The increased focus on corporate sustainability by regulators has intensified interest in the economic relevance of diversity and inclusion (D&I). Using LSEG Data and Analytics D&I Ratings for 567 listed European non-financial firms over 2014–2024, this study examines whether these aspects are associated with firms’ profitability, market valuation and financial stability. The results indicate that stronger D&I, captured through gender and cultural diversity, inclusion policies, people development and workforce controversies, are associated with higher financial performance. This relationship is primarily driven by people development, which reflects a company’s commitment and effectiveness in training and developing its workforce. In contrast, formal alignment with Sustainable Development Goal 10 (SDG 10) - Reduced Inequalities shows no significant association with financial outcomes, consistent with reporting commitments that are largely symbolic relative to substantive actions.
AdamsR. B., De HaanJ., TerjesenS., & Van EesH. (2015). Board diversity: Moving the field forward. Corporate Governance—An International Review, 23(2), 77–82.
2.
AdlerP. S., & KwonS. W. (2002). Social capital: Prospects for a new concept. Academy of Management Review, 27(1), 17–40.
3.
AhernK. R., & DittmarA. K. (2012). The changing of the boards: The impact on firm valuation of mandated female board representation. The Quarterly Journal of Economics, 127(1), 137–197.
4.
AhlstromD. (2010). Innovation and growth: How business contributes to society. Academy of Management Perspectives, 24(3), 11–24.
5.
AltmanE. I. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23(4), 589–609.
6.
AttigN., El GhoulS., GuedhamiO., & SuhJ. (2013). Corporate social responsibility and credit ratings. Journal of Business Ethics, 117(4), 679–694.
7.
BarneaA., & RubinA. (2010). Corporate social responsibility as a conflict between shareholders. Journal of Business Ethics, 97(1), 71–86.
8.
BattagliaF., & GalloA. (2017). Strong boards, ownership concentration and EU banks’ systemic risk-taking: Evidence from the financial crisis. Journal of International Financial Markets, Institutions and Money, 46, 128–146.
9.
BarneyJ. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120.
10.
BerettaV., DemartiniM. C., & TruccoS. (2024). From sustainability to financial performance: The role of SDG disclosure. Measuring Business Excellence, 29, 237–255.
11.
BernileG., BhagwatV., & YonkerS. (2018). Board diversity, firm risk, and corporate policies. Journal of Financial Economics, 127(3), 588–612.
12.
BhagatS., & BoltonB. (2008). Corporate governance and firm performance. Journal of Corporate Finance, 14(3), 257–273.
13.
BhattacharyyaA., & KhanM. (2023). Financial inclusion, corporate social responsibility and firm performance–analysis of interactive relationship. Meditari Accountancy Research, 31(2), 417–440.
14.
BrammerS., & MillingtonA. (2006). Firm size, organizational visibility and corporate philanthropy: An empirical analysis. Business Ethics: A European Review, 15(1), 6–18.
15.
BrickI. E., & ChidambaranN. K. (2008). Board monitoring, firm risk, and external regulation. Journal of Regulatory Economics, 33(1), 87–116.
16.
CarterD. A., SimkinsB. J., & SimpsonW. G. (2003). Corporate governance, board diversity, and firm value. Financial Review, 38(1), 33–53.
17.
ChanL. K., LakonishokJ., & SougiannisT. (2001). The stock market valuation of research and development expenditures. The Journal of Finance, 56(6), 2431–2456.
18.
ChengS. (2008). Board size and the variability of corporate performance. Journal of Financial Economics, 87(1), 157–176.
19.
ChengI. H., HongH., & ShueK. (2023). Do managers do good with other people’s money? The Review of Corporate Finance Studies, 12(3), 443–487.
20.
CostaR., TiburziL., Morales-AlonsoG., CalabreseA., & RosatiF. (2025). SDG walking or washing? A cross-sectoral analysis of business contribution to the SDGs. Business Strategy and the Environment, 34(3), 3561–3576.
21.
CuiH., & MakY. T. (2002). The relationship between managerial ownership and firm performance in high R&D firms. Journal of Corporate Finance, 8(4), 313–336.
22.
D’AdamoI., GastaldiM., & MoroneP. (2022). Economic sustainable development goals: Assessments and perspectives in Europe. Journal of Cleaner Production, 354, 131730.
23.
EcclesR. G., IoannouI., & SerafeimG. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835–2857.
24.
European Commission. (2023). Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34/EU as regards European Sustainability Reporting Standards (ESRS). Official Journal of the European UnionL, 2023/2772, 1–164.
25.
European Union. (2014). Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information. Official Journal of the European Union, L 330, 1–9.
26.
European Union. (2022). Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 as regards corporate sustainability reporting. Official Journal of the European Union, L 322, 15–80.
27.
FarrellK. A., & HerschP. L. (2005). Additions to corporate boards: The effect of gender. Journal of Corporate Finance, 11(1–2), 85–106.
28.
FieldsL. P., FraserD. R., & SubrahmanyamA. (2012). Board quality and the cost of debt capital: The case of bank loans. Journal of Banking & Finance, 36(5), 1536–1547.
29.
FrancoeurC., LabelleR., BaltiS., & EL BouzaidiS. (2019). To what extent do gender diverse boards enhance corporate social performance?Journal of Business Ethics, 155(2), 343–357.
30.
FrancoeurC., LabelleR., & Sinclair-DesgagnéB. (2008). Gender diversity in corporate governance and top management. Journal of Business Ethics, 81, 83–99.
31.
Gallego-SosaC., Gutiérrez-FernándezM., Fernández-TorresY., & Nevado-GilM. T. (2021). Corporate social responsibility in the European banking sector: Commitment to the 2030 agenda and its relationship with gender diversity. Sustainability, 13(4), 1731.
32.
GillanS. L., KochA., & StarksL. T. (2021). Firms and social responsibility: A review of ESG and CSR research in corporate finance. Journal of Corporate Finance, 66, 101889.
33.
HummelK., & SzekelyM. (2022). Disclosure on the sustainable development goals–evidence from Europe. Accounting in Europe, 19(1), 152–189.
34.
JohnsonS. G., SchnatterlyK., & HillA. D. (2013). Board composition beyond independence: Social capital, human capital, and demographics. Journal of Management, 39(1), 232–262.
35.
JunC., QiyuanL., XiaofangM., & ZhangF. F. (2023). Board gender diversity and cost of equity: Evidence from mandatory female board representation. International Review of Economics & Finance, 88, 501–515.
36.
Jurado-CaraballoM. Á., & Quintana-GarcíaC. (2024). Disability inclusion in workplaces, firm performance, and reputation. European Management Journal, 43, 752–763.
37.
KrügerP. (2015). Corporate goodness and shareholder wealth. Journal of Financial Economics, 115(2), 304–329.
38.
LinsK. V., ServaesH., & TamayoA. (2017). Social capital, trust, and firm performance: The value of corporate social responsibility during the financial crisis. The Journal of Finance, 72(4), 1785–1824.
39.
LiouiA., & SharmaZ. (2012). Environmental corporate social responsibility and financial performance: Disentangling direct and indirect effects. Ecological Economics, 78, 100–111.
40.
LozanoR. (2017). Designing a toolkit for the development of dynamic and intentional sustainability strategies. Journal of Cleaner Production, 140, 76–89.
41.
MangenaM., TauringanaV., & ChamisaE. (2012). Corporate boards, ownership structure and firm performance in an environment of severe political and economic crisis. British Journal of Management, 23, S23–S41.
42.
MasulisR. W., & RezaS. W. (2015). Agency problems of corporate philanthropy. The Review of Financial Studies, 28(2), 592–636.
43.
MillerT., & del Carmen TrianaM. (2009). Demographic diversity in the boardroom: Mediators of the board diversity–firm performance relationship. Journal of Management Studies, 46(5), 755–786.
44.
NahapietJ., & GhoshalS. (1998). Social capital, intellectual capital, and the organizational advantage. Academy of Management Review, 23(2), 242–266.
45.
OECD. (2020). OECD business and finance outlook 2020—Sustainable and resilient finance.
46.
OrlitzkyM. (2001). Does firm size comfound the relationship between corporate social performance and firm financial performance?Journal of Business Ethics, 33(2), 167–180.
47.
RichardO. C. (2000). Racial diversity, business strategy, and firm performance: A resource-based view. Academy of Management Journal, 43(2), 164–177.
48.
RichardO., McMillanA., ChadwickK., & DwyerS. (2003). Employing an innovation strategy in racially diverse workforces: Effects on firm performance. Group & Organization Management, 28(1), 107–126.
49.
RobinsonG., & DechantK. (1997). Building a business case for diversity. Academy of Management Perspectives, 11(3), 21–31.
50.
RosatiF., & FariaL. G. (2019). Addressing the SDGs in sustainability reports: The relationship with institutional factors. Journal of Cleaner Production, 215, 1312–1326.
51.
ShaikhI. (2022). Environmental, social, and governance (ESG) practice and firm performance: An international evidence. Journal of Business Economics and Management, 23(2), 302–320.
52.
ShoreL. M., RandelA. E., ChungB. G., DeanM. A., Holcombe EhrhartK., & SinghG. (2011). Inclusion and diversity in work groups: A review and model for future research. Journal of Management, 37(4), 1262–1289.
53.
SilaV., GonzalezA., & HagendorffJ. (2016). Women on board: Does boardroom gender diversity affect firm risk?Journal of Corporate Finance, 36, 26–53.
54.
TajfelH. (1978). Differentiation between social groups. Studies in the social psychology of intergroup relations. Academic Press.
55.
TajfelH., & TurnerJ. (1979). An integrative theory of intergroup conflict. J & A Williams & Sons.
56.
TashevaS., & HillmanA. J. (2019). Integrating diversity at different levels: Multilevel human capital, social capital, and demographic diversity and their implications for team effectiveness. Academy of Management Review, 44(4), 746–765.
57.
TrianaM. D. C., MillerT. L., & TrzebiatowskiT. M. (2014). The double-edged nature of board gender diversity: Diversity, firm performance, and the power of women directors as predictors of strategic change. Organization Science, 25(2), 609–632.
58.
UdayasankarK. (2008). Corporate social responsibility and firm size. Journal of Business Ethics, 83(2), 167–175.
59.
United Nations. (2015). Transforming our world: The 2030 Agenda for Sustainable Development.
60.
van ZantenJ., & van TulderR. (2018). Multinational enterprises and the Sustainable Development Goals: An institutional approach to corporate engagement. Journal of International Business Policy, 1(3–4), 208–233.
61.
WilliamsK. Y., & O’ReillyC. A. (1998). Demography and diversity in organizations: A review of 40 years of research. Research in Organizational Behavior, 20, 77–140.
