Impact of Strategical Sustainability on Real Estate Industry’s Sustainability Performance

A sustainable growth strategy that creates jobs at the expense of an environmental or renewable energy development that disregards its environmental and social repercussions, displacing tens of thousands of people and reducing biodiversity, is in direct opposition to its own purpose (Tupenaite, et al., 2017). The literature (Plessis, 2007) strongly backs up the idea that sustainable development must always be perceived as a comprehensive solution (the whole being greater than the sum of its parts) to the complex dynamic problems of the interdependent and interconnected connections that determine the relations among humans, their community, economy, and technology.

In recent years, sustainable construction has expanded fast across the globe as a result of source depletion, pretending a variety of management, strategic, and operational disputes and concerns. Furthermore, the real estate sector contributes considerably to addressing societal requirements by improving quality of life (Alwan, Jones and Holgate, 2017; Lima, et al., 2021) and improving building materials by using smart materials. Businesses will invest in sustainability to eliminate commercial obstacles, develop new business possibilities, and persuade new green consumers that their products and services are sustainable. In this regard, strategic sustainability has a close relationship with competitiveness and competitive positioning in the corporate environment (Przychodzen and Przychodzen, 2015).

Strategic sustainability is a planning and execution strategy that distributes limited available resources in a manner that maximizes their influence on sustainability. Numerous factors motivate businesses to include sustainability into their strategies. From one point of view, regulation; customers’ and stockholders’ needs; competitiveness; green movements; and worldwide, communal, and community pressure are among the primary factors for why strategic sustainability indicators and the intangible value of social duty should be incorporated into firms’ operations (Petersen and Brockhaus, 2017; Abuzeinab, et al., 2018).

Strategic sustainability is essential to the efficient running of businesses (Petersen and Brockhaus, 2017). The direction of a company’s business strategy determines the cross-sectional variations in its efforts to pursue a new product, join a new market, engage in uncertain and hazardous ventures, and separate itself from competitors (Akindayomi and Amin, 2022).

This research examines the strategic sustainability components of the business strategy and management. Management has the primary strategic responsibility within the organization, and it has typically guided the corporation to reach its financial goals through strategic management (Skripak, 2028). Green business initiatives can help businesses achieve competitive advantage by recruiting environmentally conscious customers (Przychodzen and Przychodzen, 2015).

This research study aims to explore the connection between the strategic sustainability components of business strategy and management and sustainable performance. The study is based on an assessment of a study of Latvian real estate companies. Particular attention is paid to the real estate industry. The focus on the real estate industry in this research is justified by its significant role in sustainable development, its rapid growth in sustainable construction practices, its impact on the quality of life and the environment, and its position as a strategic player in the corporate landscape. Understanding how strategic sustainability is applied in the real estate sector is critical for promoting sustainability and responsible business practices.

Sustainability administration and its integration in enterprises may be evaluated from several viewpoints. Included among them are sustainable management, strategic management, organizational growth and change, change managers and leadership, organizational knowledge, investor engagement, sustainable organization, sustainable business concepts, and the sustainability business case (Kiesnere and Baumgartner, 2019b). To incorporate sustainability at the level of strategic management, social and environmental factors must be considered while analyzing the exterior trends and core strengths and vulnerabilities of a firm in order to set long-term goals, policies, and design plans (Kiesnere and Baumgartner, 2019a). On the level of working management, strategic policies are executed effectively (Shen, et al., 2007). Depending on the plan, many business tasks, such as reducing excess of emissions in manufacturing or incorporating sustainability into the promotion strategy, are carried out here (Baumgartner, 2014). The research concentrates on the environmental aspect of building sustainability implementation. This indicates that the firm success is evaluated in the form of minimizing the use of construction raw material, pollutants, and energy. Proposals to improve sustainability can have long-term effects on the success of an organization. Investing in a sustainable development raises the firm’s brand value and enhances its vision and status (Misopoulos, et al., 2019).

In spite of the limitations imposed by economic, social, and ecological factors, organizations that strategically plan and attain sustainability demonstrate superior long-term performance (Tupenaite, et al., 2018). These companies react by developing tactics that establish and capture the motivation for long-term focus (Thaher and Jaaron, 2022). Strategic sustainability strives toward a well-defined sustainable condition and provides a strategic step-by-step direction on how to achieve it (Hallstedt, Thompson and Lindahl, 2013). According to the conventional viewpoint, decision making delays incur substantial costs. In the near term, prices and expenses increase exponentially, hence fostering competition. Similarly, decisions involve additional components that must be believed; links and connections between them are essential to appreciate the connection of a sustainable business model, in which an economic value is dependent on social and ecological concerns (Giannoni, Alarcón and Vera, 2018). This goal for the real estate company facilitates the development of a long-lasting business strategy that advances the company’s standing and long-term survival. Integrating environmental and societal considerations into the business standard will result in, for example, long-term cost savings and a probable increase in asset valuations. It concurrently inverts the budget curve by improving the brand value and giving competitive benefits, as well as by generating firm differentiation and minimizing risks (Ghazal, 2015). Furthermore, the strategic sustainability components of business strategy and management are outlined.

The business strategy depicts how a company competes and positions itself with respect to competition in a specific industry. The relevance of strategy in sustainable development is underlined (Alghababsheh, et al., 2022). Future eco-friendly manufacturing techniques are the primary focus of a sustainable development plan that considers economic, environmental, and social sustainability (Zuo, Jin and Flynn, 2012; Hart and Dowell, 2011). In another study, a proactive sustainability approach was defined as combining all three elements of sustainability (environmental friendly, financial, and social) into plans, with an emphasis on natural resources (Torugsa, O’Donohue and Hecker, 2013). An environmental strategy refers to human activities that do not negatively impact the environment, while an economic plan prioritizes excellent living conditions, economic success, and long-term profitability. Construction organizations must revise their corporate plans to improve react to factors of the sustainability act in light of accelerating business shifts and exponentially rising consumer and governmental expectations connected to sustainability and the environment.

In markets that are becoming more competitive (Ye, et al., 2015) in new perspectives and concepts such as income is not the individual objective or that presently the financial gain would be the outcome of doing the correct things, the organization has common ground with culture; there are bounds to productivity expansion due to the need to reserve resources and confirm their future accessibility; the organization has mutual goals through society; there are restrictions to development in the economy due to the need to preserve capitals and ensure their future existence; the organization has common interests with society; and there are limits to productivity expansion due to the need to preserve resources. Managers must accept the challenge of using creative planning and management skills (moral reasoning, accountability, entrepreneurship, social competence), i.e., they must go beyond developing, managing, implementing, and effectively managing company operations (Barbosa, Castañeda-Ayarza and Lombardo Ferreira, 2020). Strategic management requires the manager’s ability to monitor and evaluate the core and external realities of the business in order to establish the company’s strategic stance, as stated by the mission statement, mission and vision, and strategic objectives. From now on, it will be possible to establish the basic business strategy and then propose specific objectives and initiatives. Thus, the relevance of strategic alignment throughout the entire method is acknowledged (Bora, 2017). The strategic management process emphasizes the relevance of both strategy formulation and strategy implementation. Therefore, the execution and strategic management will be crucial to achieve the suggested goals (Bora, 2017). According to literature, the developed research model and hypothesis is shown in Figure 1.

Figure 1.

(Source: Authors’ own research)

The hypotheses of the investigation are as follows: H1:

The integration of strategic sustainability principles into a real estate business strategy significantly enhances the successful implementation of sustainability initiatives.

The real estate industry is one of the largest and most important contributors to the economy and quality of life. This industry contributes significantly to Latvia’s gross domestic product (GDP). Create a yearly added value in Latvia of around 310,430 EUR thousands, which is almost 7% of that nation’s GDP (LIAA, 2022).

Our study encompassed a wide spectrum of real estate businesses, varying in size, legal structure, and geographic location. Participants were drawn from different roles within these companies, including top-level managers, middle managers, administrative personnel, and specialists. We also considered their experience levels to capture a well-rounded perspective. By including participants from various departments and geographic regions, our research aimed to provide a comprehensive understanding of the real estate industry, ensuring that our findings are representative and applicable to a diverse array of scenarios in the sector.

This study is based on an assessment, a standard technique for collecting quantitative data from practice. Research was carried out in Latvia, and the information was collected from Latvian real estate firms. The research tool used in this study was a well-designed survey instrument with two main sections: one focused on the business strategy and management as components of strategic sustainability and another focused on assessing sustainability performance. The survey was conducted using an online application. In total, 150 real estate sector employees were included in the arbitrarily chosen sample. Respondents were urged to provide accurate answers as possible and were permitted to remain anonymous. The decisive structure of the survey questions was iteratively developed by a group of subject-matter-expert researchers. Five experts in the domains of digital technology and service businesses oversaw the compilation of survey data. In addition, various forms of Likert scales, “strongly disagree–strongly agree,” were applied to implement a methodological distinction (Craighead, et al., 2011).

The analysis survey has two primary sections. The first section consisted of six items defining a company strategy and management as components of strategic sustainability. Transitioning to a corporate model associated with sustainable development, using the economy and developing a strategy for sustainable improvement were utilized to assess the strategic viability of the company’s business plan. Administration’s commitment to furthering sustainable development, management’s support for the production and implementation of new ecological innovations, and management’s level of expertise in sustainable development were assessed using three items.

There were three descriptions of the dependent variable, sustainability performance, in the second part. The decreased uses of materials, emissions, and energy were the three variables used to assess sustainability performance. In addition, responses to closed-ended questions were recorded using a 5-point Likert scale, with 1 indicating “strongly disagree” and 5 representing “strongly agree” for dependent variables. Questions about the theoretical components were developed using a sequence of results from the literature study.

As stated in Table 1, Cronbach’s values were determined to guarantee the validity of the findings. The bigger the value, the better the inner reliability and, thus, the greater the data dependability. In general, a number greater than 0.7 is considered acceptable (Pinto, Fogliatto and Qannari, 2014). In this research, the highest value of Cronbach’s for the independent variable Business Strategy was 0.891, suggesting that the data are reliable and consistent for further analysis. Due to the satisfactory findings of the Cronbach’s test, the compiling of the total variables utilized in the study may be deemed acceptable. In the end, the analysis’s findings may be relied upon, allowing the hypothesis testing to continue.

Table 2 shows the correlation analyses of the study variables. The correlation analysis demonstrates that all variables have a positive association. Based on the results, the individual factors in business strategy and administration are anticipated to have a considerable link with performance indicators.

In this work, linear regression analyses were used to assess hypotheses. The number of company workers was introduced as a control variable in the regression analysis, which tried to determine the probable dependency and association between other variables. Table 3 shows the findings of the regression analysis related to sustainability performance.

Statistically, the sustainability implementation model was significant (p = 0.000). The value of R² indicates that the strategic sustainability can explain 37.1% of the difference in sustainability performance. Furthermore, the model shows that strategic sustainability in the business strategy has a substantial impact on sustainability implementation (β = 0.190, p = 0.021). Thus, we discovered evidence for the H1 hypothesis. The sustainability performance model did not place emphasis on strategic sustainability in management (β = 0.054, p = 0.354). Thus, the H2 hypothesis was rejected. These findings indicate that the more business strategy attempts and activities, the greater sustainability implementation, and therefore, the greater the business strategy competence, the greater the sustainability performance. The model was influenced by the size of the company, as assessed by the number of workers. The fewer workers there were, the greater the impact of business strategy on the sustainability performance model. In conclusion, the findings indicated that a company’s likelihood of achieving superior sustainability performance increased with the quality of its business plan.

Our study explored the relationship between strategic sustainability and business performance in the context of real estate. Our findings strongly support the hypothesis that integrating sustainability principles into a real estate business strategy significantly enhances the successful implementation of sustainability initiatives (H1). This underscores the pivotal role of business strategy in driving sustainability performance. However, the hypothesis that incorporating sustainability practices into real estate management has a direct and positive influence on sustainability measures (H2) was not confirmed. This suggests that while business strategy is a key driver of sustainability success, the impact of sustainability initiatives within management processes may be more complex and contingent upon various factors. In conclusion, our research underscores the need for a strategic approach to sustainability within the business strategy and careful consideration of the implications of sustainability practices within the real estate management.

Strategic sustainability in business strategy has a beneficial influence on sustainability performance according to the findings. These findings support and elucidate the findings of previous research that emphasize the importance of business strategy. A company may merge the Corporate Sustainability and Business Strategy perspectives into a unified plan by integrating sustainability concepts into its main business. With an incorporated strategy, a business may take a strategic management perspective on sustainability matters by using, for instance, sustainability issues as a source for innovation and to bolster the company’s competitive edge (Manninen and Huiskonen, 2022).

Sustainability in management does not directly influence sustainability performance. Previous study has also shown contradictory findings indicating that sustainability initiatives may bankrupt a company due to greater expenditures and stringent restrictions.

Despite substantial prior research on strategic sustainability initiatives, very few studies have examined the link between strategic sustainability and intangible value as it relates to sustainability performance. To add to the research gap, the current study identified two characteristics of strategic sustainability, business strategy, and management and produced a research model describing their relationship with sustainability performance. The model was developed using information from 150 respondents in various real estate sector jobs. The primary repercussions are listed below.

Most studies have seen strategic sustainability as a unidimensional notion. In contrast, this research revealed that each component of strategic sustainability has distinct implications on the sustainability performance of a company. This implies that strategic sustainability elements must be theoretically and practically separated. This research indicated that a planned methodology for sustainability is a crucial success factor for sustainability. Surprisingly, strategic sustainability in business strategy has a significant influence on sustainability performance, but strategic sustainability in management has minimal impact.

The following are the consequences of the study results for management practice. With the help of the research technique and conclusions, real estate companies can enhance their strategic viability and organizational performance.

The main conclusions enhance understanding of the most valuable strategic sustainability aspects while attempting to improve sustainability performance. Since the data indicate that business strategy is the primary driver of sustainability performance, managers should accelerate the development of business strategies to boost company performance.

This study has the following limitations that present opportunities for further research: Then, the sustainability performance strategic elements were examined. Future research may create and assess the impact of other strategic sustainability aspects on firm success. The link between strategic sustainability characteristics and corporate success can be mediated by a number of factors, such as impact of market form, external cooperation or digitalization, on the link between strategic sustainability characteristics and firm performance. Finally, the companies that responded were located in Latvia. Further research may analyze the links between the study’s variables in different locations.