Abstract
Motivated by inconclusive findings on the sustainability-performance relationship, this study focuses on the question of whether sustainability should be viewed as a financial burden or a firm performance catalyst. More specifically, this study aims to explore the crucial yet under-examined role of quality management in the sustainability-performance relationship. However, unlike previous studies that narrow their focus to only a subset of quality management practices subsumed under one banner, such as TQM or lean, this research advocates for the integration of multiple quality management practices to cultivate “quality management diligence”, namely, a rigorous and disciplined mindset to ensure that quality is integrated into every facet of a firm. Drawing on a panel of 1876 European firms with 16,901 firm-year observations over the period of 2003-2023, panel data regression is employed to empirically examine the effect of quality management diligence on sustainability and their subsequent impacts on firm performance. The empirical findings indicate a positive relationship between quality management diligence and the adoption of environmental/social sustainability practices and between the adoption of environmental/social sustainability practices and firm performance. Our results also confirm the mediating role of sustainability in the relationship between quality management diligence and firm performance.