The relationship between corporations’ SDG alignment and their financial performance

Abstract

As global attention shifts toward sustainable development, integrating sustainability priorities into corporate strategies has become a critical area of inquiry. The main research objective of this thesis is to investigate the relationship between corporate alignment with the Sustainable Development Goals (SDGs) and firm-level financial performance. Using a cross-sectional dataset of 10,223 publicly listed firms for the year 2024, this study evaluates whether SDG alignment, measured through binary indicators based on sustainability reports, is associated with profitability, measured via Return on Assets (ROA) and Return on Equity (ROE). Three econometric models were developed and estimated using Ordinary Least Squares (OLS) regression. Model 1 examines the effects of alignment with each of the 17 individual SDGs, Model 2 offers a holistic perspective by considering a composite SDG alignment score and Model 3 groups the SDGs into three thematic categories, namely Environmental, Social, and Economic. The analysis reveals that SDG alignment is more strongly and consistently associated with ROA, particularly for environmental and economic goals, than with ROE. These findings suggest that sustainability efforts may contribute more to internal efficiency than to equity-based returns.