paradoxical approach and CS, as shown exemplary Figure 10, according to Web of Science.

While the number of publications is increasing, the number is still comparably low. Thus, an expansion of research using the paradox approach is recommended.

5   Future Research

CS is a relatively young and new concept, with numerous opportunities for future research to consider and further explore CS from different perspectives and using different methods ⁸ Future research in the academic CS debate could, for example, deal with (1) definitional clarity and differentiation of other concepts, (2) the paradox approach, (3) implementing CS, (4) the impact of CS, and (5) the broader context, to name just a few examples.

5.1                 Definitional Clarity and Differentiation of Other Concepts

Chapter 3.2.2 looks at the academic perspective on the concept of CS in recent years. It becomes evident that a major shortcoming of the current academic debate is that there appears to be a lack of a standardised definition, resulting in differing understandings of the meaning of CS. Partially based on this, Chapter 3.4.2 discusses the differences and similarities between corporate sustainability and responsibility. This discussion shows that the “blurring between responsibility and sustainability” (p. 5) can sometimes lead to confusion as researchers start from different assumptions and theories.²⁷ Therefore, a common understanding of a specific concept or a particular research field is essential.⁴ A lack of such does not only have an impact on current or future research but also the implementation of CS strategies in practice. It affects the assumptions made, as well as the direction, the focus, and the perceived urgency of certain aspects. Given that the confusion among academics continues, some scholars, as Montiel (2008) suggests to analyse the extent to which the understanding of CS and CSR changes depending on the circumstances and Bansal and Song (2017) emphasise the need to either more accurately distinguish CSR and CS or, on the contrary, merge them into one construct that will account for all social, environmental, and economic issues in the business.^4,16 A follow-up literature search in some of the most common search engines has shown that there have not been any publications working on this explicitly this issue. Thus, providing research on this issue could contribute to a better research foundation on the understanding of CS.

5.2                 Tensions in CS and the Paradox Approach

In recent years, CS research has increasingly focused on investigating the influence of social and environmental aspects on corporate financial performance (CFP) (see Chapter 3.4.3). However, it is often overlooked, especially in the context of the ‘business case for CS’, that managers are often confronted with tensions and trade-offs between the individual sustainability dimensions when making decisions. For this reason, according to Burbano et al. (2023), companies should recognise that social and environmental goals are not always complementary but can also conflict.¹⁷ As a result, the study of tensions is becoming increasingly important in the academic CS debate. An increasing number of researchers are already focusing on how companies should deal with tensions. These include, for example, Bansal and Song (2017), Hahn et al. (2015), Hahn et al. (2018), as well as Hockerts and Searcy (2023). Nevertheless, there is still much potential for further research. In their editorial introduction, Hockerts and Searcy (2023) emphasise that scholars should deal with trade-offs and tensions concerning CS to contribute to the academic debate. They formulate potential research questions, which are as follows¹⁵⁵:

• “How [do] firms make normative judgements with respect to identifying, assessing, and making trade-off decisions?” (p. 228)¹⁵⁵
• Under which conditions do trade-offs transform into synergies?
• How do firms strategically direct these transitions of trade-offs becoming synergies?

Furthermore, Hahn et al. (2015) have already identified and analysed four areas of tension in their publication but emphasise that there are other tensions that companies are confronted with ((1) personal versus organizational sustainability agendas, (2) corporate short-term versus long-term orientation, (3) isomorphism versus structural and technological change, and (4) efficiency versus resilience of socioeconomic systems).³⁸ They suggest that these should also be analysed more closely, for example, with the help of their developed integrative framework. To this end, they suggest conducting a systematic analysis that can help better understand the “managerial responses to various sustainability challenges” (p. 311).³⁸ Hahn et al. (2015) also raise the question of the circumstances under which companies decide which strategy to deal with corresponding tensions.³⁸ In their editorial introduction, Hockerts and Searcy (2023) list the paradoxical perspective as one of three ways in which companies can deal with “conflicting objective functions” (p. 227).¹⁵⁵ As mentioned above, this perspective aims to recognise tensions that arise and to manage them strategically.¹⁵⁵ Van der Byl and Slawinski (2015) also note that this should provide the basis for managers to deal with complex sustainability issues and to understand how to identify and address tensions accordingly.⁸⁶ Rather than proposing specific research questions, Burbano et al. (2023) focus on presenting possible areas, such as understanding behavioural change, metrics development for measuring ESG criteria, or knowledge co-creation, where further research should be conducted.¹⁷ Adopting a paradoxical perspective is seen as a promising opportunity for the academic CS debate by examining the different areas of and types of tension in sustainability and analysing how these can be managed. This ultimately contributes to a better understanding of CS and its practical implementation by companies.¹⁷

5.3                 Implementing CS

While theoretical findings on corporate sustainability, such as how the individual dimensions interact with each other or why managers make certain decisions, have already been researched, the practical implementation of CS in companies remains a key challenge. Against this background, future contributions could focus on the following questions^4,155: 

• How can environmental interests be integrated into managerial decision-making, given that the natural environment does not qualify as a stakeholder that can act in its interest?¹⁵⁵
• “What role should intergenerational justice play in corporate decision-making, and what timelines need to be considered?” (p. 231)¹⁵⁵
• “How far [should] [businesses] be expected to pursue sufficiency models?” (p. 230)¹⁵⁵
• “[What is] the role of [businesses] in a sufficiency-based economy?” (p. 230)¹⁵⁵
• “How [can] the concept of sufficiency […] drive business model innovation?” (p. 230)¹⁵⁵

Furthermore, understanding the perceptions and behavioural responses of (internal) stakeholders like employees and firm leaders towards CS practices will be crucial for encouraging its implementation within organizations. Therefore, future research could examine stakeholders’ revealed preferences and actual behaviour.¹⁷ However, there is not only a need for research into the relationship and distinction between CSR and CS (see Chapter 3.5.1). As explained inChapter 3.1.2, there are numerous concepts related to CS, such as CG, some of which overlap considerably.

• Who drives the CS phenomena, business practitioners or scholars?⁸
• How is CG affecting CS outcomes?⁵⁴
• How do different governance structures influence sustainability outcomes?⁵⁴
• How do the different concepts influence each other?

The proposed research questions can also be applied to other related concepts.

Moreover, it should be examined whether companies take equal account of the three sustainability dimensions and what value they attribute to each of them. Montiel and Delgado-Ceballos (2014), therefore, propose a study to evaluate whether “the three dimensions—economic, environmental, and social—[are] equally important“ (p. 133).⁸ This research question is also closely related to the question of and consideration of trade-offs and tensions.

5.4                 The impact of CS

Research on whether and how the integration of sustainability into corporate activities impacts society and the environment is scarce. This also affects the assessment of how CS could contribute to overcoming the so-called grand sustainability challenges.¹⁷ Objective metrics that enable corporate (financial, social and environmental) performance to be measured and analysed must be developed.⁸ However, this requires further research and raises the following questions:

• With which objectives can social and environmental performance be measured?¹⁶
• Who standardizes CS definitions and measures?⁸
• “Should we take a prescriptive role and design standardized metrics for companies to use when evaluating their CS levels?” (p. 132)⁸
• Which influence does CS have on CFP, not only social or environmental issues?¹⁷
• “[…] [T]o what extent should we rely on ratings of corporate sustainability performance?” (p. 232)¹⁵⁵
• “What is the role of small firms in pursuing a broader transition to more sustainable business and society?” (p. 232)¹⁵⁵
• What are firms’ roles in inducing large-scale sustainability transitions?¹⁵⁵

Additionally, Hockerts and Searcy (2023) also see a need for more research into the impacts of CS in relation to carrying capacities, thresholds and resilience.¹⁵⁵

5.5                 Understanding the Broader System: A Call for Interdisciplinarity

Numerous authors, such as Burbano et al. (2013), Linneluecke and Griffiths (2013), and Montiel (2008), call for the expansion and strengthening of scientific collaboration between different fields and disciplines. It is important to recognise that the economic, social and governance systems in which companies operate also influence the outcomes of their actions; hence, understanding the wider systems in which corporations operate is crucial.¹⁷ Linneluecke and Griffiths (2013), in particular, point out that in current CS research, there is a lack of “the broader consideration of emerging scientific problems, perspectives and theoretical insights” (p. 390).⁹ One reason for this is that the impact or contribution of CS to tackling major challenges such as adapting to climate change or reducing greenhouse gas emissions has not yet been extensively researched (Chapter .).^9,17 Similarly, Hockerts and Searcy (2023) suggest further research “on resilience and linking corporate sustainability to external thresholds, such as the planetary boundaries” (p. 230) using new ethical analysis or framing methods .¹⁵⁵ Specifically, they emphasise that the impacts and touchpoints of CS on thresholds and the contribution to climate change, biodiversity loss and environmental impacts are far less researched in management research.^38,155 In this context, the following exemplary research questions can be posed:

• How can CS research contribute to interdisciplinary research, such as environmental change or uncertainty?⁹
• How can CS gain from research on adaptation or resilience to climate impacts?⁹
• Where does corporate activity intersect with recognized thresholds, like the planetary boundaries?¹⁵⁵

Given the focus on interdisciplinarity, it should be noted that research in this area is closely related to and overlaps with research on CS implementation and impact, again emphasising the need for more interdisciplinarity. Also, research on the influence of external governmental regulations on CS is limited and needs further examination.^17,156

6   Implementing Corporate Sustainability

Fostering the change towards more sustainability requires companies to increasingly integrate sustainability into the core business strategies and processes. Furthermore, managers should align sustainability goals with corporate strategies to enhance long-term profitability.⁵⁴ CS is therefore seen as an approach that does not see corporate action for social and environmental concerns as an addition, repair or correction of otherwise mostly untouched corporate activities but integrates sustainability into the corporate principles in such a way.¹⁹ There are different ways to implement sustainability within a company and different strategic levels at which CS can be put into practice, i.e., corporate level, business unit, production, supply chain, personnel and corporate network.¹⁰⁷

6.1                 ESG Criteria

In a corporate context, sustainability is often implemented based on ESG criteria. The criteria refer to environmental (E), social (S), and governance (G) sustainability issues within corporations. The criteria present a framework and instrument to assess, analyse, measure and evaluate efforts regarding CS.³³ In doing so, the ESG criteria present different indicators, functioning as a basis for further evaluation and assessment and the foundation for rating agencies to evaluate a company’s sustainability performance.³⁴ The environmental (E) dimension within the ESG involves all company impacts on the environment, such as greenhouse gas emissions, freshwater usage, pollution, resource management (resource and energy usage), waste management, toxic substances or noise.^33,40 The social (S) dimension within the ESG refers to social issues such as the relationship between corporations and their stakeholders and aspects like human and labour rights.⁴⁰ Furthermore, social factors include the responsibility of companies for employees, diversity and inclusion and the social commitment of companies.³³ The governance (G) dimension within ESG “refers to issues that relate to the proper governance of corporations […]” (p. 4).⁴⁰ This includes the corporate structure, the composition of the board of directors, aspects like transparency and anti-corruption measures, corporate values, processes (managerial and control), and sourcing.^33,40

6.2                 How to Implement Sustainability into the Company

Transforming corporations to be more sustainable requires different steps. The accounting organization KPMG, for example, presents four steps along what they call the ‘sustainability journey’, which involves the whole company, to embed sustainability into the business model¹⁵⁷:

1. Strategy: Developing the right strategy is crucial for implementing sustainability. The strategy includes not only target setting and action planning but also getting all relevant stakeholders involved. According to KPMG, a sustainability strategy is mainly oriented toward the ESG criteria. One of the first steps is to identify the company’s relevant priorities and then use this as a foundation to develop an action plan, covering short, medium and long-term.^157,158
2. Integration: After formulating the sustainability strategy, the next step is to implement it. In this context, KPMG stresses two critical elements: First, KPIs should be established to monitor and control performance and success. Screening should be conducted regularly, as the process requires regular adjustments. The second element is the human component, as the success of a transformation process depends highly on the employees’ commitment.^157,159
3. Reporting: Sustainability reporting is becoming increasingly obligatory for more and more companies. With these reports, progress on sustainability, based on the measured indicators and KPIs, is communicated internally and externally. Hence, reporting processes and systems, as well as structures, need to be implemented in order to generate these reports.^157,160
4. Attestation: An attestation of sustainability reports by a third party can increase the reliability and credibility of the published reports.^157,161

6.3                 Developing a CS Strategy

As mentioned above, the first step to transform a business towards being more sustainable requires developing a sustainability strategy.¹⁵⁷ There are different ways to do so and different aspects to consider. Deloitte, for example, presents five key aspects that provide an orientation on what corporations should keep in mind while implementing sustainability.¹⁶² The first key is to conduct “a 360-degree view of a corporation’s operational relationships with people and the planet” (n.p.). ¹⁶² This step can help to identify overlooked risks, operational inefficiencies, and aspects potentially affecting future performance. Doing so requires much data to be collected, analysed, shared (with stakeholders) and quality checked. Furthermore, establishing an internal governance structure to track risks and progress is necessary. The second key is to assign responsibilities to senior management, such as the board of directors, CFO or a cross-functional sustainability steering committee. The third key is to include stakeholders (e.g., investors, auditors, employees) in the transformation process. Understanding their needs and perspectives through a stakeholder analysis can support the change process. The fourth key is acknowledging the lack of answers and recognising that sustainability is a long-term concept; hence, some answers and information are still missing. So, instead of exact values, information should be presented based on ranges, scenarios and confidence intervals to leave room for adaptation of the numbers. An important aspect is to be transparent and honest about the applied methods and assumptions. The fifth key focuses on committing to creating a better future together. No one can tackle the sustainability challenge alone, so companies must build multi-stakeholder partnerships and voluntary commitments to foster sustainable business strategies.^162,163 While these five keys do not present a concrete implementation process, Deloitte proposes a five-step strategic cascade on how to embed sustainability: (1) What is our purpose? (2) Where will we play? (3) How will we win? (4) What resources and capabilities will we need? and (5) What organizational journey will we draw?¹⁶⁴

The Strategy Institute has also developed a guide consisting of eight steps, which is intended to provide orientation on how sustainability can be integrated into a corporation’s core business strategy¹⁶⁵: 

1. Set the foundation: Evaluate where the business stands and the impacts, dependencies and performance in relation to the sustainability dimensions. Conduct a materiality assessment, that helps to identify the ESG/sustainability factors relevant for the corporation.
2. Map Risks and Opportunities: Evaluate how the material issues might evolve throughout the years, identify different scenarios and map the corporation’s value chain to help understand where risks and opportunities can be found.
3. Develop targets and solutions: Establish specific targets and metrics (KPIs) and evaluate how these targets can be reached (e.g., initiatives, R&D, marketing).
4. Operationalize the Plan: The implementation of sustainability strategies requires that the approaches are adopted and integrated into day-to-day business activities. To achieve this, employees should be involved, for example, through training and further education regarding sustainability and necessary skills (e.g., life cycle assessment). A reporting procedure should also be implemented to monitor the KPIs. Communication measures help to promote dialogue between different levels.
5. Engage stakeholders: Those affected by measures should be informed and involved. Collaboration with key stakeholders should be encouraged through regular dialogue. Open communication also helps to create trust and ensure that the workforce feels that they are being listened to, involved, and willing to play their part.
6. Measure Performance and Progress: Track KPIs, objectives and targets. If those are not reached, adjustments and adaptations of the measures can be made. Progress should be recorded.
7. Communicate the commitment: Public communication of annual or sustainability reports creates transparency and accountability of corporate actions. It sheds light on the efforts and results of all relevant stakeholders. Furthermore, the communication of commitment to sustainability via social media campaigns, award applications or participation in sectoral initiatives can create visibility of the efforts,
8. Reaping the rewards: Implementing sustainability has several benefits for a company, such as cost reduction, revenue growth, risk management or new business opportunities.

These steps guide how to embed sustainability into the core business strategy. However, each corporation is different; thus, the concrete steps should be adapted and adjusted depending on the specific circumstances.

PDCA Cycle

Another possible approach to develop a sustainability strategy is the change management process of the Plan-Do-Check-Act cycle (PDCA), illustrating a continuous improvement cycle.¹⁶⁶ It can be applied to various circumstances and processes, including developing a CS strategy in order to implement sustainability into business activities. The PDCA “provides a cyclical structure to understand what issues to be managed, implement actions to address these, check how these have worked and correct” (n.p.).¹⁶⁷

Plan

The planning stage focuses on the organizational aspects of the upcoming implementation process. The stage includes the target setting, general process planning, identifying needed resources, potential risks and opportunities (as well as KPIs). It focuses on understanding the corporation’s impact and identifying the key issues, stakeholders, and needs. For the latter, a stakeholder analysis should be conducted. This step’s results can be used to set sustainability ambitions.^166-168

Do

Within the next phase, corporations implement and manage the planned actions. This step should include, among other things^166-168: 

• Assignment and make availability of necessary resources (e.g., budget and equipment) to follow through with the action planned.¹⁶⁸
• Establish control mechanisms to ensure that all measures work as intended and minimise the risk of any negative impact on the corporation, stakeholders, or the environment. The control mechanism should align with the corporation’s overall ESG/sustainability goals.^166-168
• Appointing team members to report on organisational (sustainability) performance, 
• Providing training for employees and managers. ^166,168
• Establishing internal and external communication processes. ^166,168

Check

An important part of implementing CS is measuring, reviewing and evaluating the company’s overall performance and whether planned objectives and KPIs are being met. Doing so requires good documentation of actions and impacts to record the corporation’s performance.^167,168 There are various methods of evaluating companies’ sustainability performance. They “include performance reviews, audits, inspections and management reviews” (n.p).¹⁶⁷ These evaluations can help identify improvement opportunities and adaptation areas. They also help to prepare sustainability reports (e.g. as a result of the CSRD) and to be able to provide corresponding information.^166,167 Examples for evaluating the corporation’s sustainability performance are the sustainability balanced scorecard, evaluation according to the GRI, or benchmark setting. Metrics regarding CS performance are categorized according to the different sustainability dimensions, often oriented on the ESG criteria.¹⁶⁹ Furthermore, databases such as KLD, Down Jones Sustainability Index, Sustainalytics or the GRI provide guidance and serve as an additional information source for evaluating the influence of sustainability performance on financial performance, rating the companies’ overall performance and generating sustainability reports.^8,138

Act

This phase aims to implement corrective measures for issues identified in the reviews and evaluations. This step, therefore, also involves the continuous evaluation, optimisation, adjustment and regular development of further actions, processes and objectives that build on the projects and measures implemented in the previous stages, as well as the establishment of procedures that enable these adaptations to be made. The overall outcome of this phase, the identification of areas with improvement potential, then forms the basis for continuous improvement in the course of further PDCA cycles.¹⁶⁸ Figure 11 summarises the PDCA cycle in the context of sustainability implementation.

McKinsey, one of the leading global management consulting firms, takes a similar approach as the PDCA, developing the ESG Process cycle with four phases: (1) mapping, (2) defining, (3) embedding, and (4) engaging.¹⁷⁰

Meta-strategies: Sufficiency, Consistency and Efficiency

For companies that want to integrate sustainability into their business model, selecting a suitable principle to guide the selection of actions and making decisions is important. The principles of sufficiency, consistency and efficiency offer a good starting point.¹⁰⁷ For completeness, these three principles are only described very briefly below.

Sufficiency strategy

The sufficiency strategy aims to reduce resource use by changing behaviour.¹⁷¹ In this strategy, ‘less is more’, and the main goal is to keep the resource and material consumption as low as possible by avoiding unnecessary consumption of products. It is assumed that reduced consumption does not lead to a reduced quality of life but, on the contrary, to a more satisfying life.¹⁰⁷ According to Van Hauff (2021), ecologically and socially acceptable upper limits for the economy and economic growth are called to comply with the ecological impact limits.²⁰ Increasing sufficiency can be achieved by changing end consumers’ and corporate customers’ usage behaviour and needs, thereby increasing demand for environmentally and socially friendly or compatible products.¹⁰⁷ The sufficiency strategy is, therefore, mainly influenced by consumer demand. However, companies can also influence this, for example, through product design.²

Efficiency strategy 

The efficiency strategy aims to increase resource efficiency and resource productivity.²⁰ This involves reducing the resource input (i.e., fewer materials and energy) while keeping the output constant or increasing the output with less input¹⁰⁷. Doing so increases the efficient use of natural resources (eco-efficiency).¹⁷¹ With this approach, the efficiency strategy can contribute to reducing resource consumption and decoupling the economic growth from both resource consumption and the ecological footprint.^2,20 Due to its main advantage being the possible cost reductions by using fewer resources such as materials or energy, the efficiency strategy is seen as one of the most important managerial approaches.²² This should be achieved, among other things, by substituting products and processes with more sustainable and resource-efficient variants. The focus here is on technical progress and innovation.^20,107

Consistency strategy

The consistency strategy, also called eco-effectivity, seeks to promote new technologies, products and practices to make material and energy flows from human activities compatible with material flows of natural origin, such as ecosystems. The focus is on enabling the reuse and recycling of resources by closing cycles and thereby “changing the quality of material and energy flows” (p. 207).² Products should be designed so that no more waste is produced and only reusable materials are used. In cases where this is not possible, non-natural materials should be recovered in closed loops; if this is not possible, these materials should no longer be used. With the aim of recycling, the consumption of non-renewable resources should be reduced or avoided. However, this requires a long-term change in existing production and consumption patterns.^20,107 Examples include the re-utilisation of waste heat generated during production, process water, or the substitution of toxic materials with carbon-based materials^2,107 Table 6 briefly summarizes the main criteria of each presented meta-strategies.¹⁰⁷

Table 6: Sufficiency, Consistency and Efficiency Criteria

Sufficiency	Consistency	Efficiency
Avoidance of any waste and unnecessary resources and activitiesNo production of non-sustainable productsObservance of the principle of frugality, e.g. a smaller, cleaner, more sustainable product range	Thinking, acting and producing in line with the closed-loop principleWaste is the starting material for the next productProcesses from nature serve as a model	Improving productivity of raw materials and resourcesMinimax principle: Achieving the same output with as little input as possible or more output with the same inputPrinciple relates to materials and activities

7  Influencing factors of CS Implementation

Many companies have recognized the importance of integrating sustainability into their business strategy. However, there are different factors influencing this process. On the one hand, there are organizational factors. On the other hand, various drivers and barriers support or hinder the ambition to pursue a transformation towards being more sustainable while pursuing business.^172,173 Figure 12 will provide a broader overview of the relevant factors.

7.1                 Organizational factors

Internal organizational factors like firm size and structure, history, ownership structure, and scope influence how CS is perceived within the company and how it is integrated into strategic management. External organizational aspects are the type and structure of the industry in which the firm operates and its position within this industry.¹⁷³

These factors can influence the companies’ strategic positioning, e.g., their strengths and weaknesses, as well as the risks to which they are exposed, thus influencing the decision-making on different strategies and objectives when implementing CS.^40,173 Depending on these factors, the decision-makers might decide on different strategies and objectives when implementing CS.¹⁷³

7.2                 Drivers of CS Implementation

Implementing CS into business strategies and processes is important in fostering the transformation towards more sustainability. Different internal and external drivers influence companies’ motivation and motives to integrate sustainability into their organisation.¹⁷³ Usually, there is not only one but various, often interrelated motives, for corporations to transform.^40,173 The following chapter will briefly discuss the most relevant drivers and barriers to implementing CS into business activities and strategies. However, there are various other incentives for companies to adopt CS. 

7.2.1            Internal drivers

Various factors incentivise corporations to pursue a change towards integrating sustainability into their business activities and strategies. Some of the most relevant factors will be briefly discussed in the following. The factors can be of a strategic, instrumental or institutional nature.⁴⁰

• Cost reduction: The introduction of measures aiming towards CS can contribute to more material- and energy-efficient production processes and internal company procedures, thus leading to higher productivity and efficiency, lower costs, and reduced use of (natural) resources.^2,173 Examples include waste reduction or environmental management systems. The introduction of sustainability-related measures can also lead to cost reductions at a social level.¹⁷⁴
• Revenue growth and new business opportunities: Innovations, either new developments or the ecologically and socially compatible further development of existing products, can create new business opportunities and open up new, sustainable markets. This helps to increase turnover.^40,173,174
• Risk management: Increasing awareness of companies’ interrelation with their environmental and social context can contribute to a better understanding and management of potential risks. Every company is confronted with different business risks, such as “contaminated land, leaking landfills, health issues at the workplace, child labour or discrimination” (p. 202).² The risk of these examples occurring can be counteracted by establishing CS and the (environmental) management systems introduced as part of this. CS also enables more conscious risk management regarding legal risks such as liabilities, technical or social risks, and undesired stakeholder reactions. The avoidance of potentially costly risks can, therefore, positively impact costs and, thus, profit and shareholder value.^2,39,40,173
• Corporate reputation and brand value: Taking action in CS can positively influence a company’s perception and reputation. Especially social initiatives, connected to the business strategy, are perceived as highly influential and thus a driver for implementing CS.^2,173
• Moral commitment and leadership: Leadership is perceived as one of the most important factors for fostering the change towards more sustainability within corporations.³⁹ Leading by example is a stronger motivator than mere words.³⁹ The moral commitment and mental mindset of managers, the board of directors or other decision-makers are thus highly influencing the implementing process of CS.⁴ The selection of those who are responsible contributes significantly to how CS is approached and implemented in the company. For example, one board task is overseeing a company’s strategy, which is also increasingly relevant for integrating sustainability into all company areas.⁷⁰ Awareness of internal social and environmental responsibility and sustainability as ‘the right thing to do’ and not as a financial burden can significantly accelerate the process.^40,173 By pursuing sustainability-relevant strategies, decision-makers can present themselves well and gain esteem. Therefore, maintaining a good personal reputation also plays a role for managers, but the individual attitude of employees can also help to implement and realise the planned changes more quickly.²

Furthermore, some of the listed drivers can also be regarded as external motivators. According to Lozano (2015), these are so-called ‘connecting factors’ that connect internal and external perspectives. These factors include reputation, sustainability reports, resource access, and new markets or market positioning.³⁹

7.2.2            External drivers

This section examines the external drivers that push companies to integrate sustainability, with a focus on the most important ones and a particular emphasis on regulatory factors: 

• Competitive advantage. Sustainability strategies can help companies to stand out from the competition. In particular, companies that have acted early as so-called ‘early movers’ in this sense benefit from the experience and knowledge they have already gained.²
• Stakeholder demands and expectations. Companies have numerous stakeholders whose requirements and needs can significantly influence decision-making processes. Therefore, the demand and expectation of customers and other stakeholders for sustainable behaviour is one of the most important external motivators for implementing CS.¹⁷⁵ Satisfying stakeholder demands can contribute to sales growth, profit increases and market share.^176,177 Investors and other stakeholder groups such as NGOs, philanthropic donors or relevant corporate actors and business advisors are putting pressure on companies to account for their activities and impact and to become more transparent.¹⁷⁵
• Maintaining legitimacy. Corporate success and the ability to continue entrepreneurial activities depend on social legitimacy, i.e. they grant companies a ‘licence to operate’. This is influenced, both positively and negatively, by the behaviour and decisions of companies. By pursuing CS, companies can gain social acceptance and thus maintain their legitimacy. For example, negative environmental impacts can contribute to causing boycotts, among other things, which in turn would damage the company and should, therefore, be avoided.²

Regulatory Drivers: Legal Frameworks and Guidelines

Legal compliance

Legal obligations concerning CS can be found in the obligation to report. There are now numerous national and international guidelines and laws that companies must legally comply with and implement. These include¹⁷⁸: 

• CSRD: The European CSRD obliges companies that fulfil at least two of the following criteria to report regularly on the social and environmental risks they face and how their activities impact people and the environment: (1) A total balance sheet of at least 25 million euros, (2) net sales of at least 50 million euros and/or (3) having at least 250 employees.^114,179 It reinforces the NFRD, which came into force in 2018 and obliged companies for the first time to report on environmental, social and employee matters, respect for human rights, and the fight against corruption and bribery, thus ensuring greater transparency and comparability.¹¹³
• EU Taxonomy: The EU-Taxonomy sets criteria that can be used to assess the sustainability of economic activities. It forms the basis for numerous European and national regulations relating to sustainability as well as sustainable finance/investments.¹⁸⁰
• Sustainable Finance Disclosure Regulation (SFDR): The European SFDR specifies how sustainability-relevant information is to be communicated to investors, primarily referring to participants in the financial market.^181,182

These three guidelines are regarded as the pillars of regulatory sustainability reporting within the EU, and they are geared towards transparent disclosure of all sustainability-related environmental, social, and economic issues affecting and affected by the company’s activities.¹⁸³ This should contribute to greater transparency and clarity regarding sustainable economic activity.^181,183

Moreover, other legal requirements can be attributed to the implementation of CS. However, they often focus on a particular approach, such as the European level, including the Corporate Sustainability Due Diligence Directive (CSRDDD), or an individual dimension of sustainability, such as the European Ecodesign for Sustainable Products Regulation (ESPR) or the Bundes-Immissionsschutzgesetz (engl.: Federal Emission Control Act) in Germany.^180,184-186

Guidelines: Frameworks and Standards

Frameworks and standards guide companies in considering sustainability-related issues in their business strategy and internal processes and how to report on them. Most standards and frameworks still rely on voluntary use, but mandatory guidelines such as the legal requirements described in the previous section are increasingly drawn. The use of frameworks and standards creates transparency and comparability, not only for companies but also for other stakeholders such as investors, end consumers or politicians.

• Frameworks: Sustainability frameworks guide desired behaviour regarding economic, ecological, and social aspects by providing values and guidelines. They assist decision-makers in integrating sustainability into business operations.¹⁸⁷ Many frameworks focus on sustainability reporting, such as the Carbon Disclosure Project (CDP), Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), and the IFRS’s International Sustainability Standards Board (ISSB). In Germany, the Deutscher Nachhaltigkeitskodex (DNK) (engl. Sustainability Code) offers a reporting guideline.^188,189
• Standards: Standards are voluntary rules, not laws, but hold regulatory significance as ‘soft laws’, defining metrics for assessing, verifying and communicating.^187,189,190 Some frameworks mentioned above are supplemented by respective standards, which specify the frameworks accordingly and build on the established principles. Examples include GRI Standards, the UN Global Compact, ISSB standards, ISO norms (e.g., ISO 14001 for corporate social responsibility or 26000), and ESG criteria.^134,189,191 Many focus on reporting standards, guiding companies in implementing sustainability and addressing key issues.¹⁸⁹

Frameworks and standards are complementary and are designed to be used together.¹⁹² It can be posited that frameworks can be regarded as the frame itself, while standards can be considered as the specification of the topics covered by that frame, making the frameworks applicable.¹⁸⁹ For example, the IFRS Foundation explicitly uses the GRI framework and the SASB standards together¹⁹². The following Table 7 briefly describes the most relevant frameworks and standards.

Table 7: Most relevant frameworks and standards for CS Implementation

Framework/Standard	Description
CDP	Framework for disclosure on climate impact, deforestation, and water security, focusing on planetary boundaries.193
CDSB	Framework for reporting environmental and social information (now part of ISSB).194,195
DNK	Framework for reporting non-financial performance in Germany.196
ESRS	Standards according to which the CSRD should be reported.114
EU-Taxonomy	Criteria for evaluating the ecological sustainability of economic activities.180
GRI Standards	Widely used standard for sustainability reporting, focusing on economic, environmental, and social impacts192,197.
The International Integrated Reporting Council (IIRC)	Promotes communication about value creation, preservation, and erosion, linking financial statements with sustainability disclosures (now part of ISSB).192,198
ISO 14001	Globally accepted standard for environmental management systems.199
ISO 26000	Guidelines for corporate social responsibility.191
ISSB	Guidelines for sustainability disclosures based on frameworks like CDSB, TCFD, IIRC, and SASB.192,200
SASB	Standards focusing on sustainability issues impacting financial performance (now part of ISSB).192,195
TCFD	Seeks to improve reporting on climate-related financial information (discontinued).201
UN Global Compact	Principles for responsible corporate governance.202

Some factors can be characterised as both drivers and barriers to CS implementation. Engert et al. (2020) identify stakeholder engagement, organisational learning and knowledge management, transparency and communication, managerial attitudes and behaviour, organisational culture, complexity and investment costs as the most relevant factors that can either support or hinder CS integration.¹⁷³ Furthermore, market-related factors influence how a company is doing business. Consequently, aspects like the demand for sustainable products, which can vary depending on the region and the season a corporation operates in, and unpredictable global crises support or hinder the ambitions to integrate sustainability.¹⁷²

7.3                 Barriers to CS Implementation

Barriers to CS can block the efforts of companies to implement CS into business activities and strategies. Identifying such can contribute to overcoming those barriers with appropriate strategies and thus help to incorporate CS.²⁰³

7.3.1            Internal barriers

Internal barriers hinder CS’s implementation into corporate strategies.¹⁷⁴ Some of the most relevant ones will be briefly described in the following:

• Focus profit maximisation: Sustainability requires the equal consideration of ecological, social and economic issues. However, the evaluation of companies is still largely based on financial performance, which leads to a focus on economic issues rather than a three-dimensional focus.¹⁷⁶ Thus, the perceived high costs can hinder the transition towards sustainable business practices.^37,176
• Short-termism: Corporations seek to increase immediate profits, primarily in response to shareholder demands for immediate returns. Consequently, investments are prioritized to generate short-term benefits rather than long-term value creation.¹⁷⁶ For this reason, long-term investments might be minimized or cut entirely.^204,205However, sustainability is long-term oriented, so focusing on short-term goals hinders a profound transformation.¹⁷⁴
• Bureaucracy and structures: Bureaucracy and hierarchical decision-making processes might slow down the transformation of existing structures due to the long period between an idea and its final implementation.^174,203
• Avoiding uncertainty: Implementing CS involves risk, such as changing established processes, values, and structures, as well as the risk of making investments. However, focusing on short-term benefits leads to avoiding investments with uncertain returns, resulting in a lack of funding for this transformation. This is amplified by the perception that the costs of implementing sustainability exceed the expected returns, thus negatively impacting profits.^174,176 In combination with focusing on profit maximisation and short-term benefits, decision-makers might postpone this change.¹⁷⁶
• Complexity: One of the main challenges of CS is the need to change the whole business model. Thus, integrating sustainability into the corporate structures requires a holistic and complete adaption of all existing procedures, processes, products, and services regarding social, environmental, and economic factors, as well as the need to inform and communicate those changes and their relevance.^173,206 This adoption process requires time and cannot be done in one step.²⁰⁶ Additionally, requirements due to mandatory (reporting) standards are also complex, and their fulfilment requires specialized skills and knowledge ²⁰⁷
• Lack of resource access: Factors such as lack of time, capacity, or financing influence whether and to what extent CS is considered and implemented in the company.^174,176 As long as the financial performance continues to be the main indicator of a company‘s success, “maintaining operational efficiency” (p. 9) remains an important factor.¹⁷⁶
• Lack of awareness, knowledge and skills: Implementing new strategies or strategic directions depends on individual factors related to the board of directors, management and employees. They include, among other things, a lack of CS awareness, knowledge, and understanding.³⁷ Furthermore, adopting and implementing sustainability requires specialized competencies and knowledge/skills concerning sustainability.^37,206 However, the needed training and the capacity to provide them are often missing.¹⁷⁴ Consequently, a lack of CS competencies and knowledge in the workforce and among directors can result in the inability to initiate or complete corresponding transformation processes.^37,174,208 Lack of knowledge often goes hand in hand with limited awareness and understanding of the importance of sustainability practices. This gap in understanding can lead to insufficient management support, lack of acceptance and unrealistic expectations. Furthermore, if environmental and social values are not prioritised, sustainability issues may be overshadowed by other projects.^174,206 208
• Resistance to change: Resistance towards change presents another barrier in the case of CS implementation, which is “moving away from unsustainable practices towards more sustainable ones” (p. 279).²⁰³ Resisting to change can appear on different organizational levels and can be caused by various reasons such as scarce resources, doubt and unwillingness to commit to the change efforts, and fear of the unknown.²⁰⁹ However, if employees do not accommodate change and support the implementation of new procedures and strategies, the implementation of sustainability will not succeed.²⁰³

7.3.2            External barriers

External factors are out of a corporation’s control but can hinder implementation.²⁰⁷ These factors are dominated by issues due to institutional barriers such as opposing stakeholder demands and political barriers like non-supporting or conflicting regulations.²⁰⁶ The adoption and change of existing structures, processes and products are highly driven by the demands and expectations of share- and stakeholders (primarily customers). Therefore, corporations hesitate to make bigger changes if the interest of these two groups in certain products and services is limited or insufficient.^176,203,206 Furthermore, some industries and their companies are further along in recognizing the need for sustainability and taking appropriate action compared to others. The European Commission states that only a third of companies within the EU “[recognizes] the need to act and [takes] measures to address adverse effects of their actions […[” (n.p.).²¹⁰ Moreover, some industries face more sustainability challenges than others.¹⁷⁴ Although regulations can be regarded as a driver, providing structure and guidance, their complexity, frequent changes or low legislative pressure can also hinder the implementation of CS. When regulations fail to emphasize the urgency of sustainability, the ambition to integrate CS might be overshadowed by other priorities.^176,206 Furthermore, strict regulations can restrain innovation.²⁰⁶ The increasing complexity and mandatory nature of regulations pose significant challenges for corporations, requiring adjustments to internal structures, allocating specialized human resources, and additional resources such as time, capacity, and budget.^176,211 Moreover, varying regulatory requirements across countries and regions create further difficulties, particularly for internationally operating corporations.

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