Sustainability and short-term profitability in the agri-food sector, a cross-sectional time-series investigation on global corporations

Abstract

Purpose: This paper aims to investigate whether being sustainable is also profitable for agri-food companies in the short-term. Design/methodology/approach: The study analysed the impacts of sustainability multiple issues on one-year lagged return on assets, developing a longitudinal analysis focused on best and worst companies' samples for a timeframe of ten years. Notably, we performed OLS regressions on unbalanced panels data collecting overall 1,760 annual observations from 318 companies. Moreover, we examined the moderating effects of slack resources on the relationship between sustainability and the short-term firms' profitability. Findings: The results show that the best sustainable companies usually improve future profitability. Conversely, the worst ones should prioritize efforts in specific initiatives (i.e. responsible products, eco-innovation, management and governance commitment to sustainability), which positively affect their profitability and compensate possible short-term financial losses due to CSR strategy execution and sustainable production/supply chain management. Finally, the study found mixed results regarding the moderating effects of slack resources on the scrutinized relationships. Practical implications: The paper highlights the key environmental, social and governance aspects to be addressed for consolidating and enhancing the virtuous relationship between non-financial and financial performance, distinguishing between best and worst sustainability performers. Originality/value: This study is among the first that decomposed sustainability in multiple micro aspects (i.e. sustainable strategy, products and processes) investigating the effects of each of them on the short-term agri-food firms' profitability.