The Relationship Between Corporate Social Responsibility, Corporate Sustainability, and Corporate Financial Performance

Some business executives are reluctant to engage in social responsibility and sustainability practices because of the assumption that these projects are costly and impair profitability. The purpose of this correlation study was to examine the relationship between corporate social responsibility, sustainability (as proxied by the 2016 Best Corporate Citizens index), and corporate financial performance (as measured by ROA and Tobin's Q). Stakeholder theory was the theoretical framework for the study. The results of linear regression analyses indicated an insignificant positive relationship between corporate social responsibility, sustainability, and financial performance. The yield of the linear regression analyses was as follows: F(1, 12) = .023, p = .881, R2 = .002 for ROA and F(1, 12) = .060, p = .811, R2 = .006 for Tobin's Q. The findings from the study revealed that the relationship between social and sustainable activities and financial performance is indifferent regardless of whether financial performance is assessed using accounting or market measures. The presence of a direct, though insignificant, association calls for business managers' attention. The reason is that with the positive association, it is arguably useful to suggest that the more social and sustainable projects are embarked on by firms, the greater the probability of an increased financial outcome.