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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS

COPY RIGHT © 2013 Institute of Interdisciplinary Business Research

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INTEGRATION OF CORPORATE SUSTAINABILITY WITH BUSINESS

PROCESSES AND ITS IMPACT ON CORPORATE PERFORMANCE

Kanzah Abid Student

Bahauddin Zakriya University Multan Pakistan Institute of Management Sciences, Bahauddin Zakriya University, Multan, Pakistan

ABSTRACT

This paper tests whether corporate environmental and social activities and particularly corporate sustainability

practices have a positive influence on the corporate performance. In order to overcome at least some of the

limitations of earlier studies, the empirical analyses used to test the hypotheses developed in this paper are based

on a questionnaire specifically targeted towards corporate sustainability practices which is used to collects data

of service and manufacturing sector. One of the older questions in the debate about corporate sustainability (CS)

is whether it is worthwhile for organization to pay attention to sustainability demands. This debate was

emotionally, normatively and ideologically loaded. Up to the present this question has been an important trigger

for empirical research. Corporate entities are increasingly under pressure to demonstrate how they contribute to

the stake holders. Hence, this study seeks to provide the link between integration of corporate sustainability with

businesses processes and corporate performance. Qualitative study was performed in order to get the research

objective. Qualitative method that is used in study is based on survey that was done on the basis of

questionnaires which are directed to corporate employees. AHP is applied to analyze the extent of integration of

corporate sustainability dimensions with business processes. Sustainability approach can also be applied to

business organizations. The findings here endorse the applicability of the philosophy as an approach to corporate

sustainability because integration of corporate sustainability with business processes found to have impact on

short term efficiency, corporate risk and operations management. Overall index for the integration of corporate

sustainability with business processes has a strong significant mean difference between service and

manufacturing sector. Sustainability in service sector is more than in manufacturing sector. Performance index

shows that there is a strong significant mean difference between performance of service and manufacturing

sector. This paper increases the understanding of the impact of integration of corporate sustainability with

business processes on corporate performance.

KEYWORDS Corporate sustainability, corporate social responsibility, corporate sustainability performance,

corporate performance, stake holders.

INTRODUCTION

Corporate sustainability by definition, is a business approach that creates long-term Shareholder value by

embracing opportunities and managing risk from economic, environmental and social dimensions (Lo and Sheu

2007).

Corporate sustainability is not just a buzzword—for many industry leaders and corporations, it has become a

valuable tool for exploring ways to reduce costs, manage risks, create new products, and drive fundamental

internal changes in culture and structure. However, integrating sustainability thinking and practice into

organizational structure is not a trivial task and it requires a vision, commitment and leadership. It also requires a

systems approach with an appropriate management framework that enables design, management and

communication of corporate sustainability policies (Azapagic 2003).

The manifestation of society or self-sufficiency is unprejudiced by the moral obligation to be liable for its impact

on the environment. It is empathy that stops freedom when it impede with the freedom of others. Being a unit

within somewhat larger require to adapt to the environment, fiddle with it self to changing circumstances and be

answerable for one‟s impact on others. These principles apply to organizations as well (Van Marrewijk 2003).

Many companies are working well but at the same time they created a separate kingdom. They are facing a lot of

challenges. Employees are working and caring for their own units even at the expense of others. Another

challenge that a corporations are facing is a management of supply chain. Quality management is another hot

topic these days. Their can be information asymmetry. The need of the time is that organization must work as

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whole not as individual units. For the solution of all these a successful organization must have to develop a

climate of trust and respect. We can conclude that organization that has to prosper and to remove all above

problems has to move towards more societal approach i.e., towards higher level of corporate sustainability (Van

Marrewijk 2003)

LITERATURE REVIEW

It is concluded by World Summit on Sustainable development in 2002 that companies can play a major role in

changing production and consumption patterns (United Nations, 2002). Corporate behavior needs to be change

in entire supply change like from the acquisition of raw material to the sale of final product because all parties of

supply chain perform activities that have impact on their surroundings (Panya et all., 1998). Changing corporate

behavior is not an easy chore. Previously the only reason to operate a business was profit maximization. Nature

is only seen as a source for doing the business hence rapid industrialization caused harm and destruction to

natural resources (United Nations Environmental Programme 2000) corporate entities need to analyze every

thing from holistic perspective to move towards sustainability and to understand the relation between economic

growth and social and environmental concerns. They have to change their vision towards long term protection of

environment (Hoffman, 2000).

SUSTAINABILITY PLANNING

Corporate sustainability planning (CSP) is defined as:

“The process of specific strategies and action plan development to help ensure the long term goals. In generally,

this presents a complex process and task which includes considering the full range of resources and

competencies such as financial, political, administrative and managerial. Accordingly this complex task has to be

reduced to a relatively simple one, capable of being analyzed” (Modrak and Dima 2010)

Depending on the relationship of corporate entity with corporate stakeholders corporate sustainability is the

ability of a firm to prolong operating over a long period of time. An appropriate system is required by corporate

entities to measure and control their behavior to assess whether they respond to stakeholder concerns in an

effective way and communicating the results. (Perrini and Tencati 2006).

Knowledge management

Organizations have been considering knowledge as an organizational asset and there has been a lot of interest in

treating knowledge as a significant organizational resource. (Alavi and Leidner 2001).There is a need of

corporate entities to support the combination of various components of the knowledge management system

(KMS). For it corporate entities requires to develop its infrastructure, securing new and existing knowledge,

distributing it, and combining it. Knowledge management can be described as the “management of the

environment, making knowledge flow through the different phases of its life cycle”. There are organizational

knowledge repositories. These knowledge repositories contribute in transfer of knowledge. Knowledge

developed at one place in an organization can be made available to other units through it. For the survival of

corporate entity continuous development of new knowledge based on creative ideas, daily experiences, and work

in R&D departments is required. those companies can perform at its best if all available knowledge areas are

combined (Chang Lee, Lee et al. 2005).

MANAGEMENT FOCUS

In recent years there are a lot of discussions on extent to which corporate directors and managers should consider

social and environmental issues in making corporate decisions, rather than focusing exclusively on maximizing

short-term accounting profitability. In promoting interest in the issue of corporate directors and managers

considerations in social and environmental concern International developments in corporate law have also been

made for example the reformulation of directors‟ duties in the United Kingdom (Brine, Brown et al. 2006).

EMPLOYEES’ DEVELOPMENT

Staff turnover due to the decrease in loyalty of employees for its organization is considered as internal pressure

for corporate sustainability according to recent studies (Wilkinson, Hill et al. 2001). For achievement of

corporate sustainability the aspects that are considered crucial are top management support, human resource

management, environmental planning, motivation through reward system, encouraging team work, training the

employees (Daily and Huang 2001; Wilkinson, Hill et al. 2001). Together these studies imply that corporate

sustainability is a multifaceted concept that requires organizational change and implementation at different

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corporate levels. Corporate social responsibility is increasingly a significant factor in attracting and retaining

talented and diverse workforce is indicated by recent surveys (Globescan Inc 2005). Corporate entities that care

for their employees by offering good working conditions will achieve better performance in requisites of quality

and delivery, and, therefore, practice higher levels of corporate efficiency and productivity (Brine, Brown et al.

2006).

ENVIRONMENTAL CONCERN

Sustainability has become the main challenge and mantra for the 21st century. Sustainability includes taking care

of natural environment and preservance of it for the coming generations. For the corporations who truly want to

become sustainable needs to address cases of sustainable development. For it what managers need to do? They

have to consider natural case for corporate sustainability. The natural case for corporate sustainability means

entailing corporate activities that have more caring and positive impact on environment. It is important to keep

environment unpolluted. Eco effectiveness is required (Dyllick and Hockerts 2002). In recent years to due to the

issue of pollution, use of minimal resources especially the resources which are scarce, to serve community and

care the stake holders organizations have changed their polices, products and processes (Crane 2000). There is a

argument that organizations are changing their systems only superficially but not in a real sense so organizations

in order to protect the environment and to serve the community organizations should develop an organizational

culture that is sustainability oriented (Crane, 1995). Societal concern

For the effective business case for sustainable development by corporate entities CSR serve as basic concept.

Natural environment includes all the stake holders like management, share holders, suppliers. There is a need to

implement the vision of sustainable development. Current corporate social responsibility approaches attempt to

implement the vision of sustainable development at corporate level. Maximization of profit is not the only

objective of corporate entities. Organizations need to take societal concern into consideration i.e. social

dimension of sustainable development(Kleine and Von Hauff 2009).

Corporate entities that focus on societal activities offers effective management of risk, and help companies to

reduce avoidable losses, identify new up coming issues and use positions of leadership as a way to gain

competitive advantage. Organizations that understands the importance of societal considerations and embrace the

concept of corporate responsibility are realizing that the long-term financial interests of a company resides in

corporate involvement towards its society and understand that these two are not „mutually exclusive‟ with acting

fairly in the best interests of stakeholders (other than shareholders) (PJC 2006).

INTEGRATION OF OBJECTIVES WITH PROCESSES

There is no single strategy or approach that can be fit in all organizational settings for corporate sustainability.

Organizations first define there specific ambition and approach regarding corporate sustainability. Organizations

have to integrate their objectives with processes regarding corporate sustainability after aligning there will be an

appropriate response towards circumstances in which organization operates (Van Marrewijk and Werre 2003).

CORPORATE RISK

The environment in which organization operate is not risk free. Corporate entities face a lot of risks. Corporate

risks are to be considered as both threat and opportunities. The decision of the corporate entity to embrace

sustainability is not a difficult task but the issue is to implement sustainability in such a way that it will balance

both the opportunities and risks (Yilmaz and Flouris 2009).

In 2006, reports are released by both the Parliamentary Joint Committee on Corporations and Financial Services

and the Corporations and Markets Advisory Committee that examined the extent to which Australian companies

should implement corporate social responsibility. The conclusion of the reports was that corporate social

responsibility can be an imperative way for companies to cope up with non-financial risks and maximize their

long-term financial value (Brine, Brown et al. 2006).

“A well managed company will generally see it as being in its own commercial interests, in terms of enhancing

corporate value or opportunity, or managing risks to its business, to asses and, where appropriate, respond to the

impact of its activities on the environmental and social context in which it operates. Companies that fail to do so

appropriately may jeopardize their commercial future” (CAMAC 2006).

SHORT TERM EFFICIENCY

Critic on corporate social dimension of sustainability is this that responsibility of the business is to earn money

as much as possible (Friedman 2007). In spite of this many researchers have considered corporate sustainability

as a source of competitive weapon and have indicated that corporate social responsibility has a positive impact

on corporate performance (Brammer and Millington 2005). Many researches are made to study the relation

between corporate sustainability and corporate performance (Margolis and Walsh 2003). However literature has

shown mixed set of results for the relationship, It includes positive, negative and neutral relationship

(McWilliams and Siegel 2000; Margolis and Walsh 2003).

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OPERATIONS MANAGEMENT

Environmentally proactive firms are expected to enjoy greater profitability. The reason for this is reduced costs

for conformity to environmental regulations and improvement of operational efficiencies (Russo and Fouts

1997). Russo and Fouts (1997) found that high corporate performance towards its environment is positively

associated with firm profitability. Corporate attention towards community relations may direct to favorable tax

legislation and reduced local regulations. It will allow firms to dwindle their operational costs (Waddock and

Graves 1997).Corporate social activities can offer opportunities for corporate entities to reduce present and

future costs related to the business and hence increasing the operational efficiency (Brine, Brown et al. 2006).

RESEARCH HYPOTHESIS

Based on structure model following hypothesis has been formulated:

: Sustainability planning, knowledge management, management focus, workforce development,

environmental concern, societal concern and integration of objectives and processes have a significant positive

impact on short term efficiency.


environmental concern, societal concern and integration of objectives and processes have a significant negative

impact on corporate risk.


environmental concern, societal concern and integration of objectives and processes have a significant positive

impact on operations management.

Figure 1 : Structural model

Integration of

objectives with

processes

Short term

Efficiency

Societal

Concern Operations

management

Corporate Risk

Knowledge

Management

Management

Focus

Workforce

Development

Environmental

Concern

Sustainability

Planning

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METHODOLOGY

Qualitative study was performed in order to get the research objective. Qualitative method that is used in my

study is based on survey that was done on the basis of questionnaires which are directed to corporate employees.

AHP is applied to analyze the extent of integration of corporate sustainability dimensions with business

processes.

RESEARCH DESIGN

Study is divided into two stages, pre analysis and post analysis. In pre analysis stage factor analysis was

performed for the extraction of constructs and reliability assessment was performed to check the reliability of

items. In second stage data analysis was done by using data analysis techniques. Multivariate analysis, critical

indices and analysis of variance was performed. The central point of the study is how much the corporate

sustainability is integrated into business processes is the main point that is conveyed by the conceptual frame

work. It is based on a very famous proverb that “what gets measured, gets managed” so it is very crucial to settle

on how corporate sustainability is assessed in an organization. Set of questions are asked from respondents to

study the evaluation of how much the corporate sustainability is integrated into business processes. How much

the corporate sustainability is integrated into business processes is assessed after the of the analysis

questionnaires which are filled from respondents.

SAMPLING TECHNIQUE

Sampling is the process of selecting a sufficient number of elements from the population. The type of sampling

technique is use is probability sampling. In probability sampling simple random sampling is used as sampling

technique for the selection of organizations. Sectors are selected on judgmental basis i.e. non probability

sampling. Five sectors are included in the study named as hospitality sector including hotels and hospitals, textile

sector, fertilizer sector and food sector. In hospital both public and private hospitals are included in equal

proportion to make a comparative analysis.

UNIT OF ANALYSIS

Prime unit of analysis is corporate managers having deep understanding of corporate sustainability policies and

corporate performance.

THE TIME DIMENSION

It is a Cross-sectional study, because it is carried out once and represents a "snapshot" of one point in time.

SAMPLING SIZE

A sample is a sub-set of population; it comprises some numbers selected from it. I have obtained 110 complete

survey responses. Total sample size is of 110. In hospitality sector 20 hotels, 10 private hospitals and 10 public

hospitals are selected. 50 corporate entities are selected from textile sector, 10 from fertilizer sector and 10 from

food sector. Some questionnaires were mailed to respondents through electronic mail and courier. Response rate

was 85% for the whole sample.

RESEARCH TOOLS/INSTRUMENTS

This is survey study. Questionnaire is used for data collection Five point likert scale is used from strongly

disagree to strongly agree scaled from 1 to 5.

First section of the Questionnaire that is used in the of the study that is integration of corporate sustainability into

business processes was developed by (Asif, Searcy et al.).

The unique set of diagnostic questions provides a way to evaluate the extent to which corporate sustainability

has been integrated into an organization. Questionnaire second part consists of questions related to corporate

performance. Questionnaire related to corporate performance is contributed by stone forest (n.d) to the “business

insights” booklet published by the business financial services of Standard Chartered Bank.

FACTOR ANALYSIS

Empirical findings of the study are quite supportive of the conceptual framework. The seven key constructs in

the model all have crucial impact and have relation with performance parameters. Factors are extracted from

literature and validated through the factor analysis. Ten constructs are extracted, seven are sustainability factors

and three are performance factors. Factor weight of 0.5 has been set as a minimum cut-off value which makes

the criteria more strict and valid.

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Table 1: Corporate sustainability integration with business processes indicators

Rotated Component Matrixa

Component

Knowledge

management

Sustainability

planning

Societal

concern

Environmental

concern

Management

focus

Employees

developmen

t

Integrati

on of

objectiv

es with

processe

s

KM I .580

KM II .450

KM III .541

KM IV .550

KM V .677

KM VI .565

KM VII .652

KM VIII

.686

SP I .599

SP II .755

SP III .741

SP IV .719

SP V .500

SP VI .568

SP VII .587

SP VIII .632

SC I .765

SC II .783

.635

.610

.670

.841

SC III

SC IV

SC V

SC VI

SC VII .583

SC VIII .568

EC I .755

EC I1 .615

EC III .912

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EC IV .779

EC V .545

EC VI .863

EC VII .730

MF I .786

MF II .678

MF III .869

MF IV .867

MF V .812

MF VI .786

ED I .673

ED II .702

ED III .840

ED IV .845

ED V .736

ED VI .777

ED VII .649

OB I

OB II

OB III

OB IV

.640

.722

.822

.713

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

Empirical findings of the study are quite supportive of the conceptual framework. The seven key constructs in

the model all have crucial impact and have relation with performance parameters. Table 1 shows the factors that

are extracted from literature and validated through the factor analysis. Ten constructs are extracted, seven are

sustainability factors and three are performance factors. Factor weight of 0.5 has been set as a minimum cut-off

value which makes the criteria more strict and valid.

For the first construct i.e. knowledge management eight items are extracted. Which are related to individual

understanding and corporate about the economic, ecological and social context, organization mechanism to

address conflicting stakeholders‟ views, employees‟ knowledge about sustainability, and management of internal

knowledge of sustainability by the organization and its updating, development of collective knowledge and

incorporation of organizational experiences into various knowledge repositories.

The second construct comprise of sustainability planning obviously planning for sustainability its integration and

reporting is very crucial for corporate entities and need to be evaluated.

Third construct is about management focus. It includes item related to management consideration about

sustainability. Management consideration towards sustainability in planning its annual budget, how much the

norms and values are defined in an organization and commitment of top management towards sustainability.

Fourth construct is related to employees‟ development. It comprise of eight items. Employees are the internal

stake holders of the organization. This construct includes items related to employees‟ education and development

of skills and capabilities and work life balance.

Fifth construct includes items related to integration of objectives with processes. To what extent organizations

processes are horizontally integrated with each other.

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Sixth construct is societal concern an important dimension of corporate sustainability. It comprise of nine items

including identification and employment of mechanism to meet stakeholders requirements, action plan for CSR

structure, medium for feedback from stakeholders.

Seventh construct is environmental concern. It includes six items about the organization targets on

environmental activities and disclosure of environmental information on products and services. Organizational

activities related to energy conservation, reduction of waste and recycling. Environment concern is a very

important aspect for the achievement of sustainability outcomes. Aras and Crowther (2008) identified the

dimensions of sustainability that need to be recognized and analyzed. It includes Environmental impact, which

measures how much impact the corporation has in polluting the environment.

Three constructs related to corporate performance are also extracted. These are short term efficiency, corporate

risk and operations management.

Table 2: Performance indicators (Rotated Component Matrix a)

Component

Short term efficiency Corporate risk Operations management

ST I .883

ST II .928

ST III .590

ST IV .632

ST V .788

ST VI .896

ST VII .930

CR I .944

CR II .937

CR III .951

CR IV .889

CR V .744

CR VI .715

CR VII .745

CR VIII .839

OP I .579

OP II .568

OP III .951

OP IV . .931

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

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RELIABILITY ASSESSMENT

Cronbachs alpha is the most common measure of internal consistency ("reliability"). It is most commonly used

when there are multiple Likert questions in a survey/questionnaire. Cronbachs alpha of questionnaire items of

each construct shows that they are reliable and are close to 1. Number of items in knowledge management are 8

and they gave cronbachs alpha value of .950, in sustainability planning there are 9 items which gave cronbachs

alpha value of .962,management focus includes 7 items and cronbachs alpha value is .954, employees

development has 8 items and cronbachs alpha value is .911, integration of objectives with processes has 4 items

and cronbachs alpha value is .898, societal concern has 9 items and cronbachs alpha value is .875, environmental

concern has 6 items and cronbachs alpha value is .819, short term efficiency has 7 items and cronbachs alpha

value is .819, corporate risk has 8 items and cronbachs alpha value is .819, operations management has 4 items

and cronbachs alpha value is .819.

ANALYTICAL HIERARCHICAL PROCESS (AHP)

AHP is a multi-criteria decision making (MCDM) method. MCDM is a well-known class of decision

making, that was introduced by (Saaty, 1980) which addresses decisions problems that are related with a number

of decision criteria. Common MCDM methods include priority based, distance based making, outranking etc.

Each method has its own characteristics on the basis of this they can be classified as deterministic or stochastic

or fuzzy method or depending upon the number of decision makers, as single or group decision making method

(Figueira, Greco & Slowinski, 2009). The primary objective of AHP is to classify a number of alternatives (e.g. a

set of quality determinants) by considering a given set of qualitative and / or quantitative criteria, according to

pair wise comparisons/ judgments provided by the decision makers. AHP results in a hierarchical leveling of the

quality determinants, where the upper hierarchy level is the goal of the decision process, the next level defines

the selection criteria which can be further subdivided into sub criteria at lower hierarchy levels and finally the

bottom level presents the alternative decisions to be evaluated.

The main advantages of applying the AHP method are:

It is capable to provide a hierarchical decomposition of a decision problem that helps in better

understanding of the overall decision making process;

It handles both quantitative and qualitative criteria;

It is based on relative, pair wise comparisons of all decision elements; instead of arbitrarily defining a

percentage score and a weight for each decision element, AHP allows the decision maker to focus on

the comparison of two criteria/ alternatives, at a time, thus it decreases the possibility of defining ratings

based only on personal perceptions of the evaluators or other external influences;

AHP is applicable to both individual and group-based decision making (this is often achieved by

considering the geometric mean of comparison values),

It enables consistency checks upon pair wise decision judgments; and

It supports sensitivity analysis to examine the effects of changing values of criteria weights on the final

ranking of the decision alternatives.

As mentioned, AHP is a method that orders the priorities in a given situation, incorporating the element of

subjectivity and intuition so that a final decision can be reached by making decisions for part-issues in a

consistent way and gradually moves up levels to deal with the given situation having a clear view of what it

entails. AHP is relatively simple and logical and given that a certain consistency in the part-decisions is

maintained, AHP can help decision makers to deal with complicated issues where often not only tangible but

also intangible parameters affect their decision makers affect their decision. It should be noted briefly at this

point that AHP is as effective as its design in each individual case and that analysts should exercise care and

precision in capturing the true sub-elements and requirements of the case in question. The global weights of all

the factors have been computed and then these weights are used to compute the weighted indexes of corporate

sustainability and its dimensions.

MULTIVARIATE ANALYSIS

Multivariate analysis is used to see the impact of various dimensions of integration of corporate sustainability

with business processes on corporate performance.

Analysis of variance (ANOVA)

Analysis of variance is conducted on the dimensions of integration of corporate sustainability with business and

corporate performance to see difference between manufacturing and service sector.

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RESULTS

MANUFACTURING SECTOR ANALYSIS


Table 3 Multivariate table

Source Dependent Variable Type III

Sum of

Squares

df Mean

Square

F Sig.

environ_manuf oper_mang_manf 4.91 1 4.91 101354.92 0.00

corporatrisk_manuf 1.56 1 1.56 863.13 0.00

st_eff_manuf 1.04 1 1.04 171.74 0.00

objectives_manuf oper_mang_manf 0.32 1 0.32 6784.51 0.00


st_eff_manuf 0.10 1 0.10 17.06 0.00

ed_manf oper_mang_manf 0.34 1 0.34 7056.80 0.00


st_eff_manuf 0.00 1 0.00 0.53 0.04

Manfocus_manf oper_mang_manf 0.09 1 0.09 1937.73 0.00


st_eff_manuf 3.09 1 3.09 508.26 0.00

km_manuf oper_mang_manf 0.00 1 0.00 55.37 0.00


st_eff_manuf 0.80 1 0.80 131.79 0.00

societal_manuf oper_mang_manf 2.93 1 2.93 60520.81 0.00


st_eff_manuf 12.45 1 12.45 2043.33 0.00

susplaing_manuf oper_mang_manf 0.39 1 0.39 8246.06 0.00


st_eff_manuf 0.04 1 0.04 7.60 0.01

R Squared = 1.000 (Adjusted R Squared=1.00)

R Squared = .997 (Adjusted R Squared = .997)


At 5% level of significance environmental concern has significant impact on operations management, corporate

risk and short term efficiency. Significance level is (.000) which is very strong. According to these results if the

corporate entities indulge in environmental activities its performance will increase and corporate risk will reduce.






Graves 1997).

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Integration of objectives and processes has a significant relationship with operations management, corporate risk

and short term efficiency.

At 5% level of significance employee‟s development has significant impact on corporate operations. Results

show that if the corporate entities perform activities related to employees‟ development its performance related

to operations will increase.

If the management focus is strong in an organization then its performance will increase. Knowledge management

will reduce the corporate risk.

Organizations which understand the importance of societal considerations and embrace the concept of corporate

responsibility are realizing that the long-term financial interests of a company resides in corporate involvement

towards its society and understand that these two are not „mutually exclusive‟ with acting fairly in the best

interests of stakeholders (other than shareholders) (PJC, 2006).



competitive advantage Corporate social activities can offer opportunities for corporate entities to reduce present

and future costs related to the business and hence increasing the operational efficiency (Brine, Brown et al.

2006).

R2 is a statistic that will give some information about the goodness of fit of a model. In regression, the R

2

coefficient of determination is a statistical measure of how well the regression line approximates the real data

points. An R2 of 1.0 indicates that the regression line perfectly fits the data.

Adjusted R2

for the first model which includes the impact of predictor variables on operations management is

.1000. Adjusted R2

for the second model is .997; it includes corporate risk as dependent variable. It is close to 1

which means that model is good fit between predictor variables and dependent variable. Third model proposed

adjusted R2 of .980.

CRITICAL SUSTAINABILITY FACTORS STRUCTURE

Table 4 shows the critical sustainability factors structure comprising of 51 factors, sorted in descending order of

criticality and stratified into three tiers representing stages of priorities. Tier I consists of 34 factors and their

presence in organization is most critical. Tier II consists of 10 factors which plays a supporting role for

sustainability. Whereas, tier III constitutes 6 factors and are described as the maintaining factors for the

integration of sustainability into organization business processes.

The critical sustainability factor structure suggest that in Tier-I in table 4.3.1 there are factors related to

organizations consideration towards employees development for example either organization encourage

employees to develop real skills and long term careers (e.g. via a performance appraisal process, a training

plan).These variables are extremely important. Tier I also contain items related to societal concern and

environmental concern. For the achievement of integration of sustainability into organization business processes

these variables are very important and critical. These items are needed to be highly focused.

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Table 4.1 Critical Indices of Sustainability Factors

Index values Sustainability Factors

Tier I Critical

0.001098494

Organization ensures that learning to be sustainable and responsible remains an essential

strategic imperative and not an ad hoc process or a one-time activity.

0.001444639

Organization have a policy to ensure honesty and quality in its contracts, dealings and

advertising(e.g. a fair purchasing policy, provisions for customer protection etc)

0.001516298 Assessment teams have required competencies for the assessment of sustainability.

0.001637546 Employees have the time and resources to carry out an assessment,

0.001861381 Management remain alert to new issues

0.001861381 Management promote learning from old experiences and responses

0.002577316 Organization values and rules are clearly defined

0.003248452 Top management put economic, ecological, and social issues on its agenda

0.003248452 Organization has approved action plan for creating a corporate social responsibility structure

0.003358805

Organization have a well-documented and Organization-wide environmental policy that the

CEO has participated in developing

0.003684551

Organization encourage employees to develop real skills and long term careers (e.g. via a

performance appraisal process, a training plan)

0.004779414 Management manuals address social, ecological, and economic aspects in an integrated manner.

0.005178554 Society is satisfied from the social responsibility Organization is doing.

0.005201362 Stakeholders have a medium to provide feedback to the organization.

0.005342379 The organization employ some mechanism to meet stakeholder requirements

0.00690988

Organization have a process to ensure effective feedback, consultation and dialogue with

customers suppliers and other people you do business

0.007295791 Organization is trying to reduce enterprise‟s environmental impact in terms pollution prevention

0.007328155

Organization employ some mechanism for continuous improvement along various dimensions

of business.

0.00839117 Company actively offers a good work life balance for employees

0.00840691 Organization deal with the disclosure of environmental information on its products or Services

0.008535652

Organization is trying to reduce enterprise‟s environmental impact in terms waste minimization

and recycling.

0.009418548 The organization employ some mechanism to identify stakeholder requirements

0.010637667 Organization have a concrete action plan?.

0.011584464

Organization is trying to reduce enterprise‟s environmental impact in terms of energy

conservation

0.011898915

Organizational objectives relate to effective management of environmental, economic, and

social aspects

0.012758948 Top management demonstrate its commitment to corporate Sustainability

0.012787933 Organization have environmental education programs for employees

0.013580779 Organization updates its knowledge of sustainability.

0.013993805 Organizational processes (horizontally) integrated with each other

0.014174605 Organization have a concrete action plan for sustainability oriented

0.01618199 Organization has mechanism for reporting the sustainability outcomes.

0.018224395 Sustainability is well integrated in the organization‟s strategic plans

0.018506271 Previous organizational experiences been incorporated into various knowledge repositories.

0.019143131 Organization's business processes create value for economic,

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Table 4.2 includes variables related to sustainability planning and knowledge management. Items including in

Tier II are supporting sustainability factors. Organizations are using these variables for the achievement of

integration of sustainability into organization business process and need little support.



Tier II Supporting

0.020345304 Organizations have concrete targets on environmental activities.

0.022339227 Previous experiences incorporated into organizational business process

0.022655057 Sustainability results communicated to key stakeholders.

0.023328059 Employees have sufficient knowledge to achieve sustainable business processes

0.023357736 Procedures address social, ecological, and economic aspects in an integrated manner

0.024324715 Organization manages its internal knowledge of sustainability

0.024619013 Organization develop collective knowledge and a shared image of sustainability

0.028152581

Resources for integration (human, financial, material, informational, and infrastructural)

planned upfront

0.030493855

Management reviews carried out regularly to evaluate the stakeholder requirements and

the extent of integration of sustainability in business processes

0.03117147 Organization has a mechanism to address conflicting stakeholder views

0.03183508

Organization employ mechanism to evaluate the outcomes of integration of sustainable

development

Variables including in Table 4.3 are maintaining sustainability factors. It includes six items. Organization has

well defined norms and values for corporate sustainability. individuals understands well economic, ecological,

and social aspects in the specific context of organization and its business processes, Organization considers

corporate sustainability vital in planning its annual budget Sustainability indicators used measure progress to

achieve corporate goals. Organization defined the business case for sustainability Organization has a mechanism

to identify sustainability indicators and to reach mutually acceptable outcomes. Most of these items are related to

management focus. Organization is already maintaining these items for the integration of sustainability into

organization business processes.



Tier III Maintaining

0.042788488 Organization has well defined norms and values for corporate sustainability.

0.047202877

individuals understands well economic, ecological, and social aspects in the specific

context of organization and its business processes

0.049352041 Organization considers corporate sustainability vital in planning its annual budget

0.066857428 Sustainability indicators used measure progress to achieve corporate goals.

0.115496446 Organization defined the business case for sustainability

0.119882463

Organization has a mechanism to identify sustainability indicators and to reach mutually

acceptable outcomes.

Figure 1 represents the bar graph showing index values and critical sustainability factors. Critical sustainability

factors having index values within 0.00 and 0.02 are included in Tier I. Tier II consists of sustainability factors

having index values from 0.02 to 0.04. Tier III consists of sustainability factors having index values higher then

0.04.

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Figure 2 Bar graph for critical factors and index values

SERVICE SECTOR ANALYSIS


Table 5 Multivariate table

Source Dependent Variable

Type III

Sum of

Squares df

Mean

Square F Sig.

objectives_service corporaterisk_service

0.04 1 0.04 1.56 0.02

st_eff_service 0.00 1 0.00 0.08 0.06

oper_mang_service 0.10 1 0.10 3.67 0.06

environ_service corporaterisk_service 0.08 1 0.08 2.92 0.09

st_eff_service 0.34 1 0.34 6.07 0.01


ed_service corporaterisk_service 0.00 1 0.00 0.10 0.04

st_eff_service 0.11 1 0.11 1.918 0.07


management_service corporaterisk_service 0.86 1 0.86 28.75 0.00

st_eff_service 0.69 1 0.69 12.06 0.00


km_service corporaterisk_service 0.18 1 0.18 6.32 0.01

st_eff_service 0.04 1 0.04 0.79 0.08


societal_service corporaterisk_service 0.02 1 0.02 0.82 0.07

st_eff_service 0.03 1 0.03 0.57 0.05


susplanning_service corporaterisk_service 0.00 1 0.00 0.01 0.01

st_eff_service 0.03 1 0.03 0.54 0.06


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At 1 % level of significance environmental concern has significant impact on corporate risk. Environmental

concern has significant impact on short term efficiency (0.01). It is significant at 5 % level of significance.

According to these results if the corporate entities indulge in environmental activities its performance in terms of

short term efficiency will increase and corporate risk will reduce.






Graves 1997).

Integration of objectives and processes has a significant relationship (0.06) with operations management at 1 %

level of significance.

Management focus has strong significant relationship with corporate risk and short term efficiency. This relation

is interpreted as if the management focus is strong in an organization then corporate risk will reduce and short

term efficiency will increase.

Knowledge management will reduce the corporate risk and increase the operations management. It can be

interpreted from the table that knowledge management has significant impact on corporate risk (0.01) and

operations management (0.04)

R2 is a statistic that will give some information about the goodness of fit of a model. In regression, the R

2

coefficient of determination is a statistical measure of how well the regression line approximates the real data

points. An R2 of 1.0 indicates that the regression line perfectly fits the data.

R2

for the first model which includes the impact of predictor variables on corporate risk is .834 and its adjusted

R2

is .894. Adjusted R2

for the second model is .922; it includes short term efficiency as dependent variable. It is

close to 1 which means that model is good fit between predictor variables and dependent variable. Third model

proposed adjusted R2 of .925.

CRITICAL SUSTAINABILITY FACTORS STRUCTURE

Table 6.1 shows the critical sustainability factors structure comprising of 51 factors, sorted in descending order

of criticality and stratified into three tiers representing stages of priorities. Tier I consists of 33 factors and their

presence in organization is most critical. Tier II consists of 14 factors which plays a supporting role for

sustainability. Whereas, tier III constitutes 3 factors and are described as the maintaining factors for the

integration of sustainability into organization business processes.

The critical sustainability factor structure suggest that in Tier-I in table 4.4.1 there are factors related to ,

organizations consideration towards employees development for example either organization encourage

employees to develop real skills and long term careers (e.g. via a performance appraisal process, a training

plan).These variables are extremely important. Tier I also contain items related to societal concern and

management focus. For the achievement of integration of sustainability into organization business processes

these variables are very important and critical. These items are needed to be highly focused.

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Index

values Sustainability Factors

Tier I Critical

0.00117

Organization ensures that learning to be sustainable and responsible remains an essential

strategic imperative and not an ad hoc process or a one-time activity.

0.00191 Assessment teams have required competencies for the assessment of corporate sustainability.

0.00245 Management remain alert to new issues

0.00265 Organization values and rules are clearly defined

0.00295

Organization have a policy to ensure honesty and quality in its contracts, dealings and

advertising(e.g. a fair purchasing policy, provisions for customer protection etc)

0.00299 Management promote learning from old experiences and responses

0.00422 Top management put economic, ecological, and social issues on its agenda

0.00424 Organization has approved action plan for creating a corporate social responsibility structure

0.00466

Organization employs some mechanism for continuous improvement along various Dimensions

of business.

0.00495 Employees have the time and resources to carry out an assessment,

0.0051

Organization encourage employees to develop real skills and long term careers (e.g. via a

performance appraisal process, a training plan)

0.00541 Management manuals address social, ecological, and economic aspects in an integrated manner.

0.00631

Organization have a well-documented and Organization-wide environmental policy that the

CEO has participated in developing

0.00664 Organization deal with the disclosure of environmental information on its products.

0.00677 Society is satisfied from the social responsibility Organization is doing.

0.00692 Stakeholders have a medium to provide feedback to the organization.

0.00782 Organizational processes (horizontally) integrated with each other

0.00929 Previous experiences incorporated into organizational business process

0.00956 Organization have environmental education programs for employees

0.01044 The organization employ some mechanism to identify stakeholder requirements

0.01143 Organization have a concrete action plan for sustainability oriented

0.01183 Company actively offers a good work life balance for employees

0.01364 Organization have a concrete action plan?

0.01373 Previous organizational experiences been incorporated into various knowledge repositories.

0.01451 Organization's business processes create value for economic,

0.01472 Top management demonstrate its commitment to corporate Sustainability

0.01629 The organization employ some mechanism to meet stakeholder requirements

0.01648

Management reviews carried out regularly to evaluate the stakeholder requirements and the

extent of integration of sustainability in business processes

0.01698

Organizational objectives relate to effective management of environmental, economic, and social

aspects

0.01718 Employees have sufficient knowledge to achieve sustainable business processes

0.01859 Organization has well defined norms and values for corporate sustainability.

0.01877 Organization considers corporate sustainability vital in planning its annual budget

0.01887 Organization have mechanism for reporting the sustainability outcomes.

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Table 6.2 includes variables related to sustainability planning, integration of objectives with processes and

knowledge management. Items including in Tier II are supporting sustainability factors. Organizations are using

these variables for the achievement of integration of sustainability into organization business process and need

little support.


Index


Tier II Supporting

0.02015 Procedures address social, ecological, and economic aspects in an integrated manner

0.02041 Organization updates its knowledge of sustainability.

0.02323 Sustainability indicators used measure progress to achieve corporate goals.

0.025 Organization defined the business case for sustainability

0.02668 Organization manages its internal knowledge of sustainability

0.02711

Organization employ mechanism to evaluate the outcomes of integration of sustainable

development

0.02738 Organization develop collective knowledge and a shared image of sustainability

0.02789

individuals understands well economic, ecological, and social aspects in the specific context of

organization and its business processes

0.02791 Sustainability is well integrated in the organization‟s strategic plans

0.03052 Sustainability results communicated to key stakeholders.

0.03107

Organization have a process to ensure effective feedback, consultation and dialogue with

customers suppliers and other people you do business

0.03136 Organization has concrete targets on environmental activities.

0.03305

Resources for integration (human, financial, material, informational, and infrastructural) planned

upfront

0.03399 Organization has a mechanism to address conflicting stakeholder views

0.03405

Organization has a mechanism to identify sustainability indicators and to reach mutually

acceptable outcomes.

Variables including in Table 6.3 are maintaining sustainability factors. It includes three items. Organization is

trying to reduce enterprise‟s environmental impact in terms of energy conservation. Organization is trying to

reduce enterprise‟s environmental impact in terms waste minimization and recycling. Organization is trying to

reduce enterprise‟s environmental impact in terms pollution prevention. All of these items are related with

environmental concern. Organization is already maintaining these items for the integration of sustainability into

organization business processes.


Index


Tier III Maintaining

0.04685

Organization is trying to reduce enterprise‟s environmental impact in terms of energy

conservation

0.07645

Organization is trying to reduce enterprise‟s environmental impact in terms waste

minimization and recycling.

0.14741

Organization is trying to reduce enterprise‟s environmental impact in terms pollution

prevention

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Figure 3 represents the bar graph showing index values and critical sustainability factors. Critical sustainability

factors having index values within 0.00 and 0.02 are included in Tier I. Tier II consists of sustainability factors

having index values from 0.02 to 0.04. Tier III consists of sustainability factors having index values higher then

0.04.

Figure 3: Bar graph for critical factors and index values

INDEPENDENT SAMPLES T-TEST

Table 7 T-table of predictor variables for service and manufacturing sector

t df Sig. (2-tailed) Mean Difference

Planning_concern 2.68 108 0.00 0.3685

Societal_concern 2.19 108 0.03 0.17857

Knowledge_management 3.60 108 0.00 0.41434

Management_focus 2.54 108 0.01 0.37137

Employees_dev 0.65 108 0.51 0.0691

Objectives_processes 1.93 108 0.05 0.28849

Environmental_concern 1.99 108 0.04 0.1856

Sustainability 3.03 108 0.00 0.36450

Table 7 gives the mean difference of predictor and dependent variables that exists in manufacturing and service

sector. Two independent sample T- test is used for the comparison of mean differences. There is a strong

significant mean difference of (.000) exist between sustainability planning in service and manufacturing sector.

Sustainability planning in service sector is 0.3685 units more than manufacturing sector. Significant mean

difference exist between societal concern in service and manufacturing sector (0.03). Societal concern is 0.17857

units more in service sector than in manufacturing sector. There is significant mean difference in knowledge

management and management focus in service and manufacturing sector. Knowledge management in service

sector is 0.414 units more than manufacturing sector while management focus is 0.371 units more in service

sector. No significant mean difference exist between employees development in service and manufacturing

sector. Significant mean difference exist between integration of objectives with processes in service and

manufacturing sector. Environmental concern in service sector is 0.1856 units more than manufacturing sector.

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Overall index for the integration of corporate sustainability with business processes has a strong significant mean

difference between service and manufacturing sector. Sustainability in service sector is 0.36450 units more than

in manufacturing sector.

Table 8 T-table of dependent variables for service and manufacturing sector

t df Sig. (2-tailed) Mean Difference

shortterm_efficiency 2.13 108 0.35 0.20031

Corporaterisk 3.50 108 0.00 0.46540

operations_management 2.00 108 0.47 0.15281

Performance 4.77 108 0.00 0.37155

Overall index for performance shows that there is a strong significant mean difference between performance of

service and manufacturing sector. Performance of service sector is 0.37155 units more than in manufacturing

sector.

COMPARITIVE ANAYLYSIS OF MANUFACTURING AND SERVICE SECTOR

If collectively analyze the research findings from both sectors it would be clear that integration of sustainability

into organization processes has significant impact on corporate performance. However there are some practices

which appears to be different relevant to both sectors.

Environmental concern, integration of objectives with processes, management focus, knowledge

management, societal concern and sustainability planning has more significant impact on performance

in manufacturing. Strong significant relationship was found between above variables and performance.

Management focus and knowledge management has significant impact on corporate risk. It infers that

in service sector if management and knowledge management is strong then it has significant impact on

corporate risk and corporate risk will reduce. Sustainability planning, societal concern, employees‟

development has significant impact on performance in service sector.

In manufacturing sector items related to societal and environmental concern are most critical and needs

to be focused more for the better integration of sustainability into organization business processes.

Employees‟ development, management focus, societal concern and integration of objectives with

processes are found to be most critical in service sector. Service sector organizations need to focus them

more for the better achievement of integration of sustainability into organization business processes.

If we compare the results of T-Test it would be clear that there is significant mean difference exist

between sustainability planning, knowledge management, societal concern, environmental concern,

management focus, integration of objectives with processes in manufacturing and service sector.

Integration of corporate sustainability with business processes is more in service sector than in

manufacturing sector.

Performance index shows the significant mean difference between performance of service and

manufacturing sector.

Performance of service sector is more than in manufacturing sector.

DISCUSSION OF THE FINDINGS

Sustainability approach can also be applied to business organizations. The findings here endorse the applicability

of the philosophy as an approach to corporate sustainability because integration of corporate sustainability with

business processes found to have impact on short term efficiency, corporate risk and operations management.

The adoption of corporate sustainability principles can occur at several different dimensions. Environmental

concern found to have a significant impact on operations management, corporate risk and short term efficiency.

According to these results if the corporate entities indulge in environmental activities its performance will

increase and corporate risk will reduce. Environmentally proactive firms are expected to enjoy greater

profitability. The reason for this is reduced costs for conformity to environmental regulations and improvement

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of operational efficiencies (Russo and Fouts 1997). Russo and Fouts (1997) found that high corporate

performance towards its environment is positively associated with firm profitability. Corporate attention towards

community relations may direct to favorable tax legislation and reduced local regulations. It will allow firms to

dwindle their operational costs (Waddock and Graves 1997). Integration of objectives and processes has a

significant relationship with operations management, corporate risk and short term efficiency. Employee‟s

development has significant impact on operations, management, corporate risk and short term efficiency. Results

show that if the corporate entities perform activities related to employees development its performance will

increase. If the management focus is strong in an organization then its performance will increase. Knowledge

management will reduce the corporate risk. Organizations which understand the importance of societal

considerations and embrace the concept of corporate responsibility are realizing that the long-term financial

interests of a company resides in corporate involvement towards its society and understand that these two are not

„mutually exclusive‟ with acting fairly in the best interests of stakeholders (other than shareholders) (PJC, 2006).



competitive advantage Corporate social activities can offer opportunities for corporate entities to reduce present

and future costs related to the business and hence increasing the operational efficiency (Brine, Brown et al.

2006).

There is a strong significant mean difference exist between sustainability planning in service and manufacturing

sector. Sustainability planning in service sector is more than manufacturing sector. Significant mean difference

exist between societal concern in service and manufacturing sector. Societal concern is more in service sector

than in manufacturing sector. There is significant mean difference in knowledge management and management

focus in service and manufacturing sector. Knowledge management in service sector is more than manufacturing

sector while management focus is more in service sector. No significant mean difference exist between

employees development in service and manufacturing sector. Significant mean difference exist between

integration of objectives with processes in service and manufacturing sector. Environmental concern in service

sector is more than manufacturing sector. Overall index for the integration of corporate sustainability with

business processes has a strong significant mean difference between service and manufacturing sector.

Sustainability in service sector is more than in manufacturing sector. Overall index for performance shows that

there is a strong significant mean difference between performance of service and manufacturing sector.

Performance of service sector is more than in manufacturing sector.

LIMITATIONS

The current research entails limitations. First, despite the wide use of extant CS literature, CS indicators suffers

from limited construct validity. Although this construct validity issue may not be solved in a short-term period,

future research should attempt to explore potential solutions. Second, this study collected qualitative cross-

sectional data which has its own limitations. If quantitative data is available then longitudinal study becomes

available in the future, a replication study may provide more robust findings or different results. Moreover, some

additional factors may be incorporated into the examination. For example, market leadership and competitive

performance that may be affected by CS practices. The examination of such constructs may open another avenue

for further investigation in the future. Finally, as shown in the additional analysis, we could not eliminate the

possibility of the recursive relationship between CS and CP. Future research addressing this reverse causality

may provide more accurate results regarding the relationship between CS and CP.

CONCLUSION

This study has two important aspects to explore. To what extent the corporate sustainability is integrated with

organization business processes in service and manufacturing sector and comparing the result sector wise.

Second what is the impact of integration of corporate sustainability with business processes on corporate

performance. Results from multivariate models and analysis of variance consistently suggest that superior-

performing sector have a better integration of corporate sustainability with business processes. These findings

complement existing studies of the relationship between corporate social responsibility and financial

performance by explicitly articulating the dynamic implications of better integration of corporate sustainability

with business processes. At the same time, they are consistent with the growing body of strategy research that

links sustainability with sustained superior performance. This study points important aspect of integrating

corporate sustainability with business processes. Aim of Corporate sustainability is to develop the organizational

processes that will contribute towards corporate sustainability in meeting the demands of present and future

generations of both internal and external stakeholders. For this economic, ecological, and social aspects should

be considered simultaneously and in an integrated manner. Corporate sustainability has gained significant

attention in both academic world and industry. There is a need to integrate corporate sustainability into

organizational business processes because above it is corporate responsibility to be socially responsible it also

have an impact on corporate performance. This study Encourage debate across the organization regarding the

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integration of corporate sustainability with business processes. This study identify, for companies, citizens and

policy makers, the most important advantages related to the operational implementation of the corporate

sustainability which is its economic benefit.

IMPLICATIONS AND RECOMMENDATIONS

Due to the findings of the present study, it is advisable for managers who wish to sustain their long term success

by managing corporate risk, short term efficiency and operation to give priority the integration of corporate

sustainability with business processes. Knowledge management, sustainability planning, management focus,

employees‟ development, integration of objectives with processes, societal concern and environmental concern

should be adopted by corporate entities for managing risk and enhanced performance.

This study has provided a closer examination of the concept of integration of corporate sustainability with

business processes and its link to organizational performance. The findings of this study may assist several

groups of people in the hotel, hospitals, textile, fertilizer and food industry. Industry executives and managers

may incorporate

The findings of the study into their strategic development of CS investments. For example, hotel, hospitals,

textile, fertilizer and food industry executives and managers may develop their overall CS investments around

community.

Future research may test the proposed relationship model using different composite measurements to explore

whether the strengths and directions of variables are found to be in the same direction as shown in our study.

Moreover, additional constructs including market leadership, competitive performance may be tested.

Future research could extend the literature on sustainability practices in Pakistan by addressing the limitations.

Studies with similar objectives could be attempted with reference to other industries.

Questions that remain to be answered by future research are:

o To what extent integration of corporate sustainability into business processes is possible

o How can corporate entities better learn to develop and track corporate sustainability.

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