Drivers of Sustainable Performance in European Energy Sector

Abstract

The main purpose of this study is to identify the drivers of sustainable performance in firms that operate in the energy sector. Under the assumption of bidirectional impacts, we empirically tested the trade-offs between sustainable and financial performance, in light of neoclassical theory, the natural-resources-based view, and instrumental stakeholder theory. We hypothesize that, in the energy sector, sustainable performance is positively associated with firms’ financial performance and that sustainability reporting is an important driver of sustainable performance. We add primarily by considering the relevance of sustainability-policy-oriented factors and revising the role of sustainability reporting within. We provide empirical evidence based on a large panel of firm-year observations within the 2013–2020 time span, for firms that operate in the energy sector and are located in Europe. We have found strong support for the positive link between sustainable performance (proxied with ESG score) and returns, which conforms to the assumptions of the natural-resources-based view. However, we have also found some evidence that more sustainable firms face greater costs input, which is considered in neoclassical theory. We have also confirmed no relevance of the slack-resources-based view. Finally, we found sustainability reporting to be the most influential among the set of sustainability-policy-oriented factors. This evidence demonstrates that stakeholders’ pressure on firms’ transparency could be an important driver of sustainable performance in the energy sector.

Keywords

• sustainable performance
• firm’s performance
• sustainability reporting
• energy sector