The Relationship between Sustainable Development Practices and Financial Performance: A Case Study of Textile Firms in Vietnam

Sustainable development practices have become very important for firms to go beyond short-term profitability, towards economic, environmental and social sustainability. This research aims to examine the relationship between a firm's sustainable development practices and its financial performance. Modelled as a multidimensional construct, sustainable development practices are represented by environmental practices, social practices in the workplace and social practices in the community, while financial performance is determined by profitability and growth. Using a mixed method survey, data were obtained from 389 textile firms in Vietnam, where there is a dire need to promote sustainable and environmental practices. Data analysis using partial least squares structural equation modeling demonstrates that sustainable development practices positively affect financial performance directly and indirectly via customer loyalty, employee satisfaction and corporate reputation. The findings also reveal the moderating role of entrepreneurial orientation, whereby the impact of sustainable development practices on financial performance is stronger for firms that are more innovative, proactive and willing to take risks. Taken together, these findings provide support for firms to holistically implement sustainable development practices and adopt an entrepreneurial orientation.