Deergha Sharma and Pawan Kumar
Growing concern over sustainability adoption has presented an array of challenges to businesses. While vital to an economy's success, banking is not immune to societal…
Abstract
Purpose
Growing concern over sustainability adoption has presented an array of challenges to businesses. While vital to an economy's success, banking is not immune to societal, environmental and economic consequences of business practices. The study has examined the sustainable performance of banking institutions on the suggested multidimensional framework comprising economic, environmental, social, governance and financial dimensions and 52 sustainability indicators. The study benchmarks the significant performance indicators of leading banks indispensable to sustainable banking performance. The findings attempt to address research questions concerning the extent of sustainable banking performance, ranking the sustainability dimensions and indicators and standardizing sustainability adoption metrics.
Design/methodology/approach
To determine the responsiveness of the banking industry to sustainability dimensions, content analysis was conducted using NVivo software for the year 2021–2022. Furthermore, a hybrid multicriteria decision-making (MCDM) approach is used by integrating entropy, the technique for order preference by similarity to ideal solution (TOPSIS) and VlseKriterijumska Optimizacija KOmpromisno Resenje (VIKOR) to provide relative weights to performance indicators and prioritize banks based on their sustainable performance. Sensitivity analysis is used to ensure the robustness of results.
Findings
In the context of the Indian banking industry, the pattern of sustainability reporting is inconsistent and concentrated on addressing environmental and social concerns. The results of the entropy methodology prioritized “Environmental” sustainability over other selected dimensions while “Financial” dimension has been assigned the least priority in the ranking order. The significant sustainable performance indicators delineated in this study should be used as standards to ensure the accountability and credibility of the sustainable banking industry. Additionally, the research findings will provide valuable inputs to policymakers and regulators to assure better contribution of the banking sector in meeting sustainability goals.
Originality/value
Considering the paucity of studies on sustainable banking performance, this study makes two significant contributions to the literature. First, the suggested multidimensional disclosure model integrating financial and nonfinancial indicators would facilitate banking institutions in addressing the five aspects of sustainability. As one of the first studies in the context of the Indian banking industry, the findings would pave the way for better diffusion of sustainability practices. Second, the inclusion of MCDM techniques prioritizes the significance of sustainability indicators and benchmarks the performance of leading banks to achieve better profits and more substantial growth.
Details
Keywords
Parul Munjal and Deergha Sharma
Reporting on triple bottom line (TBL) practices has emerged as an essential aspect in banking sector due to evolving social and environmental concerns. Engaging in social and…
Abstract
Purpose
Reporting on triple bottom line (TBL) practices has emerged as an essential aspect in banking sector due to evolving social and environmental concerns. Engaging in social and environmental activities is a strategic means to uphold dynamic alliances with stakeholders and eventually attain sustainable development. Furthermore, perception towards social and environmental practices is strategic to satisfy stakeholders’ interests. This paper aims to examine managers’ perception about reporting on social-environmental performance and its impact on financial performance (FP) in Indian banking sector. Research further assesses moderating effect of gender and experience in influencing the relationship between the constructs and also determines importance and performance of the constructs.
Design/methodology/approach
A well-structured questionnaire was distributed to 400 bank managers across India’s public, private, regional-rural, foreign and cooperative banks. The collected data were analysed through Smart PLS structural equation modelling. The moderating effect of demographics of bank managers in influencing the relationship was assessed using PLS-multi-group analysis (MGA). Besides, importance performance map analysis (IPMA) was used to understand the importance and performance of the constructs.
Findings
Findings indicate that bank managers believe that social and environmental activities strengthen relations between banks and stakeholders, resulting in better FP, thereby endorsing the stakeholder theory. Results of MGA suggest that gender and experience of bank managers are not effectual moderators in determining relationship between the constructs. Using IPMA, findings advocate that managers perceive environmental performance as a relatively high performance and a more important construct in influencing FP than social performance.
Social implications
Research would pave the way for banks to effectively communicate their commitment to sustainable development goals, engage stakeholders and demonstrate their commitment to creating positive social and environmental impacts. Furthermore, managerial perceptions can have a marked effect on customers’ understanding of social and environmental practices. This may influence customer satisfaction, conviction, commitment and constancy. Besides, a better understanding of the performance on social and environmental aspects over and above the FP of banks would facilitate the investors to make more informed and effectual decisions.
Originality/value
Considering the paucity of studies on the managerial perception of social and environmental activities and determining how the perception affects financial success, this study makes significant contribution to the literature. It would facilitate banks to design appropriate strategies and legislations to incorporate reporting on TBL practices for improved performance analysis. This would eventually ensure profitability along with sustainability in the Indian banking sector.
Details
Keywords
Parul Munjal and Deergha Sharma
The purpose of this paper is to determine managerial perception on social and environmental performance and its effect on financial performance in the Indian banking industry. In…
Abstract
Purpose
The purpose of this paper is to determine managerial perception on social and environmental performance and its effect on financial performance in the Indian banking industry. In addition, the study tests moderating role of gender and experience of bank managers in influencing the association between the constructs.
Design/methodology/approach
The empirical study is conducted using survey methodology. Responses were collected from 182 bank managers covering the private sector, public sector, foreign, regional rural and cooperative banks. Structural equation modelling technique was used to test hypothesized relationships between the constructs using Smart partial least squares software (3.3.2 version).
Findings
Results of the study endorse the stakeholder perspective. Bank managers perceive that involvement in socially responsible practices strengthens the relationship between stakeholders and banks, which eventually improves financial performance. Conversely, results indicate that environmental practices by banks do not influence financial performance, thereby sustaining shareholder perspective. Further, results suggest that gender and experience of bank managers are not effective moderators in determining the relationship between the constructs.
Practical implications
Findings would be valuable for investors to better assimilate social and environmental performance along with its effect on the financial performance of banks. The study would also facilitate policymakers and regulators to outline pertinent policies and rules to uphold financial strength and integrity in the banking industry. Further, bank managers’ perception would have a marked influence on customers’ understanding of social and environmental activities that might shape customer satisfaction, trust, engagement and loyalty.
Originality/value
The study underscores the eminence of endorsing socially responsible practices in the banks. This would facilitate in improving the sustainability in the Indian banking industry.