Understanding How Financial Sustainability Affects Environmental and Social Sustainability: A Study of BSE SENSEX Companies

Abstract

In today’s competitive market, sustainability is a crucial factor for companies, be it financial, environmental, or social. The demand for sustainability is largely driven by shifts in consumer preference. The common assumption that investors focus solely on financial sustainability is strongly challenged by growing awareness of social and environmental sustainability. This study seeks to examine the effect of financial sustainability on environmental and social sustainability. Data were collected from companies included in the BSE SENSEX index and BSE 100ESG index for the last five financial years, ranging from 2018-19 to 2022-23. Data analysis was carried out using Panel Logistic Regression. Predictors used to test the impact include various financial and market metrics such as earnings per share (EPS), Tobin’s Q, return on total assets (ROA), free cash flow (FCF), return on capital employed (ROCE), priceto- earnings (PE) ratio, and promoters’ shareholding pattern. Findings suggest that ROA has a negative and significant impact on sustainability compliance. Further, it is evident that although sustainability has gained recognition as an important topic among researchers, academicians, and environmentalists, corporate sustainability does not necessarily depend on financial or market performance.