ABSTRACT
This paper investigates the relationship between sustainability and financial performance using a sample of G7 firms from 2004 to 2020. We find a positive bidirectional relationship that firms with better sustainability performance are more profitable in the future and firms with better financial performance have higher subsequent sustainability performance. In addition, we test how two major crises (the financial crisis and the COVID-19 pandemic) affect the sustainability-financial performance relationship. Firms with better sustainability performance are hit harder on their financial performance, but the benefits of financial performance on sustainability are strengthened during the financial crisis. During the ongoing COVID-19 crisis, firms with strong sustainability performance have been more resilient, and their financial performance has dropped less than firms with poor sustainability performance. However, the benefits of profitability on sustainability are weakened. Our results suggest that sustainability provides “insurance”-like protection against economic downturns during COVID-19 and mature sustainability offers economic benefits but not early-stage sustainability. It expands the contingency perspective of sustainability–financial performance relationship to crisis management. © 2022 ERP Environment and John Wiley & Sons Ltd.