The long‐term benefits of organizational resilience through sustainable business practices

TLDR

Sustainability research and managers often focus on short‑term causal logic and financial benefits to justify socially responsible practices. The study argues that social and environmental practices enhance organizational resilience—defined as the firm’s ability to sense and correct maladaptive tendencies and cope with shocks—and encourages sustainability beyond short‑term profits. Using matched‑pair data from 121 U.S. firms over 15 years, the authors assessed resilience through long‑term outcomes such as financial volatility, sales growth, and survival rates. Responsible practices were associated with lower financial volatility, higher sales growth, and greater survival over 15 years, but did not improve short‑term profits.

Abstract

Research summary : Prior work on the benefits of business sustainability often applies short‐term causal logic and data analysis. In this article, we argue that the social and the environmental practices ( SEPs ) associated with business sustainability not only contribute to short‐term outcomes, but also to organizational resilience, which we define as the firm's ability to sense and correct maladaptive tendencies and cope positively with unexpected situations. Because organizational resilience is a latent, path‐dependent construct, we assess it through the long‐term outcomes, including improved financial volatility, sales growth, and survival rates. We tested these hypotheses with data from 121 U.S.‐based matched‐pairs (242 individual firms) over a 15‐year period. We also tested, but did not find support for, the relationship between SEPs and short‐term financial performance . Managerial summary : Most managers look for short‐term financial benefits to justify socially responsible or sustainable practices. In this article, we argue that such practices also help firms become more resilient, which helps them avoid crises and bounce back from shocks. However, it is difficult to measure the avoidance of shocks, so we analyzed long‐term outcomes. We show that firms that adopt responsible social and environmental practices, relative to a carefully matched control group, have lower financial volatility, higher sales growth, and higher chances of survival over a 15‐year period; yet, we were unable to find any differences in short‐term profits. We hope this research provides good reasons for firms to practice sustainability beyond the pursuit of short‐term profits . Copyright © 2015 John Wiley & Sons, Ltd.