Unraveling the Complex Interplay of Sustainability, Investments, and Economic Indicators

Abstract

The concept of sustainability, both in strong and weak forms, has been evaluated through methodologies like the Human Development Index and the Index of Sustainability Development. While the strong form emphasizes the irreplaceable nature of natural capital, the weak form has been often critiqued for its operational ambiguity, even amidst international conservation agreements. Meanwhile, the seventeen Sustainable Development Goals have been grouped into categories based on their influence being positive or negative. Multinational companies’ investments, both internal and external, play a vital role in balancing competitiveness and addressing externalities in various host communities. This research primarily focuses on understanding the intricate relationship between human development, concentration indices, sustainable development, investment, and gross domestic product (GDP). In this research, we use an econometric methodology based on maximum likelihood estimation to control for heteroskedasticity effects of the proposed models. The main results indicate that factors such as the level of industrial concentration, human development, and GDP have a significant impact on the sustainability indices of the countries of the research.

1. Introduction

Over the past century, the primary objective of most corporations has been to maximize economic gains, catering to the interests of their stakeholders. However, beginning in the 1970s, society began to recognize that the prevailing standards up to that point were no longer suitable, as they were causing environmental and social degradation [1]. This was because the traditional model excessively used resources with the sole interest of maximizing profits, regardless of the costs involved in this. As [2] asserts, the socially stipulated norms for organizations up until the mid-1970s allowed companies to engage in activities where the only concern was profit.

Furthermore, Ref. [2] states that business strategies focused solely on economic concerns began to lose credibility because they were no longer socially acceptable. This led organizations to seek new strategies to meet the demands set by a new context centered on social and environmental concerns. Consequently, companies found themselves compelled to innovate with new business models to regain the trust of their clients and stakeholders. This shift has occurred as companies have sought new alternatives to meet the needs of humanity without compromising future generations in the face of significant changes in the value systems of the social, economic, and political environments in which they operate.

The concern regarding a company’s interaction with its environment has become a significant consideration for its executives; contingency theory [3] states that an organization’s effectiveness arises from the relationship between situation and structure, and its alignment with the environment. In other words, it is crucial to implement a system that meets social needs without significantly compromising the financial stability of businesses. As a result, organizations that want to continue to succeed in an ever-evolving marketplace need to rethink their existing business models and place greater emphasis on innovation in sustainability [4]. This transformation seeks to comprehensively tackle challenges in social, ethical, environmental, and governance realms, simultaneously boosting financial outcomes and generating value for shareholders [5].

The concept of sustainability emerges here, focusing on the efficient and judicious management of existing resources. Its goal is to enhance the current population’s well-being without jeopardizing the quality of life for future generations (United Nations, 1987). At its core is the pivotal challenge of transforming societal patterns of consumption and production [6]. In this way, according to [7], in their research, four distinct interpretations of ’sustainability’ were identified, each with its own implications: (i) as a set of socio-ecological criteria guiding commercial actions; (ii) as an embodiment of human aspirations achieved by merging social and environmental aims within a designated framework; (iii) as a tangible or observable phenomenon in specific socio-ecological systems; and (iv) as a framework integrating socio-environmental aspects in the examination of activities, processes, or human-made products. The focus of this research centers on sustainability as a human aspiration actualized through the alignment of social and environmental goals in a selected reference system.

Therefore, this research focuses on the relationship between the variables of human development, concentration indices, investment, and gross domestic product (GDP) with the Sustainable Development Index through the Sustainable Development Goals.

The rest of the material is divided into several parts. Section 2 is a literature review which elaborates on sustainable development and the variables under investigation. Section 3: presents the materials and methods section, which details the data used in the research and provides descriptive statistics for the primary variables studied. Section 4 presents the results, the models constructed, and interprets the results specific to each model. In Section 5, the discussion shows the analysis, with an emphasis on scientific novelty; and Section 6: presents the conclusions, where the implications and interpretations of the results are thoroughly explored.

2. Literature Review

The application of the concept of sustainability has fostered an innovative perspective that considers the relationship between humans and their environment through its preservation and balance with social and economic factors. It is important to highlight that sustainability is fundamentally approached through two perspectives: environmental economics, rooted in neoclassical economic thinking; and ecological economics, which offers an eclectic viewpoint drawing upon premises from various disciplines including economics, biology, ecology, and sociology. Various organizations focused on sustainability aim to bring together key international stakeholders to discuss and design the best ways to incorporate and adapt sustainable measures across various entities, minimizing disruptions to both business operations and natural resources. The United Nations Climate Change Conference (COP26) in Glasgow, which convened 120 global leaders and attracted more than 40,000 attendees, resonates with this perspective [8] to address various global crises currently faced regardless of their business sector or activities. This suggests that sustainability is a more intricate approach to fostering positive relationships with local communities and the environment, in addition to maintaining the profitability of business transactions [9].

Corporate sustainability has a direct impact on a company’s market positioning and serves as a competitive and differentiating advantage. This is achieved by implementing strategies that focus on an organization’s cultural ethos to generate a positive societal impact with processes that benefit employees, customers, the environment, and the community at large [10]. It is widely recognized as the integration of traditionally perceived sustainable development within a business framework. This concept is embodied in an index that evaluates opportunities and manages risks across three dimensions: economic, environmental, and social [11].

Furthermore, when examined from a business perspective, sustainability emerges as an opportunity for change and transition toward new ways of fulfilling needs. It encourages novel means of societal engagement, business development, and growth in a competitive environment, where the significance of environmental considerations becomes increasingly evident in short-, medium-, and long-term corporate decision-making. Other scholars assert that sustainable development must maintain a balance across three fundamental dimensions: social, economic, and ecological or environmental. This ensures adherence to the ethical and social objectives of development and promote efficient resource management and planning, thereby sustaining life-support systems. This corresponds with the prudent adoption of sustainable business models by companies, aimed at harmonizing their economic goals with sustainability aspirations. Such an approach ensures mutual advantages for all stakeholders involved [12].

Moreover, various approaches exist within sustainable business models, each tailored to different industries, as each organization presents unique challenges. Therefore, the appropriate sustainable model must be chosen to meet specific objectives and goals. A few overarching orientations of sustainable models are detailed below:

The innovation-centric approach in business models encompasses value creation, selection of value opportunities, and prototyping of value propositions. Incorporating design thinking into the innovation process aids in creating additional value forms and includes stakeholders previously overlooked in the value proposition. Consequently, this value creation process helps companies enhance their performance while becoming more sustainable [13].

In the context of an innovative paradigm, termed the value triangle, for sustainable business models, essential constituents prominently encompass societal aspects, encompassing both the natural environment and the interests of future generations. This framework delineates three distinct categories of value, which are co-created and co-delivered: public, partner, and customer value. The application of the value triangle in shaping business models provides managers with a comprehensive tool to comprehend, scrutinize, and appraise their business strategies through the lens of the three pivotal dimensions of sustainability: economic, social, and environmental, in an integrated manner [14].

From the viewpoint of market management, the objective is to progress from a foundational understanding based in both theory and practice, assisting organizations in moving towards a more robust framework for strategic sustainable development (FSSD). This framework clearly delineates the key components necessary for aligning business operations with sustainability performance goals [15]. To reinforce the notion that there is no universal solution for crafting sustainable business models (SBMs), this study examines multiple cases in eleven organizations across different industries in Brazil and the UK. The results suggest that SBMs are not about discarding traditional business approaches, but rather enhancing them with a deeper axiological and systemic perspective. Specifically, the study identifies three key aspects from the case studies that support integrating sustainability into the value creation and delivery system of the framework for strategic sustainable development (FSSD): (1) aligning business objectives with employees’ values and beliefs; (2) a distinct and proactive commitment to sustainability; and (3) the necessity for systemic alterations to facilitate effective sustainability in business models.

The theory of entrepreneurial action, posited as an alternative to traditional entrepreneurship theory, occupies a critical position in the framework of sustainable business innovation. Insights garnered from entrepreneurial actions offer enhanced clarity in comprehending the methodologies for cultivating and instituting ventures that are both innovative and sustainable [12].

The authors in [16] mention that the orientation of sustainable supply chain management (SSCM) has led to an overall reshaping of incoming and outgoing supply chains, setting up an integrated supply chain where a new sustainable business model is configured. Ref. [17] asserts that the final version of the business model is based on 12 building block elements that a design entrepreneur would encounter in building a sustainable business.

A viable business model that addresses the identified conflict is embodied by the circular economy. This model is underpinned by various schools of thought and theoretical frameworks that challenge the prevailing linear economic systems predicated on the presumption of infinite resources. One of the pioneering thinkers credited with shaping the concept of the circular economy is Kenneth Boulding. In 1966, Boulding envisaged an economy in space functioning through the regeneration of its initially limited stock of inputs and the recycling of waste. The concept of the circular economy has since undergone significant evolution, garnering recognition among policymakers, scholars, and the business sector regarding the imperative of transitioning towards an economic model where materials and energy derived from discarded products or by-products are reintegrated into the economic system. From an environmental perspective, the adoption of a more circular approach is anticipated to contribute to the mitigation of emissions, curtailment of resource depletion, and reduction of pressures on global ecosystems [18].

According to [19], the concept of a circular economy revolves around restorative and regenerative systems of production and consumption. These systems strive to maintain the utmost utility and value of products, components, and materials within both technical and biological cycles for extended periods. Consequently, the circular economy offers various mechanisms for creating value, independent of finite resource consumption, waste, and environmental impact. This approach serves as a pathway towards greater sustainability. In a world increasingly challenged by climate change, unplanned demographic growth, and dwindling resources, the urgency to prioritize sustainability has impacted nearly every sector [20].

The implementation of sustainability, since every organization is distinct, takes on different forms, as asserted by the case study by [21]. This implies that leaders might more effectively tackle the integration challenges intrinsic to strategic sustainable development, thereby hastening advancements in these initiatives. The authors emphasize that sustainable models do not begin anew but rather adapt to pre-existing organizational tasks, enhancing the value of the activities carried out.

One of the problems that can be seen in the interior of countries is that a narrowly focused approach in policy formulation may lead to what is referred to as sustainability arbitrage. This phenomenon involves a gradual transfer of climate-change-inducing activities from public entities to private firms [22]. Additionally, according to [23], the issue of attention management is highlighted as a significant obstacle in the shift towards environmentally sustainable development trajectories. Additionally, to encompass all sustainability challenges and address the upper tiers of the waste hierarchy, life cycle assessments of waste management must consider the manufacturing and usage phases of products that eventually become waste [24].

In different industrial sectors, such as health [25], the mobility and transport industries [26], technology [27], fashion [16,17], manufacturing [28], energy [29,30], and agri-food [31,32], sustainability is correlated with the implementation of structural changes to enhance energy efficiency.

From an industrial concentration and competition perspective, this comparison is narrow and serves as a reference for policy-making. The study results of [33], in the context of policy development, suggest that an emphasis should be placed on the political and legal/regulatory dimensions of environmental policy. This includes concentrating on the public service aspect of demand-side policy. For [34], the research results show that firms exhibiting strong governance tend to utilize excess cash more sparingly on internal investments and diversification in competitive industries. Moreover, it is suggested that effective management of surplus cash, guided by robust governance, results in improved business performance, particularly in less developed economies.

According to [35], sustainable development mandates that the growth strategies fulfilling the current generation’s needs should not compromise the ability of future generations to meet their own needs. This concept necessitates not only the sustainability of natural resources and the environment, but also stresses the importance of sustaining the individuals within a company, its community, and its governing bodies.

Concerns about social and environmental issues offer brands an opportunity to connect more profoundly with their consumers, thereby enhancing their competitive edge and sales advantage [36]. According to [37], a sustainable company would be capable of making profits while safeguarding the social and environmental resources it uses as inputs. Such a company would likely succeed and thrive for generations. Another significant point raised by [38] is that corporations must be concerned about ethics, as a company’s ethical reputation is a valuable intangible asset that will influence the market price of its stocks [11]. Moreover, proper sustainable development allows organizations access to numerous international markets, as well as enhanced growth and development opportunities within them [39].

Sustainability can be assessed through various indices and methods. In the context of markets and investor valuation, ESG/sustainable indices are prominent, as highlighted by the S&P Dow Jones Indices [40]. The growing global need for responsible investing is fueling demand for transparency in environmental, social, and governance (ESG) factors, which are crucial for benchmarking and tradable indices underpinning investment portfolios and other financial instruments. Conversely, the 2030 Agenda for Sustainable Development, unanimously adopted by United Nations Member States in 2015, offers a collective road map for global peace and prosperity. Central to this agenda are the 17 Sustainable Development Goals (SDGs), representing a pressing call to action for all nations, whether developed or developing, to collaborate in a global partnership. The Sustainable Development Goals (SDGs) [41] emphasize the integration of strategies for global sustainability. These strategies focus on eradicating poverty and deprivation, advancing health and education, reducing inequality, and promoting economic growth, while concurrently addressing climate change and conserving oceans and forests. The SDGs highlight the interconnectedness of these objectives in pursuit of a sustainable and equitable global future. According to [42], one method of assessment involves examining the application of the SDGs. The research indicates that SDG reporting varies for companies based in countries with sustainability regulations and those with better SDG performance ratings. Contrary to initial expectations, it is found that companies in shareholder-oriented countries report on SDGs more extensively than those in stakeholder-oriented countries. Additionally, the study reveals that companies in developing nations tend to have higher levels of company-specific SDG reporting compared to their counterparts in developed countries. Furthermore, the United Nations employs the SDG Index as a metric to gauge progress in achieving the 17 development goals. This index can be interpreted as a representation of the extent to which the SDGs are being fulfilled, where a score of 100 signifies complete achievement.

For [43], their research reveals that the degree to which the Sustainable Development Goals (SDGs) are integrated into non-financial information systems is influenced, in descending order of impact, by institutional pressures at the national level, the size of the company, and incentives linked to financial analyst monitoring and investor demands, as well as the specialization and size of the board.

For [44] the SDGs, succeeding the MDGs (Mundial Development Goals), aim to foster global betterment by 2030, focusing on inclusive development. A major obstacle, especially in developing nations, is securing sufficient funding. Presently, financing, predominantly from ODA (overseas development assistance) and public sources, falls significantly short of the requirements. Private sector contributions, despite their vast potential to accelerate SDG progress, are minimal. Challenges impeding advancement include inadequate stakeholder collaboration, communication, and commitment; scarcity of timely, accurate data; deficient planning and regulatory frameworks; and international development disparities. In relation to the results economics of the companies, the research of [45] demonstrated a positive correlation between the implementation of sustainability practices and improved corporate financial performance.

According to [46], the concept of strong sustainability emphasizes the importance of preserving natural capital, akin to the ecological footprint concept, and surpasses the criteria of weak sustainability. This is because natural capital is largely irreplaceable for promoting sustainable human development. The Ecological Footprint Biocapacity Index (EFBI) that has been developed is utilized in conjunction with other components of the UNDP’s Human Development Index (HDI) to create the Sustainable Human Development Index (IDHS).

A blend of the evaluation methodologies was used by [47], integrating measures like the Human Development Index and the ecological footprint, to create CompasSus. This framework is built upon the notion of the highly complementary operational concepts of sustainability, particularly weak and strong sustainability, which are frequently viewed as contradictory. Despite progress in the sustainable development framework, as acknowledged in international agreements for nature conservation and the execution of national sustainability policies, there still exists a lack of clarity in the practical application of the sustainability concept.

According to [48], the seventeen Sustainable Development Goals (SDGs) can be classified into six distinct categories. This categorization is based on their role in either increasing positive externalities like knowledge, wealth, or health, or reducing negative externalities such as the over exploitation of natural resources, social cohesion degradation, or excessive consumption. The authors suggest that internal investments by multinationals in their subsidiaries within host countries, aimed at boosting competitiveness, are crucial in addressing local externalities. On the other hand, external investments in host communities, intended to counteract underdevelopment, are perceived as creating competitiveness externalities for these subsidiaries. This categorization helps in clarifying the relationship between the various variables explored in this research [48].

Table 1. Variables used in the literature that relate to sustainability indices.

Variable	Reference	Effect
Human Development	[46,47,49,50]	Positive
Concentration Indices	[33], [16,25,26,27], [17,28,29,30,31,32]	Negative
Foreign Direct Investment	[39,43,51,52]	Negative
GDP	[8,34,35]	Positive
Population	[20,53]	Negative
Sustainability Development Goals	[42,43,44]	Positive

show the variables studied in this research, considering an analysis of the research of the different authors.

Table 1 lists the variables, the authors who mention them in their research and, in addition, the impact of the variable on the sustainability index, taking into account the Sustainable Development Goals.

3. Materials and Methods

For the analysis, we will use data obtained from The Sustainable Development Report of the United Nations and World Bank, obtained from https://dashboards.sdgindex.org/explorer (accessed on 25 October 2022) and from https://databank.worldbank.org/ (accessed on 25 October 2022), respectively. The Sustainable Development Report data corresponds to the official information used by the United Nations to develop policies and stimulate the achievement of sustainable development objectives in the world. On the other hand, the information of the World Bank is used as a compilation of information from its member countries that is intended to be shared in order to reduce poverty and generate prosperity in the member countries.

Table 2. List of countries included in the research.

Country	Country	Country	Country
Afghanistan	Cuba	Lebanon	Portugal
Albania	Cyprus	Lesotho	Qatar
Algeria	Denmark	Lithuania	Romania
Angola	Djibouti	Luxembourg	Rwanda
Argentina	Dominican Republic	Madagascar	Sao Tome and Principe
Armenia	Ecuador	Malawi	Saudi Arabia
Australia	El Salvador	Malaysia	Senegal
Austria	Estonia	Maldives	Sierra Leone
Azerbaijan	Eswatini	Mali	Singapore
Bahrain	Fiji	Malta	Slovenia
Bangladesh	Finland	Mauritania	South Africa
Barbados	France	Mauritius	Spain
Belarus	Gabon	Mexico	Sri Lanka
Belgium	Georgia	Moldova	Sudan
Belize	Germany	Mongolia	Suriname
Benin	Ghana	Montenegro	Sweden
Bhutan	Greece	Morocco	Switzerland
Bolivia	Guatemala	Mozambique	Tajikistan
Bosnia and Herzegovina	Guinea	Myanmar	Tanzania
Botswana	Guyana	Namibia	Thailand
Brazil	Honduras	Nepal	Togo
Bulgaria	Hungary	Netherlands	Trinidad and Tobago
Burkina Faso	Iceland	New Zealand	Tunisia
Burundi	India	Nicaragua	Turkmenistan
Cambodia	Indonesia	Niger	Uganda
Cameroon	Iraq	Nigeria	Ukraine
Canada	Ireland	North Macedonia	United Arab Emirates
Central African Republic	Israel	Norway	United Kingdom
Chad	Italy	Oman	United States
Chile	Jamaica	Pakistan	Uruguay
China	Japan	Panama	Uzbekistan
Colombia	Jordan	Papua New Guinea	Vietnam
Comoros	Kazakhstan	Paraguay	Zambia
Costa Rica	Kenya	Peru	Zimbabwe
Cote d’Ivoire	Kuwait	Philippines
Croatia	Latvia	Poland

shows the countries that have been included in the research, corresponding to a total of 142 countries with information available for the research, from all five continents.

The data to be used in this research are supported by the literature review, which describe a functional relationship defined as

$$Y_i=f(x_{1i},x_{2i},x_{3i},x_{4i},x_{5i},x_{6i})$$

(1)

where Y corresponds to the overall sustainability index that measures compliance with the Sustainable Development Goals of the United Nations; $x_1=concentration$ corresponds to industry concentration as measured by the Herfindahl–Hirschman index which measures the relative size of firms relative to the size of the industry to which they belong, as mentioned by [54,55]; $x_2=HDI$ corresponds to the Human Development Index, developed by the United Nations to measure the development of societies from a multifactorial perspective, as discussed in [49,50]; $x_3=ln\left(FDIinflows\right)$ corresponds to the natural logarithm of inflows of foreign direct investment, serving as a measure of the impact of external investments on the recipient country; $x_4=ln\left(FDIoutflows\right)$ corresponds to the natural logarithm of outflows of foreign direct investment, serving as a measure of the impact of capital outflows on sustainable development. The role of FDI in sustainable development has been discussed in [51,52]; $x_5=ln\left(GDP\right)$ corresponds to the natural logarithm of GDP, which allows us to better compare between countries with significant differences in annual output, a variable that is fundamental in development and must be reviewed in terms of its impact in the context of sustainable development [56,57]; $x_6=ln\left(Population\right)$ corresponds to the natural logarithm of the population, which allows us to better compare countries with large populations to those with smaller populations; as an example of how this variable has been approached in the research of sustainable development, we can mention [53].

When analyzing the descriptive statistics of the main variables under study, as shown in

Table 3. Descriptive statistics of the main variables of the study.

Variable	Mean	Std. Dev.	Min	Max
Sust. Index	65.31	10.36	37.29	86.56
Concentration	0.14	0.12	0.03	0.91
HDI	0.70	0.16	0.26	0.96
ln(GDP)	24.62	2.12	18.15	30.78
ln(FDI inflows)	19.76	5.52	0.00	27.32
ln(FDI outflows)	1.26	4.95	0.00	26.52
ln(population)	16.06	1.68	11.88	21.08

, we can observe a significant source of variability in the studied variables, with the industrial concentration index and the natural logarithms of foreign direct investment inflows and outflows standing out as some of the factors exhibiting greater heterogeneity. One element to consider is the case of the natural logarithm of foreign direct investment outflows, which has a relatively low mean level when compared to the inflows.

Next, we present Figure 1, which serves as a complement to the descriptive statistics. In the upper triangular part, we can observe the correlation between the variables under study, while in the lower part, we display a scatter plot to examine the relationships between the variables. Along the diagonal, we have histograms of the variables. The main elements to highlight are the relatively high correlations of the independent variables with the sustainability index, justifying their inclusion in the regression model, except for the natural logarithm of population, which exhibits low correlations but will be tested to verify the existence of a functional relationship. Elements of the analysis to be cautious about are the relationship between HDI and GDP, as well as the relationship between FDI outflows and GDP, and GDP and population size, which display high correlations that may lead to issues of multicollinearity and, consequently, parameter estimation problems.

To establish the regression model, based on the functional form defined in Equation (1), we define the response variable in terms of the explanatory variables, as well as modeling the variance in the error term, by means of

$$Y_i=X_i\beta +{ϵ}_i$$

(2)

$${\sigma }_i^2=exp\left(Z_i\alpha \right),$$

(3)

where $Y_i$ corresponds to the dependent variable of the sustainability index; $X_i=(x_{1i},x_{2i},x_{3i},$$x_{4i},x_{5i})$ corresponds to the vector of observed variables, which are denoted as $x_{1i}=concentratio{n}_i$, $x_{2i}=HD{I}_i$, $x_{3i}=ln\left(GD{P}_i\right)$, $x_{4i}=ln\left(FDIInflow{s}_i\right)$, $x_{5i}=ln\left(FDIOutflow{s}_i\right)$; $Z_i=(z_{1i},z_{2i},z_{3i},z_{4i},z_{5i})$ corresponds to the vector of observed variables that can affect the variance, which are denoted as $z_{1i}=concentratio{n}_i$, $z_{2i}=HD{I}_i$, $z_{3i}=ln\left(FDIInflow{s}_i\right)$, $z_{4i}=ln\left(FDIOutflow{s}_i\right)$, $z_{5i}=ln\left(GD{P}_i\right)$, $z_{5i}=ln\left(populatio{n}_i\right)$; $\beta$ and $\alpha$ correspond to the vectors of parameters associated with the variables x and z, respectively. In addition, the models consider parameters associated with the fixed effects of time and the different countries included in the sample.

In the model described in Equations (2) and (3), ${ϵ}_i$ corresponds to the error term of observation i, which is assumed to come from a Gaussian distribution centered at zero and independent of the other error terms. On the other hand, the variance ${\sigma }^2$ depends on the Z control variables defined in Equation (3), which allows us to control for the effect of heteroskedasticity that can be observed in the regression model. When modeling the variance, we break the classical assumptions of constant error variance, allowing us to understand the variability in the phenomenon as a function of the independent variables. This approach allows us to have models that can be adapted to variations in the independent variables when heteroskedasticity is present.

In this research we will use a methodology based on maximum likelihood estimation in order to control for possible heteroskedasticity effects (see [58,59]), which will be tested to see the best modeling option.

4. Results

The first model corresponds to a model with the following explanatory variables: (i) industry concentration index; (ii) Human Development Index; (iii) natural logarithm of foreign direct investment inflows; (iv) natural logarithm of foreign direct investment outflows. The second specification additionally incorporates the following control variables: (v) natural logarithm of gross domestic product; (vi) natural logarithm of population. The third specification considers the following variables: (i) industry concentration index; (ii) Human Development Index; (iii) natural logarithm of foreign direct investment inflows; (iv) natural logarithm of foreign direct investment outflows. We also include year and country fixed effects, which allows us to control for global and country-specific effects and avoid possible specific shocks that may alter the regression analyses. The fourth specification additionally incorporates the following control variables: (v) natural logarithm of gross domestic product; (vi) natural logarithm of population. For all models, data from 2000 to 2021 are considered.

Table 4. Parameter estimates and t-statistics of the model considering heteroskedasticity.

	Model 1	Model 2	Model 3	Model 4
Variable	Sust. Index	Sust. Index	Sust. Index	Sust. Index
Concentration	−2.457 ${}^{***}$	−1.850 ${}^{***}$	−1.806 ${}^{***}$	−2.040 ${}^{***}$
	(−4.12)	(−3.61)	(−5.14)	(−5.70)
HDI	57.57 ${}^{***}$	77.82 ${}^{***}$	33.43 ${}^{***}$	29.41 ${}^{***}$
	(113.94)	(65.09)	(23.91)	(18.52)
ln(FDI inflows)	0.0448 ${}^{*}$	0.0247	0.00244	0.00197
	(2.42)	(1.44)	(0.50)	(0.44)
ln(FDI outflows)	−0.00787	−0.00709	0.00534	0.00317
	(−0.76)	(−0.72)	(1.78)	(1.07)
ln(population)		2.123 ${}^{***}$		0.322
		(16.26)		(1.54)
ln(GDP)		−2.112 ${}^{***}$		0.551 ${}^{***}$
		(−17.25)		(5.62)
Constant	24.12 ${}^{***}$	28.01 ${}^{***}$	24.63 ${}^{***}$	8.446 ${}^{*}$
	(55.13)	(30.15)	(36.12)	(2.33)
		$ln\left({\sigma }^2\right)$
Concentration	0.0839	−0.807 ${}^{**}$	0.217	0.0645
	(0.29)	(−2.91)	(0.74)	(0.23)
HDI	2.367 ${}^{***}$	−4.817 ${}^{***}$	−2.146 ${}^{***}$	−3.414 ${}^{***}$
	(11.45)	(−9.19)	(−10.00)	(−5.79)
ln(FDI inflows)	−0.0223 ${}^{***}$	−0.0136 ${}^{*}$	−0.0369 ${}^{***}$	−0.0259 ${}^{***}$
	(−3.72)	(−2.34)	(−6.04)	(−4.25)
ln(FDI outflows)	−0.00107	0.000945	−0.00623	−0.00511
	(−0.28)	(0.24)	(−1.56)	(−1.22)
ln(population)		−0.705 ${}^{***}$		−0.205 ${}^{***}$
		(−13.08)		(−3.33)
ln(GDP)		0.639 ${}^{***}$		0.116
		(12.17)		(1.89)
Constant	1.515 ${}^{***}$	1.982 ${}^{***}$	2.185 ${}^{***}$	3.287 ${}^{***}$
	(8.12)	(4.55)	(11.52)	(8.20)
N	2638	2637	2638	2637
log likelihood	−7397.918	−7186.9	−3534.9	−3494.7
	Likelihood Ratio Test for $ln\left({\sigma }^2\right)=0$
Prob $>{\chi }^2$	<0.001	<0.001	<0.001	<0.001

t statistics in parentheses. ${}^{*}$$p<0.05$, ${}^{**}$$p<0.01$, ${}^{***}$$p<0.001$.

shows the results of the regression performed. For all models we can observe that the level of industrial concentration is highly significant, with a negative sign, which implies that higher levels of industrial concentration negatively affect the sustainability index. This indicates that a poorly diversified economy is at a disadvantage in achieving the Sustainable Development Goals defined by the United Nations.

The case of the Human Development Index is significant, with a positive sign for each of the models. This result shows that a higher level of development of the country positively affects the achievement of the Sustainable Development Goals. The positive correlation between these variables indicates that a better developed society goes hand in hand with the Sustainable Development Goals, and therefore, the monitoring of the Sustainable Development Goals is an appropriate metric for the achievement of the countries’ development. The HDI index integrates factors such as the population’s educational attainment, life expectancy, and the availability of resources and allows countries’ development effects to be analyzed from a multifactor perspective, assuming multicollinearity costs with other relevant variables of the model such as GDP.

When looking at the natural logarithm of FDI inflows, it is only significant in model 1. The natural logarithm of FDI outflows is not significant for all models and the natural logarithm of population size is only significant in model 2. Finally, the natural logarithm of GDP is significant in models 2 and 4, but with the opposite sign, which may be an effect associated with the fixed effect.

Upon conducting a rigorous evaluation of the likelihood ratio test with the constraint that $ln\left({\sigma }^2\right)=0$, it is discerned that in each computational model under consideration, the p-value consistently falls below the threshold of $0.001$. This empirical result leads to the unequivocal rejection of the null hypothesis, thereby substantiating the superiority of the heteroskedasticity-adjusted model over the ordinary least squares (OLS) model due to the presence of heteroskedasticity in the defined model.

When we analyze the variance we can observe that the Human Development Index has a high level of significance, with a negative sign, which implies that the higher the level of human development the lower the level of variability in the sustainability index of the countries, which reaffirms the strong link between the Sustainable Development Goals and the development of the countries.

The case of the natural logarithm of FDI inflows is significant, with a negative sign for all of them, implying that a higher level of capital openness tends to decrease the variability of the Sustainable Development Index. A similar effect can be observed in the case of the natural logarithm of the population size.

Finally, controlling for the natural logarithm of GDP reveals a significant and positive effect in model 2, suggesting that higher GDP levels are associated with increased variability in the sustainability index. This result underscores the disparate effects that economic growth can have across countries, a factor that should be taken into consideration when formulating national development policies.

When conducting a multicollinearity analysis using the variance inflation factor (VIF) for the model, the concentration variable registers a VIF of $1.09$, HDI has a VIF of $7.34$, ln(FDI inflows) is at $1.24$, ln(FDI outflows) is at $1.46$, ln(population) stands at $9.59$, and ln(GDP) is notably high at $14.19$. Despite the specific concern related to GDP, the overall average VIF ($6.75$) is considered acceptable, so it is preferable to keep the most problematic variable within the model and assume the possible costs of variance in parameter estimation.

5. Discussion

Among the key discussion areas of this research, it is noteworthy that factors having a negative impact on the sustainable development of the countries studied are related to industrial concentration indices and the level of foreign direct investment. Conversely, factors such as the level of human development and economic development as measured by the gross domestic product have a positive impact on the level of sustainable development of the countries included in the research.

The findings mentioned align with the existing literature, suggesting that by embracing foreign investment, domestic industries may enhance their efficiency. This improvement can occur through direct learning, indirect technological and managerial spillovers, or through a process known as churning. Consequently, foreign investment could indirectly boost energy efficiency in the host country by compelling domestic industries to upgrade. However, it is important to note that this research lacks detailed data to specifically identify this mechanism.

In addition, concerning the results of our research, and as a discussion, we can observe that factors such as the level of industrial concentration, human development, foreign direct investment, and gross domestic product have a significant impact over the sustainability indices of the countries of the research. This study offers substantial empirical evidence that, for example, a host country’s environment can benefit from openness to foreign investment. This suggests that economic development and environmental protection need not be mutually exclusive goals for policymakers, provided that environmental standards and policies are effectively set and enforced. The evidence indicates that developing countries achieving a relatively high level of industrialization and structural competitiveness have achieved this by cultivating domestic technological capabilities. These capabilities extend beyond the basic requirements for selecting, adapting, and efficiently utilizing foreign technological inputs.

On the other hand, our findings illustrate the feasibility of connecting two concepts that are typically considered distinct in scholarly literature: human development and sustainability. The key takeaway from these results is that countries with high to very high human development levels are confronted with a dual challenge. Firstly, they must attain strong sustainability by breaking the association between high human development and highly unsustainable development practices. Secondly, they have a role in assisting other nations, especially those with low levels of human development, to initially achieve weak sustainability and, ultimately, strong sustainability.

Despite advancements in the perspective of sustainable development, as evidenced by international agreements for nature conservation and the implementation of national policies oriented towards sustainability, operational ambiguity of the concept remains [60]. According to Jain and [46], the notion of strong sustainability emphasizes the need to maintain a natural capital akin to the ecological footprint. This is superior to a criterion of weak sustainability, as natural capital cannot be largely substituted to promote sustainable human development.

In summary, based on an updated theoretical framework, the present research integrates the relationship between variables of human development, industry concentration indices, foreign direct investment, gross domestic product, and population for the analysis of sustainable development in a set of countries.

6. Conclusions

A study of this nature could contribute new insights into economic and social mechanisms, converging toward more sustainable and inclusive economic development. This could be approached from a "bottom-up" perspective, starting from the individual behavior of people, citizens, consumers, workers, and investors, as well as the collective behavior surrounding businesses. All of this is considered within the context of the group of developed countries analyzed in the study.

Given the existing limitations concerning income and wealth distribution, the study should consider the redistribution of subsidy taxes. This approach would expand the focus beyond issues like income inequality and wealth redistribution to also include the global sustainability of countries, thinking from a "bottom-up" perspective. For example, the implementation of environment-related taxes on products that negatively affect the environment, especially those impacting scarce natural resources, could be considered. Such taxes can enhance environmental quality by incentivizing the manufacturing sector to innovate and adopt efficient technologies or to produce environmentally friendly goods. Thus, ecological taxes play a significant role in achieving sustainable development by discouraging practices that are detrimental to the environment.

Moreover, additional variables and factors that are more complex to measure should be considered in future studies. This would involve turning to new sources of information and supplementing methodologies with qualitative work. Our research points to various strategies that national governments could adopt to maintain global sustainability. Empirical evidence supports the implementation of measures aimed at more energy-efficient processes, promoting renewable sources, and regulatory adjustments to encourage the establishment of clean foreign industries in host countries. To improve ecological effectiveness, responsible government bodies should aim to expand capitalization facilities derived from their productive matrices. This involves intensifying technical efforts to mitigate the scale effect and adopt cleaner technologies. Therefore, it could be beneficial for countries to revise and enhance their global sustainability strategies and institutional frameworks.

A future challenge lies in conducting comparative analyses between different groups of countries with disparate situations in their sustainable development or within the framework of some of the variables considered in the research. Lastly, projecting the various elements analyzed in this article to consider not only the economic development and growth of nations but also aspects such as quality of life, well-being of the citizenry, equity, and the emerging generation of human rights may be relevant in measuring the impact these elements have on the global sustainability of the economy.