Linking SDGs to corporate financial performance: Insights from fsQCA analysis of prosperity-related SDGs and market capitalization

Abstract

This study examines the relationship between corporate financial performance and the implementation of Sustainable Development Goals (SDGs), with a focus on prosperity-related SDGs. Using fuzzy-set Qualitative Comparative Analysis (fsQCA), the research analyzes a sample of 26 companies to explore the interaction between SDGs and market capitalization, particularly emphasizing SDG 8 (Decent Work and Economic Growth) and SDG 11 (Sustainable Cities and Communities). The findings indicate that companies aligning their strategies with these specific SDGs tend to be associated with higher market capitalization, demonstrating the financial advantages of incorporating sustainability into business models. Conversely, the absence of certain SDGs, such as SDG 7 (Affordable and Clean Energy) and SDG 9 (Industry, Innovation, and Infrastructure), is associated with lower market value, suggesting that prioritizing specific sustainability initiatives is vital for financial success. Notably, the absence of SDG 10 (Reduced Inequalities) was found to have no significant impact on this research. These results contribute to the growing body of literature on sustainable business practices and provide valuable insights for companies aiming to integrate global sustainability goals while improving long-term profitability. Future research should investigate industry-specific variations and the long-term effects of SDG integration on financial performance.