Abstract

With the world shifting toward more sustainable economic growth, a global demand for innovative
solutions to incorporate sustainability in the decision-making has emerged. This work challenges
the premise that financial profits and pro-environmental purposes are mutually exclusive. The
research addresses a major barrier that the corporate sector faces in incorporating sustainability
in the decision-making: Corporate Short-Termism (CST) (UNGC, 2017). CST stems from the fact
that there is a significant segment of investors with excessive sensitivity to companies’ short-term
financial performance, these investors tend to pressure management away from sustainability
related investments as sustainability investments tend to not generate positive short-term returns. The
work tackles the question on how the corporate sector could increase its sustainability
investments to generate a positive impact on the environment without compromising its ability to
cater to its short-term investors’ needs.
While previous work recommended addressing CST through regulations change, direct incentives
to short-term investors and even a system-wide financial reform, this work proposes a different
perspective, a perspective that responds directly to what management perceive as the main
cause for CST: The industry-wide competition. Our proposed framework utilizes the same main
element that enforces CST: competition and recommends overcoming CST through profits. This
would be achieved by targeting a fast-growing consumer market segment; labeled the conflicted
consumers. Tapping on this growing market segment would generate short-term financial returns
while investing in sustainability. The conflicted consumer market segment differs from the general public by having favorable environmental/ethical beliefs and by their willingness to defect to
sellers who offer them viable options on environmental/ethical products. In 2007, the conflicted
consumer segment was estimated to be 25% of all consumers and that this segment is growing
fast (Watts, 2007 & Winston 2007).
This work utilizes the Theory of Planned Behavior (TPB) and New Institutional Economics (NIE)
to gauge the conflicted consumer’s intention to purchase environmental products and to
understand the root of this purchasing behavior. A paper-pencil survey (n=136) was conducted
to gauge the conflicted consumer intention to purchase organic food. Organic food was chosen
because organic agriculture has a notable positive environmental impact (FAO). In addition,
organic food is perceived favorably by the conflicted consumers.
Our findings reveal that only the elements of the Perceived Behavior Control (PBC) play a
significant role in explaining the intention to purchase organic food by the conflicted consumer.
Furthermore, the research utilizes NIE framework for economic change to demonstrate the
mechanism in which a positive impact on the environment could take place. Our analysis reveals
that consumers’ pro-environmental beliefs would translate into a purchasing decision if these
beliefs are in line with the main uncertainty priority of the consumer, or if the elements of the
environmental products are not in conflict with the main uncertainty priority of the consumer. In
other words, improving the elements of PBC in the environmental products offerings leads to
demand creation by the conflicted consumers, which in turn lead to short-term financial returns
and overcoming of the CST barrier while investing in sustainability.