From Sustainability to Profitability: The Role of SDGs in Malaysian Companies

Abstract

The high initial costs of sustainable efforts and the challenges in assessing long-term returns make it difficult to link profitability with the Sustainable Development Goals (SDGs). This study investigates the relationship between SDGs and profitability in Malaysian listed companies. According to the Resource Dependency Theory, companies can enhance profitability and market positioning by strategically managing external dependencies to obtain resources and support, aligning with SDGs. Such alignment will help secure essential resources and improve operational efficiency. The study analyzed data from 73 Malaysian companies during 2021-2022. SDGs data were obtained from official company websites, while other variables company size, debts, liquidity, and profitability were sourced from annual reports. Regression results indicate a negative relationship between SDGs and profitability. While SDGs like environmental and social initiatives may increase costs and reduce short-term profits, they offer long-term benefits, such as improved reputation and customer loyalty. The study recommends that companies align SDGs with their core strengths and seek government support to mitigate financial burdens. Policymakers should provide incentives, such as tax breaks and subsidies, to encourage SDGs adoption. Finally, the study emphasizes the importance of balancing profitability with sustainability to ensure long-term success and societal impact.