Investigating the Relationship between Sustainability-Related Expenditure and Profitability: A Comparative Case Study of Market Leaders in Malaysia's Service Industry
List of Authors
Ashman Shahrudin Khairuddin
Keyword
Sustainability Expenditure; Profitability; Malaysia; Service Sector
Abstract
Sustainability initiatives are increasingly important to business strategy, yet their impact on profitability remains debated, particularly within emerging markets like Malaysia. This study examines the relationship between sustainability-related expenditure and firm profitability in Malaysia’s service industry, focusing on three key earning sectors — Information and Communications Technology (ICT), hospitality, and retail/wholesale — with the aim of determining the extent of this relationship and why it may differ between these sectors. Adopting a comparative case study approach, one market-leading company from each sector is analyzed over a 3–5-year period using publicly available documents (annual and sustainability reports). Quantitative analysis (using SPSS) is employed to evaluate sustainability expenditures (e.g. CSR and environmental program costs) against profitability indicators such as Return on Assets (ROA), Return on Equity (ROE), and Net Profit Margin (NPM), and to compare average sustainability investment levels across these sectors. The findings reveal notable sectoral differences in how sustainability spending correlates with profitability. The hospitality sector shows the most pronounced positive relationship, where investments in sustainability — often cost-saving environmental initiatives – are associated with significant profit improvements. This aligns with stakeholder-driven theories, as consumer-facing businesses in hospitality and tourism often gain tangible financial returns from proactive sustainability efforts. The retail sector exhibits a moderate positive linkage, whereas the ICT company displays a comparatively weaker or negligible correlation. The analysis further indicates that the hospitality company allocates a higher proportion of its budget to sustainability initiatives relative to the retail and ICT firms. These disparities suggest that industry-specific factors shaping the sustainability–profitability relationship. This research contributes to a complex understanding of the business case for sustainability in service industries; showing that while sustainability investments can enhance profitability. However, the magnitude of benefits is highly dependent on sectors. The findings have implications for managers seeking to optimize sustainability strategies and for policymakers aiming to encourage sector-sensitive sustainability adoption.