Emerging Markets Finance and Trade

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Corporate Sustainability Performance of Chinese

Firms: An Empirical Analysis from a Social
Responsibility Perspective

Xiaoling Wang, Haiying Lin & Maoxi Tian

To cite this article: Xiaoling Wang, Haiying Lin & Maoxi Tian (2019): Corporate Sustainability
Performance of Chinese Firms: An Empirical Analysis from a Social Responsibility Perspective,
Emerging Markets Finance and Trade, DOI: 10.1080/1540496X.2019.1608522

To link to this article: https://doi.org/10.1080/1540496X.2019.1608522

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Emerging Markets Finance & Trade, 1–12, 2019
Copyright © Taylor & Francis Group, LLC
ISSN: 1540-496X print/1558-0938 online
DOI: https://doi.org/10.1080/1540496X.2019.1608522

Corporate Sustainability Performance of Chinese Firms:

An Empirical Analysis from a Social Responsibility
Perspective
Xiaoling Wang1, Haiying Lin2, and Maoxi Tian3
1
School of Economics and Management, University of Science and Technology Beijing, Beijing,
China; 2College of Business, Northern Illinois University, Dekalb, IL, USA; 3College of Economics &
Management, Northwest A&F University, Yangling, Shaanxi, P.R. China

ABSTRACT: Drawing on the concepts of sustainable corporate development and the triple bottom line,
this study develops a corporate sustainability efficiency (CSE) index to evaluate sustainable corporate
performance. Further, with the help of a meta-frontier analysis and a hybrid measure approach, the study
identifies the existence and determinants of efficiency gaps introduced by technology heterogeneity
across the sectors. The findings, obtained from empirical tests based on panel data of 138 large
Chinese firms in 2011–2015, indicate that firms’ CSE was low during the twelfth five-year plan
(2011–2015). The best performance was in manufacturing, followed by construction/mining, services,
and finance, while technology heterogeneity caused significant efficiency gaps across industries. The
study also identifies various managerial failures and a technology gap that contributed to the lack of
efficiency gains before offering context-specific suggestions.
KEY WORDS: Chinese firms, corporate social responsibility, corporate sustainability efficiency, meta-
frontier analysis, technology heterogeneity

Corporate sustainability has received increasing attention worldwide due to the growing public
concerns and stakeholder awareness of environmental degradation associated with business operation.
Firms are thus challenged to meet multiple expectations to create profits without compromising the
natural or social environment (Dyllick and Hockerts 2002; Elkington 1997). This objective requires
new business paradigms to make the traditional business system more sustainable and robust. Against
this background, the notion of corporate social responsibility (CSR), which refers to companies’
capacity for self-regulation, has been stimulated to engender and further facilitate sustainable devel-
opment (Wang, Qin, and Cui 2010). Many studies have proved that CSR activities provide firms with
an effective approach for improving their business performance and their relationship with stake-
holders (Elkington 2001; Kaptein and Wempe 1998; Zadek 2001). As such, an increasing g number
of firms is gradually and widely adopting CSR as a business strategy to accommodate internal and
external stakeholder demands and to gain legitimacy and competitiveness (Huang, Duan, and Zhu
2017; Werther and Chandler 2006).
However, despite the potential benefits, corporate sustainability strategy is not a risk-free under-
taking (Chang and Lo 2005). Whether market will reward firms with good CSR practices is still an
open question, as empirical results in this respect vary with regard to divergent background of the
examinations and the research type (Cheung, Jiang, and Tan 2012). Moreover, being sustainable
requires not only an evaluation of corporate economic performance but also a good understanding of
the comprehensive impacts of CSR engagement. How to estimate sustainable achievement and
whether firms will become more sustainable by committing to CSR initiatives remains inconclusive.

Address correspondence to Maoxi Tian, College of Economics & Management, Northwest A&F University,
Yangling, Shaanxi 712100, China. E-mail: tmx015@126.com
Color versions of one or more of the figures in the article can be found online at www.tandfonline.com/mree.
2 X. WANG ET AL.

Thus, a multidimensional comprehensive evaluation of sustainable performance, drawing on an

efficiency perspective, is needed to facilitate decision-making processes (Lee and Saen 2012).
Furthermore, the meaning, behavior, and practices of CSR have cultural- and context-specific
characteristics (Quazi and O’Brien 2000). National regulations, institutional differences, industrial
norms, civil society organizations, business systems, and historical traditions play an important role
in explaining various business models around the world (Campbell 2007; Yin and Zhang 2012).
Compared with most developed countries, China is a latecomer in the field of CSR practice and its
businesses are more susceptible to environmental and social problems compared to the developed
nations. Operating in the global largest emerging market, Chinese companies need to demonstrate
their sustainability commitment and performance to the public to advance their business opportunities
at home and abroad in practice (Lin 2010). Academic researchers in China have shown increasing
interest in CSR and are expected to expand the CSR literature accordingly (Gao 2009; Wang and
Juslin 2009).
Although existing research on Chinese CSR practice stresses the importance of managing envir-
onmental and social systems, these studies focus mostly on the characteristics, motivations, and
financial outcome of CSR disclosure (Haniffa and Cooke 2005; Islam and Deegan 2008; Li et al.
2013). Very few studies have conducted a deep investigation into the effectiveness of Chinese CSR
practices. Given CSR activities’ regional characteristics, understanding CSR engagement in China
will enrich and deepen the concept, connotation, and comprehension of CSR. It is also notable that
the development of CSR in the country was also slowed down during the twelfth five-year plan
(FYP) (2011–2015) due to businesses’ involvement in domestic economic transformation and
industrial upgrading. However, this phenomenon was considered a way of returning to rational
CSR engagement, especially after the explosive growth during the eleventh FYP (2006–2010)
(Golden Bees 2018). In addition, although sectoral or industrial differences in corporate sustainable
performance have been identified (CASS 2009), few studies have been undertaken on the existence
of efficiency gaps or the differences in inefficiency factors owing to divergent objectives.
Divergent production characteristics and environment, including variable market structures, indus-
trial policy and regulation, level of openness, and resource abundance make decision-making units
(DMU) select different types of technology, also known as “heterogeneity of production technology”
(Chiu et al. 2012; Oh 2010). Given China’s particular nature and context, as well as the heterogeneity
across its industries, this paper contributes to the current discussion in the following respects: first, by
building a sustainability efficiency index to reflect the corporate sustainable performance; second, by
evaluating the CSE with the help of a state-of-the-art hybrid measure technique; third, by taking
production technology heterogeneity into account to examine the efficiency gaps in the different
sectors with the help of meta-frontier analysis; and, fourth, by employing decomposition approaches
to investigate divergent industries’ different causes of efficiency loss. Specific recommendations are
also made to enhance Chinese firms’ efficiency gains.
The remainder of this paper is organized as follows: Section 2 explains the methods and models
used in corporate sustainable performance evaluation; section 3 illustrates our variables, sample, and
data, while section 4 explains the empirical results of our research sample. Section 5 clarifies the
implications of the outcome and suggests avenues for future research on the topic.

1. Research Model
1.1. Epsilon-Based Measure
We used the data envelopment analysis (DEA) approach, a non-parametric technique that deals with
multiple input and output indicators, to complete the efficiency evaluation for corporate sustainable
performance (Lee and Saen 2012). The main types of DEA measurement techniques are either radial
or non-radial. The assumption of the radial types, including the CCR (Charnes, Cooper, Rhodes) and
BCC (Banker, Charnes, Cooper) models, is too rigid to be met in real life, whereas the non-radial
 CORPORATE SUSTAINABILITY PERFORMANCE OF CHINESE FIRMS 3

type, represented by the slack-based measure, usually leads to biased estimations when processing
positive and zero values (Ai, Deng, and Yang 2015; Tone 2004). To address these drawbacks and to
enhance the effectiveness as well as the reliability of DEA methods, Tone and Tsutsui (2010) propose
a hybrid model called epsilon-based measures (EBM) to incorporate radial and non-radial parts of
measurement simultaneously. This updated approach has been gradually used to evaluate DMU’s
relative efficiency (Lin, Chen, and Peng 2017).
The EBM approach is used to derive the CSE values of the firms in the study. Accordingly, for
a given DMU0 with m inputs and s outputs, its CSE value can be obtained using a standard input-
oriented EBM model as follows:

P
m  
γ
¼ min θ  εx
wi si
x0 (1)
i¼1
s:t:θx0  Xλ  s ¼ 0; Yλ  y0 ; λ  0; s  0


   
where λ represents the intensity vector. X ¼ Xij 2 Rmn and Y ¼ Yij 2 Rsn are input matrices
P
and output matrices, respectively. Additionally,wi is the weight of input i and satisfies mi¼1 wi ¼ 1
and εx reflects the relative importance of the non-radial slacks denoted by s over the radial θ. The
efficiency score of a given DMU, indicated by γ
, ranges from 0 to 1. A DMU can be seen as efficient
and operates on the best technique frontier compared to its peers when its CSE is 1.

1.2. Meta-Frontier Analysis

In conventional DEA models, an important assumption is that all subjects are homogeneous and have
a consistent operating environment. However, in real life, decision-makers face various controllable
choices and non-controllable situations. Different industrial attributes, including business pattern,
supply and demand, industrial structure, technology conditions, sectoral regulation, and development
phase, generally leads to divergent technology use among firms in different sectors. To capture such
heterogeneity in production technology among firms in a productivity estimation, Hayami and Ruttan
(1970) first posited a meta-production function to address the problem. This initial meta-frontier
concept was combined with DEA methods to identify various DMUs’ efficiency gaps and enhance-
ment potential (Du, Lu, and Yu 2014; O’Donnell, Rao, and Battese 2008). In so doing, DMUs’
heterogeneity is taken into account when efficiency is evaluated and decomposed.
In light of industrial differences, all the DMUs (i.e., the 138 observed firms) are divided into
multiple subgroups based on their sector. The meta-frontier comprises all the DMUs, whereas a group
frontier only includes DMUs in a given group. A technical gap between DMUj’s actual efficiency
(i.e., the score evaluated with its peers in the same group) and its potential efficiency (i.e., the score
estimated under a meta-frontier in which all the DMUs are the subject) is further appraised to observe
the DMU’s potential in efficiency gains.
If all the firms in this study are divided into hngroups, and then o two production technology sets,
namely, T h and T meta , will be obtained as T meta ¼ T 1 [T [: ::T h . When any input and output set is
2

in T h , they will be included in T meta as well (i.e., T h ∈ T meta ). Suppose h = 4 and a certain DMUj in
group 1 operates at point A, and A’s projection under the group frontier and meta-frontier is B and C,
respectively (Figure 1). CSE scores obtained under the meta-frontier and a group frontier can be
presented as MFE and GFE, respectively. Then, GFE is the ratio of OE/OF while MFE is equal to
OD/OF; thus, the technology gap ratio (TGR) of DMUj is the ratio of OD/OE and can be drawn using
the following equation (Du, Lu, and Yu 2014):

TGRhj ¼ MFEj =GFEjh (2)

4 X. WANG ET AL.

output

The meta - frontier

The frontier for

group 4
The frontier for group 3

The frontier for group 2

C
B
The frontier for group 1
A

input
O D E F

Figure 1. Illustration of meta-frontier, group frontier, and technology gap ratio (TGR).

where MFEj and GFEjk are efficiency values estimated under two production sets calculated based on
the EBM model represented in Eq. (1). A TGR score derived from Eq. (2) indicates the difference
between the CSE of firm j in group h under the two frontiers. Consequently, efficiency values
calculated under the meta-frontier are apparently no higher than those obtained under a group frontier
(i.e., MFEj ≤ GFEjk and TGR ∈ (0, 1]). A high TGR indicates a large efficiency gap and a low-
efficiency gain potential for DMUj.
Furthermore, the total efficiency loss under the meta-frontier (MTI) introduced by TGR can be
decomposed into technological gap inefficiency (TGI) and managerial inefficiency (MI) using the
following equations (Chiu et al. 2012):

MTInh ¼ TGInh þ MInh ¼ ρmeta

n (3)

TGInk ¼ GFEnk ð1  TGRkn Þ ¼ ρmeta

n  ρkn (4)

MInk ¼ 1  GFEnk ¼ ρkn (5)

where higher values of TGI and MI represent larger efficiency loss (i.e., TGI ϵ (0, 1] and MI ϵ (0, 1]).
Generally speaking, technology spillovers and self-dependent innovation (i.e., endogenous or indi-
genous innovation) will be helpful in decreasing TGI originating in technology gaps between various
industries. Resource allocation inefficiency usually leads to managerial failure. Operational ineffi-
ciency or a lack of corporate regulation on CSR administration may lead to managerial failure.

2. Variables and Data

2.1. Variables
The triple bottom line (TBL or 3BL)—namely social, environmental, and financial elements—was
first proposed and promoted by Elkington (1997) to advance the goal of sustainability in business
practices. The TBL sets not only the goal, but, simultaneously, also the method firms can employ to
achieve sustainable development (Vanclay 2004). Consequently, this study identifies the TBL as the
guideline and standard for firms’ overall performance evaluation.
 CORPORATE SUSTAINABILITY PERFORMANCE OF CHINESE FIRMS 5

Wang, Lin, and Weber (2016) coined the term corporate sustainable efficiency (CSE), referring to
the initial meaning of economic efficiency (Farrell 1957) and sustainable efficiency (Hoang and Rao
2010). The term represents a firm’s ability to achieve better overall performance with fewer inputs
and lower operating costs than its peers. However, the cost of CSR practices and commitments is also
critical for businesses to become “green” and should be taken into account when evaluating CSE. The
study thus refers to and improves on Wang, Lin, and Weber (2016) work.
Assets, labor, capital, the cost of goods sold, sales, and general and administrative (SG&A) expenses
are typical input indicators in terms of proxy selection (Joo et al. 2010; Schoenherr and Talluri 2013;
Vitaliano and Stella 2006). At the same time, sales (or revenue), net income (or profit), pollution and
emissions mitigation, environmental protection measures, and CSR indexes are typical outcomes used
in related studies on corporate efficiency evaluation (Belu and Manescu 2013; Sueyoshi, Goto, and
Ueno 2010; Tsai, Chen, and Tzeng 2006). Nevertheless, the indicators for different subjects and
analytical lenses in different sectors vary greatly, and selecting key features in multi-criteria decision-
making evaluation is crucial (Shi et al. 2018). Consistent with the prior research and certain DEA
requirements, this study uses the number of employees, total assets, managerial expenses (SG&A), and
a responsibility management index (RMI) as proxies for inputs to evaluate Chinese firms’ CSE. Based
on Wang, Lin, and Weber (2016), this study uses the market performance index (MPI), environmental
performance index (EPI), and social performance index (SPI) as output variables to reflect a firm’s
financial, environmental, and social achievements (Table 1). The RMI, MPI, EPI, and SPI are
comprehensive indexes derived directly from the database of the Chinese Academy of Social Science
(CASS). The CASS evaluates the score in multiple dimensions using the analytic hierarchy process for
each sample firm’s responsibility management, market, environmental, and social performance, draw-
ing on information collected from corporate websites, CSR reports, and annual reports. Specifically,
RMI is constructed based on second-class indicators, including the responsibility for strategy, govern-
ance, integration, and communication and the capacity for carrying out duties. MPI is evaluated by
considering dimensions of responsibility for customers, partners, and shareholders. SPI is calculated by
taking account of responsibility for the government, responsibility for employees, safety production,
and responsibility for community. EPI is reflected by a firm’s achievement in environmental manage-
ment, energy conservation, and pollution and emissions reduction. The final score of each index for
a single firm falls to [0, 100], and a higher score indicates better performance (Chinese Academy of
Social Science (CASS) 2012).

2.2. Sample and Data Sources

The research sample was derived by combining the databases of the Research Report on Corporate
Social Responsibility in China, the Compustat database, and the main stock exchange markets in
China, namely those in Shanghai, Shenzhen, and Hong Kong. Specifically, the Research Report on

Table 1. Description of inputs and output in deriving CSE.

Variable Type Variable Measurement Data Source

Input variable Labor Employee number Compustat or annual

Capital Total assets reports
Non-production Selling, General, and Administrative (SG&A)
cost expenses
CSR practice Responsibility Management Index (RMI) CASS reports
Output variable Financial output Market Performance Index (MPI) CASS reports
Environmental Environmental Performance Index (EPI)
output
Social output Social Performance Index (SPI)
6 X. WANG ET AL.

Corporate Social Responsibility of China (2012–2016) provided us with a unique dataset of detailed
and comparable information on multidimensional characteristics of the top 100 state-owned, foreign,
and private enterprises in a broad range of industries in China (Chinese Academy of Social Science
(CASS) 2009). Only firms with records in all three databases that cover the indicators of various
aspects of firms’ features and performance were selected to maintain the sample’s consistency,
integrity, representativeness, and comparability.
Almost all CSR-related initiatives and engagements are costly and have a long feedback period,
which prevents firms from “being good.” Consequently, larger firms are more likely to invest in
better CSR performance than small and medium-size enterprises (SMEs), because the former can use
their slack resources and have a greater capacity to pay for the initial certification (Nishitani 2009).
Moreover, compared to non-listed firms, listed companies have frequent information disclosure and
reporting activities, are reliable, and are accessible because of public and stock market policies and
requirements (Li et al. 2013). CASS also uses a synergetic framework to evaluate the samples’
financial, ecological, and social performance as well as their commitment to CSR engagement (i.e.,
represented by the RMI index).
In summary, 138 Chinese-listed firms in construction/mining, manufacturing, and the services
between 2011 and 2015 were used as the research sample. A total of 690 observations was collected
to complete the study’s empirical tests. Financial firms were separated from other service firms due to
their unique characteristics. In keeping with their Standard Industrial Classification (SIC) code, the
relevant firms are therefore divided into four industrial groups: construction/mining (group 1 with the
SIC code 1011–1799), manufacturing (group 2 with SIC code 2011–3999), service (group 3 with SIC
codes 4011–5999 and 7011–9721), and finance (group 4 with SIC code 6011–6799). Specifically, out
of 138 firms, 16 are in construction/mining, 68 are in manufacturing, 34 are in services, and 20 are in
finance.

3. Empirical Analysis and Findings

3.1. Estimation of CSE
The CSE scores of the firms’ under two frontiers (i.e., the MFE and GFE) are calculated using the
EBM techniques and the meta-frontier approaches demonstrated in section 3. Specifically, the meta-
frontier analysis allows us to observe the findings on both the national and industrial level. The
empirical outcome regarding the MFE, GFE, and TGR values of firms in the four industries is in
Table 2.
In Table 2, the CSE scores of Chinese firms are relatively low and range from 0.238 to 0.365
during the observation period. This CSE outcome trend matches the country’s macroeconomic
conditions. According to China’s National Bureau of Statistics (NBS), annual growth rates in the
gross domestic product slowed during the twelfth five-year plan (2011–2015) and experienced
notable drops in 2012 and 2015.

Table 2. Average mean of MFE, GFE, and TGR of Chinese firms during 2011–2015.
MFE GFE TGR

All G1 G2 G3 G4 G1 G2 G3 G4 G1 G2 G3 G4

2011 0.365 0.374 0.429 0.374 0.286 0.442 0.462 0.488 0.703 0.577 0.889 0.619 0.321
2012 0.299 0.267 0.420 0.334 0.173 0.663 0.431 0.576 0.719 0.318 0.972 0.495 0.209
2013 0.348 0.346 0.448 0.386 0.214 0.537 0.464 0.670 0.613 0.451 0.936 0.503 0.273
2014 0.348 0.316 0.499 0.389 0.188 0.538 0.510 0.503 0.561 0.444 0.969 0.636 0.260
2015 0.238 0.185 0.365 0.287 0.116 0.745 0.365 0.698 0.613 0.206 1.000 0.332 0.150
Average 0.320 0.298 0.432 0.354 0.195 0.585 0.446 0.587 0.642 0.399 0.953 0.517 0.243
 CORPORATE SUSTAINABILITY PERFORMANCE OF CHINESE FIRMS 7

In addition, the differences in corporate sustainability performance across industries were also
remarkable under the meta-frontier (i.e., the MFE). Manufacturing firms had the highest level (i.e.,
average CSE mean of 0.432), followed by firms in the services (i.e., average CSE mean of 0.354) and
construction/mining (i.e., average CSE mean of 0.298); financial firms performed the worst, with an
average mean of 0.195.
Compared to the results under the meta-frontier, insignificant distinctions were found between
the four sectors under the group frontiers when the groups’ scores (i.e., the GFE) were between
0.446 and 0.642. However, the gaps between the two frontiers’ efficiency scores were considerable,
especially for financial firms. The average TGRs of firms in this sector was only 0.243, whereas the
TGRs of the manufacturers were nearly 1.0. This result indicates that the group frontier was close
to the meta-frontier, with the manufacturing firms thus the leaders in terms of technological merit.
With respect to the TGR score changes, the technology differences among manufacturing firms
narrowed, whereas those between firms in other sectors expanded over time, especially financial
firms. The results of this comparison indicate that manufacturing firms (i.e., group 2) were moving
toward the best technology level, whereas those in other sectors were drifting away. The compar-
ison also identifies potential for raising efficiency in the financial industry, followed by construc-
tion/mining and services.
To detect the significance of the TGR differences between sectors, we the Kruskal–Wallis (KW)
rank sum test, following Wang et al. (2015). The KW test confirmed the technology heterogeneity
across the four sectors, as the null hypothesis (i.e., no difference between the variables) was rejected
at the significance level of 1%.

3.2. Decomposition of Inefficiency

Equations 3 to 5 were further used to estimate the meta-total inefficiency (MTI) and the determinants
of inefficiency—that is, the technological gap between the inefficiency (TGI) and managerial
inefficiency (MI) of firms in different sectors. These indicators are useful for revealing the underlying
causes of inefficiency in corporate sustainability. Table 3 lists the decomposition results of firms at
the meta-level and the group levels during the observation period.
The empirical results in Table 3 show that Chinese firms’ average mean of efficiency loss (MTI)
was about 0.680 during the twelfth FYP (2011–2015) period and relatively high in 2012 and 2015.
The total efficiency loss in the financial sector, at an average mean of 0.805, was the highest,
followed by construction/mining and services. Manufacturing had the least loss of efficiency, with an
average mean of 0.568. This conclusion is similar to the MEE results in the previous section.
Regarding the determinants of inefficiency, technology, and managerial failure were responsible
for about 43% and 57%, respectively, of the total efficiency loss. In general, priority should therefore
be placed on corporate managerial capability, rather than firms’ technological progress and innova-
tion. In terms of sectoral differences, both the technology gap and managerial failure explained the
efficiency loss in construction/mining and services. Firms in these sectors should therefore pay
balanced and simultaneous attention to technology innovation and resource allocation.
Nevertheless, managerial failure was the main cause of inefficiency in manufacturing’s corporate
sustainability, which accounted for about 98% of its loss of industrial efficiency. By comparison,
lagging technology was the main cause of inefficiency in the financial sector, accounting for about
62% of its inefficiency.
The decomposition results verify that technology heterogeneity contributes to the efficiency
gains of firms in backward industries, especially in the financial sector. Nevertheless, an improve-
ment in allocative efficiency and in the administrative capacity of CSR plays a more important role
in the efficiency gains of non-financial firms, especially those in manufacturing, than technical
progress.
 8
X. WANG ET AL.

Table 3. Average mean of TGI, MI, and MTI of Chinese firms.

MTI TGI MI
All G1 G2 G3 G4 All G1 G2 G3 G4 All G1 G2 G3 G4

2011 0.635 0.626 0.571 0.626 0.714 0.215 0.159 0.033 0.203 0.466 0.419 0.467 0.538 0.423 0.248
2012 0.701 0.733 0.580 0.666 0.827 0.336 0.447 0.012 0.296 0.587 0.366 0.285 0.569 0.370 0.240
2013 0.652 0.654 0.552 0.614 0.786 0.270 0.270 0.018 0.338 0.454 0.382 0.384 0.536 0.276 0.333
2014 0.652 0.684 0.501 0.611 0.812 0.238 0.312 0.011 0.191 0.437 0.414 0.372 0.490 0.420 0.376
2015 0.762 0.815 0.635 0.713 0.884 0.403 0.606 0.000 0.470 0.535 0.359 0.209 0.635 0.242 0.349
Average 0.680 0.702 0.568 0.646 0.805 0.292 0.359 0.015 0.300 0.496 0.388 0.344 0.554 0.346 0.309
 CORPORATE SUSTAINABILITY PERFORMANCE OF CHINESE FIRMS 9

4. Discussion and Implications

Drawing on corporate sustainability literature, this paper builds a sustainability efficiency evaluation
framework and a hybrid model to estimate the efficiency of corporate sustainable development. In
addition, decomposition techniques derived from a meta-frontier analysis are used to identify
efficiency loss and its consequences, including managerial failure and technology inefficiency.
Findings from the empirical tests based on the 138 large Chinses firms during the twelfth FYP are
as follows.
First, how to achieve triple bottom-line goals with an efficiency gain is a big challenge for many
businesses, especially during an economic downturn and transition. In general, CSE was still low
during the twelfth FYP period, with an average CSE mean of only about 0.32. This outcome indicates
the challenges that many Chinese business confront when they attempt to become “both green and
responsible” and simultaneously maintain market profits. This study confirms the necessity and urgency
of corporate green growth. Firm administrators and the government should pay more attention to “doing
well” by “doing good” to ensure green and inclusive growth for firms in all sectors.
Second, there are considerable variance in CSE across different industries. Sectoral differences in
sustainable development are significant, given that the CSE of manufacturers was the highest,
followed by firms in services, construction/mining, and finance.
Better CSE performance in manufacturing is attributed to change in its development pattern.
Industry, represented by manufacturing, has changed from “passive absorption” to “active adoption”
in terms of corporate sustainable concepts, strategies, policies, actions, and practices, driven by
external pressures and internal motivations to seek new market opportunities related to sustainability
improvement (Adebanjo, Teh, and Ahmed 2016). For example, certification of voluntary CSR-related
standards in Chinese manufacturing firms has increased over the past several years (McGuire 2014;
Wang, Lin, and Weber 2016). Another boosting factor could be related to the reinforcement of
environmental regulations, the prohibition of expansion by firms with high pollution, high emissions,
and high energy consumption and the promotion of advanced and green manufacturing. For example,
the Industrial Transformation and Upgrade Plan (2011–2015) outlined by the Chinese government in
2011 and the twelfth FYP for Energy Saving and Emissions Reduction released in 2012 have both
highlighted the green development requirements and expectations of the manufacturing sector.
In contrast, the lowest CSE was found among the financial firms. Although this industry is usually
considered profitable, its sustainability performance as well as its information disclosure level is relatively
low compared to that of other industries (Chinese Academy of Social Science (CASS) 2012). This could
be due to the low awareness of green financing and regulations in the industry. For example, although the
Equator Principles (EP), which is used for determining, assessing and managing environmental and social
risk in projects, were implemented in 2002, they were not officially adopted by any Chinese commercial
banks until 2008. Moreover, the construction of a green system of finance was not promoted as a national
strategy until 2016. As such, the financial sector became a laggard in implementing CSR for sustainable
development (Lu et al. 2018). Despite their rapid development, green credit practices in the country are
still in an exploratory phase (Guan et al. 2017). According to Huang, Duan, and Zhu (2017), the positive
correlation between CSR investment and banking business success can occur only when the investment is
above a certain threshold. Therefore, stimulation mechanisms and restrictive regulations should be
completed and perfected to accelerate the green development of the financial industry.
Third, the variances of CSE across different industries are attributed to technology heterogeneity.
Our statistics indicate that TGR differences across sectors are significant. According to the results of
our empirical analysis, manufacturing firms had the best technical frontier and were therefore leaders
in corporate sustainable development during the observation period. Conversely, financial firms were
laggards in terms of sustainable development, as the sector’s technology gaps were the largest. This
finding implies that financial firms have more potential for making improvements in sustainability
efficiency than other industries. It can significantly enhance CSE if appropriate strategies, guidance,
approaches, and technologies are implemented. For example, detailed guidelines and criteria on green
10 X. WANG ET AL.

credit in different industries based on their environmental impacts, technologies, and regulations
should be issued to better facilitate the use of green credit at financial firms.
Moreover, technology spillovers from industries with higher efficiency to industries with lower
performance can help narrow the technology gaps across industries. Traditional thinking usually
focuses on technology spillovers from the services to manufacturing, but some research demonstrates
a two-way spillover effect as a result of growth in these two industries (Clemes, Arifa, and Gani
2003; Kuan 2017; Wang and Shi 2017). Accordingly, intra-industrial integration and cooperation
should help release the potential for efficiency gains by financial firms. This conclusion also applies
to firms in construction/mining and services.
Last but not least, having different paths to being green in different industries should be
considered. The contributions of management and technology to efficiency loss also differ for
firms in divergent sectors. The MTIs in manufacturing are mainly due to insufficient management,
whereas technology inefficiency is mainly responsible for the MTIs in finance. Technology
progress and innovation, including energy conservation and emissions abatement, are advocated
and promoted at various levels in manufacturing. These efforts have contributed to efficiency
enhancement and green development in manufacturing (Wu et al. 2012; Zhang, Hao, and Song
2016). Improvements in management sufficiency and allocation efficiency will facilitate efficiency
gains in manufacturing.
The empirical results also show that the financial sector’s technology gap is a critical obstacle to
efficiency gains. Technological advancement in finance, which is a critical support sector, can be
easily overlooked. However, technical advancement in equipment, data analyses, risk aversion, and
financial products, especially green financial products, are crucial to the sustainable development of
financial firms. For example, conventional banking activities have been deeply influenced by the
rapid development of internet technology (Srivastava 2014). How to absorb technologies and knowl-
edge, such as cloud computing and big data based on IT, in the banking business to magnify financial
institutions’ efficiency, competitiveness, and greenness should be further emphasized by decision-
makers of financial institutions. Further, our results indicate that firms from construction/mining and
service need to advance both technologies and managerial experience to stimulate gains in sustain-
ability efficiency. In summary, general and context-specific guidance and strategies should be care-
fully noted, discussed, and implemented in line with the characteristics of various industries.
In addition, while we offer insights into the corporate sustainability performance, our study has
several limitations that could be addressed in future studies. Our sample consists of only Chinese-listed
large companies in four sectors. Future studies should expand the research sample to include small and
medium-size firms in further industries. Future studies could also explore other country settings and
potential factors that explain efficiency loss other than technology gaps and managerial failure.

Funding
The authors are grateful for the support provided by the National Natural Science Foundation of
China (71704010, 71771024, and 71873103), the Humanities and Social Science project of Ministry
of Education of China (17YJC630163 and 18YJC910011), the Social Science Research Foundation
of Beijing (18JDYJB021, 17JDGLA010) and Fundamental Research Funds for the Central
Universities (FRF-TP-18-007A2).

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