The predictive value of strategic orientation for ESG performance over time

Abstract

Purpose Despite the scholarly attention for the integration of sustainability within business strategy and processes, little is known about how strategic orientations of companies influence this integration. Drawing on stewardship theory, this paper aims to analyse the influence of strategic orientation of companies on their environmental, social and corporate governance (ESG) performance and the moderating effect of three different political models of economy (Rhine, British and American). Design/methodology/approach This paper creates a measurement for strategic orientations by using a coding scheme with a five-category evaluation matrix. The main empirical analysis is done by a fixed-effect model with a panel data set covering 179 publicly traded companies over the 2009-2016 period. Findings The conclusions of this paper present that – consistent over time – a stronger orientation on stewardship positively associates with higher ESG performance. Additionally, the political model of economy significantly alters the relationship indicating the effect of strategic orientation on ESG performance. The relationship is significantly stronger in the Rhine model and significantly weaker in the British model, when both compared to the American model. Originality/value The implications of this paper are vital to understanding corporate strategic orientation and its relationship to actual corporate behaviour and long-term performance. Implementing the elements of focus, motivation, commitment, support and communication linked to a stewardship orientation is fundamental to achieve higher levels of sustainability performance.