Corporate Sustainability Practices and Business Risk in Nigeria

Abstract

Abstract

Corporate sustainability encompasses a business's dedication to implementing environmentally, socially, and economically responsible practices. This strategic approach ensures long-term viability and effectively mitigates associated risks. Many studies have examined how corporate sustainability impacts financial performance; however, existing literature provides limited evidence regarding the influence of corporate sustainability on business risk. This study investigated the influence of corporate sustainability practices on business risk in Nigeria. The sample included thirty (30) non-financial firms in Nigerian-listed between 2013 and 2022. Corporate sustainability practices were represented through Environmental, Social, and Governance practices. Business risk was measured by the addition of accounting risk and market risk. The analysis utilised the Estimated Generalised Least Squares (EGLS) estimation method to assess the impact of corporate sustainability practices on business risk. The results revealed that environmental and social practices have significant negative impacts on business risk. However, governance practices have significant positive impacts on business risk. The study recommends that the Nigerian government support businesses transitioning to environmental, social, and governance (ESG) compliant processes and supply chains. This may involve developing infrastructure, providing logistics assistance, and creating incentives for sustainable suppliers. Additionally, implementing policies that allow flexible timelines to meet ESG targets could help companies reduce the risk of sudden operational disruptions.

Keywords: Corporate sustainability, business risk, environmental practices, governance practices, social practices