Sustainability integration matters! A German perspective on financial top and bottom line performance

The paper aims to examinate how an integrative understanding of sustainability (IUS), measured by sustainability integrated into a company's strategy, business model, and top management affects overall financial performance. This makes the study one of the first to take a holistic approach to the integration of sustainability based on previous research and new regulatory requirements from the Corporate Sustainability Reporting Directive. The study evaluates both top line effects (e.g., sales growth) and bottom line effects (e.g., return on assets). To control for any potential endogenous nature of the sustainability-firm performance nexus, we used a two-stage least square estimator with an instrumental variable of the industry mean. We also utilised a Heckman selection process. The study bases on a German sample from 2017 to 2022 in order to observe sustainability integration effects during this period. The results indicate that an IUS supports better bottom line performance, but not necessarily stronger sales growth. Specifically, the strongest evidence is in support of integrating sustainability into strategy, management board, and business model simultaneously. In the end, the study contributes to the literature, theory, methodology, and practices in various ways.