Corporate Sustainability and Financial Performance In Latvia, Lithuania And Estonia

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42 respondents completed the survey


CORPORATE SUSTAINABILITY AND FINANCIAL PERFORMANCE IN LATVIA, LITHUANIA AND ESTONIA




















ABSTRACT
Banking sectors all over the globe spend a lot of money, time and effort to create corporate sustainability. However, previous researchers have found no definite evidence that such activities can really create corporate sustainability which will lead to any financial benefits for the banks, especially in the remote places. The aim of this dissertation is to examine the relationship between corporate sustainability and financial performance in Latvia, Lithuania and Estonia. In addition, this paper discusses the elements of corporate sustainability which are; economic, social and environmental elements. The results show that corporate sustainability is best maximized to gain financial benefit more than social and environmental elements in the Baltic banking sector.













Chapter I
Introduction
Corporate sustainability has become a primary subject used to improve financial performance of bank industries across the globe. Aside from generating income for banking institutions, corporate sustainability also aims to give the utmost benefit to its customers and the wider economy while simultaneously avoiding, or at least reducing, any negative effects on society and the natural surroundings. However, there are many challenges in creating and maintaining corporate sustainability. Challenges such as shortage of resources and demographic and climate change call for transformation in many aspects surrounding a specific business industry. Companies deal with these issues at present to stay competitive in future. In finance sector, even major bank institutions that dominate the world of commerce also face these challenges on corporate sustainability.
Specifically in European countries, significant transformations in political and economic systems took place as early as 1900s to support corporate sustainability in bank industry which aimed to get maximum economic growth for all the stakeholders. These changes in political and economic systems intend to stabilize European economy by reorganization and strengthening of the bank industry. Among the countries that went through these changes in political and economic systems are the Baltic States namely Lithuania, Latvia and Estonia. Research shows that corporate sustainability in banking industry of these Baltic States changed from negative to stable. GDP growth will continue to grow by 3.0% in Estonia, 3.8% in Latvia, and 3.2% in Lithuania starting 2013. Moreover, problem loan levels have dropped in many of the Baltic States' larger banks that had severe write-downs during the economic depression (Foster and Harris 2013).
Overview on the Chapters
This paper has six chapters where it begins with a background to the research topic and research objectives. Chapter II has five subsections. Section 1 explains the concept of corporate sustainability to give readers a brief background on the topic. Section 2 discusses the elements affecting corporate sustainability. These elements are economic, social and environmental element discussed briefly in subsections. Section 3 enumerates business models related to corporate sustainability. These models pertain to European Corporate Sustainability Framework (ECSF) and the EFQM Excellence Model. Section 4 illustrates the characteristics of the banking sector in the Baltic States. Lastly, Section 5 of literature review shows the financial performance of Baltic banking sectors from international competitiveness viewpoint.
Chapter 3 talks about the research methods performed for this study. It includes three sections namely Sample, Assumptions and Content Analysis. Chapter 4 discusses the research design and approach of the paper where the writer used both quantitative and qualitative research methods. Chapter 5 shows the results and analysis of the survey performed on 60 respondents who are bank employees from Estonia, Lithuania and Latvia. Chapter 6 is about conclusion and recommendation where it has three subsections; Implications of the Study, Limitations of Study, Conclusion and Recommendation.
Research Objectives
The purpose of this dissertation is to do research on the corporate sustainability and financial performance of bank industry in three Baltic countries such as Lithuania, Latvia and Estonia. The purpose of this analysis is to explore the nature and operation of bank industries from such countries and to assess the impact of corporate sustainability to financial performance of banking institutions in Baltic countries. In particular, the objectives of this research are to:
Explore the elements affecting corporate sustainability
Discuss the business models related to corporate sustainability
Learn the characteristics of the banking sector in the Baltic States
Evaluate the financial performance of Baltic banking sectors from international competitiveness viewpoint
The fundamental point of this study is to discuss economic, social and environmental aspects to the readers and to impart the importance of corporate sustainability in improving financial performance. The outcomes of this study will benefit accounting, management and finance students, professors, and instructors not only in business subjects but also in other related aspects, and the interested readers. This study is significant for the reason that it will give essential information about the early and current phenomenon in the Baltic banking sector. This study also aims to impart the results of survey performed to interested readers such as investors, economists and creditors of banks in the Baltic States. Readers will gain knowledge on how the Baltic banks operate and what aspects contribute to their overall corporate sustainability.
Chapter II
Literature Review
Concept of Corporate Sustainability
Although there are many widely accepted definition of corporate sustainability, organizations differ on their definition of this expression depending upon a company's nature of business. For example, Lins, Wajnberg, Steger, and Somers (2008) define corporate sustainability as social and environmental combination of characteristics into business strategy and operation and stakeholder relations. Hence, this definition suits corporate sustainability for retail or service industries as it considers two external factors that have effect on internal management.
For banking and financial services sector, corporate sustainability is an approach that gives importance to the role of banks in bringing long-term economic progress that is not only financially practical, but also environmentally accountable and socially relevant (Central Bank of Nigeria 2012). This implies that financiers and bank owners are aware of their responsibility to protect and give quality service to the communities and environments in which they work while creating competitive advantage in a highly competitive industry.
Hence, the concept of corporate sustainability is firmly entrenched in a business viewpoint where an organization's socio-environmental responsibility goes hand in hand with its financial goals. It aims for solidity and continuance of the organization. In some situations, accomplishment of socio-environmental responsibilities can give short-term financial benefits to an organization. A sustainable company can assure the interest protection of its stakeholders only when it recognizes and values both internal players such as employees and directors, and external players such as suppliers and clients.
Moreover, corporate sustainability is not a tangible thing or an event that has direct metrics. There are many studies that link corporate sustainability to economic and financial performance. The only study that used the content analysis for corporate sustainability measurement took place in 1979 which tried to check the relationship between corporate sustainability with investors' profit (Reyes 2011). The authors used the investigation of the yearly reports of Fortune 500 firms for the year 1973 and 1974. These companies compare two categories; high and low social involvement and the equal men annual profits on investors. The investigation did not show any significant relationship between the two measures; however companies with high social involvement recorded higher investors' profits.
Other ways used to measure corporate sustainability in short-term economic performance studies consist of status rankings, investing in socially responsible way as well as sign of unique corporate sustainability related conduct (Grove 2007). The author suggests that there was a noteworthy stock price premium for firms with high mean status incidents after conducting regression analysis. This was interpreted as market readiness to pay extra cost for firms that are not likely to get involved in incidents or lawsuits; which carries along the significant threat of losing an investment. Socially responsible investments have come into existence along the high level awareness of corporate sustainability practices.
A lot of researches have been conducted in the effort of trying to prove whether companies which have embraced corporate sustainability practices obtain better financial outcomes. Around 127 studies analyzed the relationship between corporate sustainability and financial performance of companies between the years 1972 and 2002. Approximately half of the studies indicated a constructive relationship between the two aspects (Milne 2009). Seven out of the 127 studies indicated negative relationship between the two while there were studies which depicted inconclusive results. Hence, a relationship exists between corporate sustainability practices and financial based performance, although this relationship is mild and highly dependent on the approach of the study.
Explore the elements affecting corporate sustainability
This subsection discusses three main elements affecting corporate sustainability: economic, environmental and social. It describes what banks are doing now and what they must do in the future. There are also some examples of stories about successful corporate sustainability.
Economic Element
Managing the impact of a bank's corporate sustainability to its products, services and customer relationships is one of the most important aspects in financial sector. However, corporate sustainability in banking sector entails an understanding that excellent financial performance alone is not enough, because environmental safety and social stability must also be of the same priority (SAS 2010). It only means that bank's activities should add to general economic development and strength, with minimal negative effects on the environment or to the public. Given that banks have to give fair, responsible and high-quality services to customers, they must also give healthy working environment for employees and show excellent financial performance to shareholders.
Banking policies such as implementation of low interest rates and the deregulation faction set the economic depression in the early 2000s. Low interest rates allowed easier way to borrow money from the bank which resulted in low personal savings rates and high personal debt rates. It also allowed people to easily purchase real properties and invest in stocks, which caused over-inflation in housing and stocks. On the other hand, financial intermediaries were able to offset each other by offering substitute services due to deregulation policies (Uddin 2010). Consequently, the finance industry became extremely competitive and profit margins were squeezed. Therefore, this strategy to boost economic performance by focusing on financial growth alone resulted to economic crisis as environmental conditions and social stability were not given importance.
Social Factors
A bank can deal with its impact to the society in two ways: first, by getting rid of, or at least minimizing any harmful impacts it may contain; second, by creating proactive solutions to aid communities by its employment practices, fundraising, volunteering and charitable giving (SAS 2010). In eliminating or minimizing any harmful impacts of corporate sustainability, a bank must follow a set of ethical business principles to guarantee that it is a responsible source of banking services to customers that are individuals, small organizations, international companies, public bodies or any other entity. It assures the society that the bank's financing activities do not harm others. Hence, a bank's overall policies should have integrated value for human rights.
On the other hand, proactive solutions aim to ensure employees from diverse race, gender or religion have a healthy environment to work with. It also allows or helps employees to participate in charitable activities to help deprived people and communities. It also encourages suppliers to operate in a socially responsible approach which can eventually expand the support of shareholders for all of these activities.
Many banks all over the world engage in different advocacy such as providing public education and hospital assistance while others simply offer a charitable service of feeding the hungry. For instance, Canada's banking industry has this Food Bank sector where they have centralized depot or clearinghouses that function similar to a non-profit organization with the purpose of collecting and sharing donated food. All of which are free of charge to deprived people. It also assists social agencies which give supplementary food and meals to poor people (Riches 2002). Hence, sustainable banks are also powerful advocates to promote social welfare and eradicate hunger while providing quality banking services.
Environmental Element
The third element of every bank's sustainability outline is the environment which can vary into mining, climate change, pollution and other similar aspects. Banking sectors aim to ensure that their activities will have no negative impact or at least reduce its impact to the environment. Most banks have a set of corporate sustainability policies that promotes environmental safety (SAS 2010). For example, there are banks that decline loan requests to businesses involved in activities that cause undesirable harm to the environment. There are also banks that require their key suppliers to maintain their own sustainability values in relation to promotion of environmental safety.
In 2012, Boston Common Asset Management and other investors filed a shareholder ruling at PNC Financial, a retail bank in Pittsburgh which is a key lender to an environmentally-intensive coal mining company (Benton 2013). JPMorgan Chase, one of the largest lenders to coal utilities, also filed a resolution. These entities asked for information from PNC Financial and the coal mining company about how their plans to deal with climate risk and global warming. Hence, stakeholders of banking sectors also consider corporate sustainability policies of banks to their creditors. It only means that financial performance alone is not enough but corporate sustainability goes hand in hand in promoting economic, environmental, and social welfare.
Discuss the business models related to corporate sustainability
There are two basic business models related to corporate sustainability. These are the European Corporate Sustainability Framework (ECSF) and the EFQM Excellence Model.
2.3.1 European Corporate Sustainability Framework (ECSF)
In 1988, 14 major companies in Europe established the (ECSF) to help in managing complexity and corporate reform which includes sustainability in different business sectors. It is a multi-layer framework with a critical, contextual, situational and active dimension (Zink 2008). Given the active dimension of business realm, individuals and groups must be able to develop and apply values for them to deal with the never-ending challenges. Incorrect actions bridges further attempts, until new strategies come out which results in a series of development stages. For that reason, ECSF model creates a structure that will fit corporate sustainability and corporate responsibility at the same time. Hardjono and Klein (2004) identify the levels of ECSF framework as;
1. Compliance-driven CS (Blue): Customer sustainability at this level consists of providing community safety, within the policy restrictions of legal systems. Additionally, companies might take action to charity and stewardship concerns. This level perceives customer sustainability as duty and commitment delivered in proper conduct.
2. Profit-driven CS (Orange): Customer sustainability at this level is a combination of social, moral and environmental characteristics of business operations and executive department provided it adds to an organization's financial performance. This level promotes customer sustainability if financially beneficial.
3. Caring CS (Green): Customer sustainability at this level balances economic, social and ecological elements, which are all important in banking sector as discussed in other subsections. Initiatives go further than legal conformity and income considerations. This level acknowledges human potential, social duty and environmental responsibilities.
4. Synergistic CS (Yellow): Customer sustainability at this level balances economic, social and ecological elements through a synergistic or teamwork approach with all relevant stakeholders.
5. Holistic CS (Turquoise): Customer sustainability at this level aims to contribute to the quality and prolongation of life of every person and organization, at present and in the future. This level suggests that sustainability is the only choice to achieve these goals since all people and organizations are mutually dependent.
2.3.2 EFQM Excellence Model
The EFQM Excellence Model is a chart that shows nine criteria based on the excellent results with respect to Performance, Customers, People and Society are achieved through Partnerships and Resources, and Processes (Bhatt 2010). The arrows accentuate the active environment of the framework. They illustrate improvement and knowledge to develop enablers that in turn direct to better results. This business model offers sustainable excellence by developing the key elements; quality, efficiency and sustainability. The foundation of this model consists of the Total Quality Management (TQM) concept. As shown in Figure 5, the EFQM Excellence Model has nine criteria which consist of five Enablers and four Results:

Figure 1 EFQM Excellence Model. Retrieved from http://www.hkbc.edu.hk/
Enablers consist of five elements which are important to achieve corporate sustainability (Neergaard and Pedersen 2012):
Leadership - Excellent leaders are the first to follow rules and policies to achieve the organization's mission and vision. They also promote organisational values and systems that are important to achieve sustainable success and apply these through their actions and behaviours.
People – Corporate sustainability also includes the support of companies to their employees' full potential. Excellent organizations promote fairness and equality and they empower workers.
Policy & Strategy - Excellent organizations apply their mission and vision by creating a strategy that focuses on stakeholders taking into account of the market and industry it operates. To create superior strategy, organizations study and implement policies and strategies that aim for corporate sustainability.
Partnerships & Resources - In order to sustain policy and strategy, organizations arrange and administer outside partnerships, contractors and internal resources. Excellent organizations manage partnerships and resources while they balance the present and potential needs of the company, the society and the environment.
Processes – Sustainable companies devise, administer and develop processes in order to completely satisfy, and create growing value for, customers and other stakeholders.
The four results indicate what the intended objectives are (Neergaard and Pedersen 2012):
People Result – a result which pertains to what an organization wants to attain in relation to its people
Customer Result - a result which pertains to what an organization wants to attain in relation to its external customers.
Society Result - a result which pertains to what an organization wants to attain in relation to local and international society
Key Performance Results - a result which pertains to what an organization wants to attain in relation to its planned performance.
Characteristics of banking sector in Baltic States

Figure 2. Foreign Bank Dependence of EU Countries from 2004 to 2009. Retrieved from http://www.imf.org/external/pubs/ft/fandd/2009/09/dataspot.htm
Foreign banks play an important role in the economic status of Baltic States. Figure 1 shows foreign bank dependence of EU Countries including the Baltic States from 2004 to 2009. The Baltic States show a very high dependency percentage with the ratio ranging from 33 percent in December 2003 to a peak of 50 percent in October 2008 (Davico and Moreno 2009). Hence, one of the general characteristics of banking sector in the Baltic States is that it is highly concentrated and mostly foreign-owned. Significant transformations in political and economic systems which took place in 1900s caused the large influx of foreign investors into the Baltic countries' banking markets.
2.4.1. Banking Sector in Estonia
After the economic crisis in 1900s, the number of foreign investors increased in Estonia. Estonia is one of the European countries with highest overall debt. It also has a very low borrowing percentage of public sectors in contrast with other Eastern European countries. These are the results of Estonia's successful macroeconomic reforms such as early privatization, low and simple taxation and successful monetary and banking reorganization (Sõrg and Tuusis 2009). Hence, low-interest rates and high overall financial performance results to high level of indebtedness which is beneficial to banking institutions.

Figure 3 Total assets of Estonian banks in million Euros at the end of March 2002. Retrieved from http://www.suomenpankki.fi/pdf/106154.pdf
In 1990's, Estonia is one of the Baltic countries that restructured its banking system after the global financial crisis. It resulted to significant reduction in the number of banks and large foreign ownership started to occupy this Baltic State. This reformation strengthened the Estonian banking sector and the sum of non-performing loans reduced rapidly (Koivu, 2002). Today, Estonian economy continues to develop further and the size of the banking sector keeps on growing rapidly. As shown in Figure 2, there are seven major banks in Estonia and the two largest of them are Hansabank and Eesti Ühisbank. As discussed earlier, Baltic States has very high share of foreign ownership in its banking sector. Foreign investors own over 85% of the share capital of banks and they manage 98% of total bank assets. These two banks control approximately 80% of the banking sector's total assets.
2.4.2. Banking Sector in Latvia
Latvia's banking sector keeps its tradition in banking sector and enjoys many economic benefits. After the crisis in 2008-2009, the Latvian finance industry is flourishing once more. In 2014, non-resident deposits compose for almost half of all deposits in the banking system or 40% of GDP (Eglitis, Forgo, Krastev, Toming, and Weise 2014). Non-resident banking has privilege on helpful managerial setting, as well as an addition of short-term residence licenses to investors from the Commonwealth of Independent States (CIS) in trade for investments. On the other hand, while the development of non-resident deposits is connected with a gathering of liquid foreign assets, which to some extent lessen the risks of household spill-overs, the rising volume of the sector might characterize a source of susceptibility to external shocks.
The Latvian banking sector differs from Estonia and Lithuania in many ways. For instance, Latvia has more banks within the country than Estonia or Lithuania. At present, there are 22 banks and one branch of a foreign bank that are working in Latvia. These high numbers of bank is most likely because of the ten of the banks that works largely with non-resident transactions. The Latvian banking industry also has secure connections to the Commonwealth of Independent States (CIS) countries. It is part of central business activity for Latvian Banks to collect deposits from the CIS and reinvest them in Western Europe. The non-resident deposits cover as much as 90% of the total deposits of all the small banks which focus on non-resident transactions. Lastly, the Latvian banking sector has many active local banks in the market compared to Estonia or in Lithuania (Koivu, 2002). These characteristics imply that Latvian banking sector is not yet privatized unlike the rest of Baltic States.

Figure 4 Total assets of Latvian banks (in million euros) at the end of June 2002. Retrieved from http://www.suomenpankki.fi/pdf/106154.pdf
Figure 3 shows three largest banks in Latvia which are Parex Bank, Unibank and Hansabank. These banks control slightly over half of every trade bank assets in Latvian banking sector. Parex Bank, the largest bank in Latvia, is locally owned. Fourteen out of seventeen banks are quite similar in the amount of owned trade bank assets while the three largest banks are about five times the size of the most banks.
2.4.3. Banking Sector in Lithuania
In Lithuania, banks are the most essential international mediators of financing. Even though the banking industry is relatively small and the amount of the financing that the banks can lend is modest, Lithuania expects rapid growth to take place in the near future since the industry went through many structural transformations in the recent years. At the beginning of 2002, Lithuania sold its last domestic bank (IMF 2009). Hence, foreign banks owned a large part in Lithuanian banking sector because of privatization. Bank owners have brought new technology to the industry and improved services and products variation in the market to support its corporate sustainability. At present, favourable financial performance of Lithuanian banks and the upcoming EU membership have improved investments and the demand for banking services is likely to continue in the future.

Figure 5 Total assets of Lithuanian banks (in million euros) at the end of May 2002. Retrieved from http://www.suomenpankki.fi/pdf/106154.pdf
Figure 4 shows ten deposit banks operating in Lithuania and four of which are foreign banks. Lithuanian banking sector is highly concentrated and the two of its biggest banks – Vilniaus Bank and Hansabank own approximately 70% of the assets of the entire industry. Swedish SEB owns the largest bank in Lithuania, Vilniaus Bank. On the other hand, Swedbank owns majority shares in Estonia's Hansabank which bought the second largest bank in the country in 2001, which is the Lithuanian Savings Bank. At present, 89% share of foreign capital composes Lithuanian banks and foreign banks have the majority control in seven banks (Koivu, 2002). In contrast, the Lithuanian banking industry is significantly smaller than Estonia and Latvia's banking sectors. In measuring the financial performance in relation to these three Baltic States' sustainability in banking sector, Estonia and Latvia are in good condition already today. On the other hand, reorganizations are still happening in Lithuania which aims for smoother and more efficient banking transactions.
Evaluate the financial performance of Baltic banking sectors from international competitiveness viewpoint
Banking sectors across the globe face many critical and related challenges that could prevent excellent financial performance. This section evaluates the financial performance of the banking sectors in the Baltic States from international competitiveness viewpoint. Figure 6 shows the key determinants of financial performance in the Baltic States based on the World Economic forum's report. The illustration determines economic growth by measuring five factors which are (Rupeika-Apoga 2013);
Availability of financial services;
Affordability of financial services;
Financing through local equity market;
Ease of access to loans;
Venture capital availability
On the other hand, there are three factors characterizing trustworthiness and confidence (Rupeika-Apoga 2013);
Soundness of banks;
Regulation of securities exchanges;
Legal rights index

Figure 6 Global Competiveness Index 2012-2013. Retrieved from http://www.evf.lu.lv/fileadmin/user_upload/lu_portal/projekti/evf/konferences/konference_2013/report/2Session/Rupeika-Apoga.pdf
In relation to international ratings, Latvia's financial performance is fair in 2013 where it ranked 25 out of 185 economies (IMF 2013). However, Latvia went down four places in the latest survey by IMF as other countries made progress on their own. Other Baltic States such as Estonia and Lithuania are in line with Latvia's financial performance ranking as they place 21st and 27th respectively. Lastly, Latvia ranked 55 out of 144 countries on international competitiveness report made by World Economic Forum in 2013 (IMF 2013). On the other hand, Estonia ranked 34th and Lithuania ranked 45th. However, Latvia made a significant improvement from two years ago where it ranked 70th out of 139. These ratings imply that Baltic financial performance is in a good position in international markets.
Chapter III
3. Research Methodology
The writer's purpose in this paper is to identify the research methods that are particularly related to corporate sustainability of the banks in the Baltic States. Research methodology is defined as the "arrangement of clear rules and measures upon which research is based and next to which claims for understanding are evaluated" (Nachmias and Nachmias, 1982, p. 15). There are five basic stages taken up in this dissertation. (1) preparing the research objectives (2) Choosing the research design; (3) Gathering of relevant theories on corporate sustainability and pertinent information on banks in the Baltic States; (4) Coding and analyzing the information gathered; and (5) Interpreting the outcome. This chapter explains the chosen research design
3.1 Data Description
This study used systematic sampling method and disregarded other departments in the Baltic banks. Systematic sampling method is the process by which a researcher selects sample participants from a larger population based on a random starting point and a fixed, cyclic interval (Zoe 2006). The researcher used this sampling method because it is fast, easy and convenient to use as it basically requires only a list of units in a population. Moreover, samples are equally selected over the entire reference population. In this study, the researcher chose 60 sample participants out of 120 possible respondents, all of which are employees working at banks in the Baltic States. All possible participants including the 60 selected sample respondents were found through career and business-oriented websites such as LinkedIn, Jobster and Jobstreet. Random selection of participants took place by selecting even numbers in the list of all possible respondents. The sample respondents consist of 35 males and 25 females with age ranging from 21 to 58. The appendix section provided the basic information regarding these respondents.
Sample respondents received survey materials where they will rate their company according to aspects mentioned on the questionnaires. Instructions are short, clear, and well-presented so that respondents are more likely to commit to answer all questions. Respondents can access the questionnaires and complete them from any location provided that they have Internet access on a computer. Below are the steps followed by the researcher in distributing questionnaires to sample respondents:
1. Emails were sent to potential participants requesting their participation in the research. The minimum requirement is their experience as bank employees in the Baltic States.
2. Upon getting affirmative response, they are asked to sign a consent paper issued by the researcher. Appointment will be followed where the researcher will conduct a short interview about the background of the participant via online communication website such as Skype or Yahoo Messenger. Phone interview is possible, depending on the discretion of the participant.
3. On the day of interview, the researcher will conduct a short orientation with regards to ethical considerations of the study.
4. When a respondent agrees to answer the questionnaires, the researcher will send the direct website link which has the questions that must be completed within a given period of time.

In figure 3.1.1 60 emails were sent and 42 respondents returned the questionnaires with complete answers (70%). These respondents are 23 males and 19 females. Hence, 55% of respondents are male and 45% are female. Since 70% overall response rate is relatively high, it only means that the questionnaires are not too long for the respondents to answer. It also implies that the writer clearly targeted and effectively communicated with the selected respondents. Lastly, 70% response rate also means that the writer facilitated a good survey design. According to DAA (2014), a high response rates mean more accurate results and analysis given that more respondents represented a population. Therefore, the 70% response rate on the survey conducted helped to provide accurate more accurate results.
Chapter 5 shows the results and analysis of the survey conducted on 60 respondents where 42 successfully submitted the questionnaires back to the researcher. In Figure 7, 34 of 42 respondents rate economic dimension as "5'' which means that corporate sustainability is best maximized to give financial benefits on the banks they work at. On the other hand, 26 of 42 respondents rate social dimension as "5'' which means that the society gets average benefits from corporate sustainability. Lastly, 19 of 42 respondents rate environmental dimension as "5'' which means that environment is the last priority of banks in creating corporate sustainability. The results shown in Figure 7 illustrates that there is a direct relationship between corporate sustainability and financial performance in Baltic banking industry.
There are 8 categories in Figure 8. 39 of 42 respondents rate People category as "5'' which means that the best asset of the Baltic bank they work at are the people behind it. It implies that Baltic banks have healthy work environment for its employees. This result is also parallel to achieve "Key Performance Results". 37 of 42 respondents rate Key Performance Results category as "5'' which means that Baltic banks aim to provide high-quality performance in their services. Consequently in Figure 8, the satisfactory levels summary comes from 25 respondents who think that financial performance of the Baltic banks is Excellent; 10 answered Good, 4 answered Fair and 3 answered Poor. The results provided in Chapter 5 shows that a vast majority of respondents think that corporate sustainability is best maximized to enhance financial performance or to generate profit.
Figure 9 in Chapter 5 shows the summary of corporate sustainability levels of leading banks in the Baltic States based on the survey. 35 of 42 respondents believe that Swedbank has the highest sustainability level which means that it has a well-built tradition of corporate social responsibility and moral principles. On the other hand, 22 of 42 respondents think that Eesti Pank has the lowest sustainability which means that the bank is not competitive enough in terms of corporate sustainability. Chapter 5 explains the meaning of percentages in terms of how it affects the banking industry in general.
3.2 Assumptions
This section discusses assumptions in the survey process as well as the underlying themes mentioned in questionnaires. The researcher extremely depends on the truthfulness and cooperation of participants with regards to the information they give during interview sessions. In addition, the coded and recorded data will be tied from the information gathered in interviews, to ensure that it reflects from a participant's written answer on questionnaires. One of the most important assumptions of this research is confidentiality. Sample participants must be certain that the researcher will keep their anonymity. The researcher assures that all survey materials completed by respondents are kept private and are used only for this study. On the other hand, survey results will be published without revealing the respondents' identities. Lastly, the researcher quantitatively coded the qualitative themes discussed on this paper. Survey respondents will encounter themes in questionnaires that have designated meaningful numerical values. Three themes coded in survey questions are economic, environmental or social themes.
Below are the tasks included in the questionnaire;
From 0-5 (0 as lowest and 5 as highest), rate your bank according to these economic or financial aspects, put a check mark on corresponding values;
 
 
 
 
0
1
2
3
4
5
1. Employment relationship
 
 
 
 
 
 
2. Customer relationship
 
 
 
 
 
 
3. Annual bonus and incentives
 
 
 
 
 
 
4. Interest rates and credit policies
 
 
 
 
 
 
5. Financial Planning

 
 
 
 
 
 
6. Mortgage & Real Estate
 
 
 
 
 
 
7. Investing

 
 
 
 
 
 
8. Stakeholder's dividends
 
 
 
 
 
 
9. Marketing Strategy
 
 
 
 
 
 
 

From 0-5 (0 as lowest and 5 as highest), rate your company according to these social aspects, put a check mark on corresponding values;;












1. Employment equality in gender, race and age
0
1
2
3
4
5
2. Advocacy in poverty and health


 
 
 
 
 
 
3. Sponsorship on education


 
 
 
 
 
 
4. Donation and charity works


 
 
 
 
 
 
5. Health and safety
 
 
 
 
 
 
 
 
 

From 0-5 (0 as lowest and 5 as highest), rate your company according to these environmental aspects. Put a check mark on corresponding values;

1. Energy consumption
0
1
2
3
4
5
2. Waste management
 
 
 
 
 
 
3. Resource management
 
 
 
 
 
 
4. Green-marketing strategy
 
 
 
 
 
 
5. Environmental activities such as tree planting etc.
 
 
 
 
 
 

How are you satisfied to your bank with these aspects?
 
0
1
2
3
4
5
Leadership
 
 
 
 
 
 
People
 
 
 
 
 
 
Policy & Strategy
 
 
 
 
 
 
Partnerships & Resources
 
 
 
 
 
 
Processes
 
 
 
 
 
 

Rate these aspects according to how your bank prioritizes them;
 
0
1
2
3
4
5
People Result
 
 
 
 
 
 
Customer Result
 
 
 
 
 
 
Society Result
 
 
 
 
 
 
Key Performance Results
 
 
 
 
 
 

From 0-5 (0 as lowest and 5 as highest), rate these banks on their financial performance as your bank transacts with them. Put a check mark on corresponding values;

 
0
1
2
3
4
5
Swedbank
 
 
 
 
 
 
Parex Banka
 
 
 
 
 
 
ABLV Bank
 
 
 
 
 
 
DNB Bank AB
 
 
 
 
 
 
Nordea Bank AB
 
 
 
 
 
 
Eesti Pank
 
 
 
 
 
 

3.3 Content Analysis
This section tackles the content analysis of this dissertation. According to Berelson (1952), content analysis is a study for the logical and quantitative explanation of the visible content of message. Accordingly, it will review the comparative level to which particular references, approach, or themes infuse a specified meaning or document.
The first step in content analysis is the preparation of data. Qualitative content analysis is useful to examine a variety of data, but usually the data require to be changed into written text before segregating it into pieces. As the interviews are on-going, the subsequent questions came up: (1) should the questionnaires of the interviewer or merely the key questions from the discussion point be recorded; (2) should the verbalizations be recorded exactly or merely in an outline and (3) should explanations throughout the interview (e.g., echoes, pauses, and other perceptible actions) necessary to be recorded or not? Based on the given research objectives on the beginning part of this paper, the objectives aforementioned are answered accordingly. Merely the outlines of the participants' answers were recorded. Other audible responses of the participants were not recorded also, only the gist or the idea. Though the whole records of participants' answers may be the nearly valuable, the supplementary significance it may give may not substantiate the additional time needed to construct it.
The second step of the qualitative content analysis is the description of the unit of analysis. The unit of analysis refers to the essential component in the paper to be categorized throughout content analysis. Qualitative content analysis typically employs individual subjects as the unit for analysis, relatively than the material linguistic elements (e.g., phrase, sentence, or clause) most regularly utilized in quantitative content analysis.
The third step is the identification of population from which the answers were extracted. The respondents were invited through e-mail. These respondents are bank employees in the Baltic States. The fourth step is the coding. A coding scheme can be copied from three bases: the data, prior linked studies, and theories. Coding schemes can be developed both inductively and deductively. In papers where no theories are accessible, the researcher should produce groups inductively from the data. The coding scheme by this paper was done by an SPSS expert.
Chapter IV
4. Research Design & Approach
According to Cohen, Manion, and Morrison (2008), sampling is a procedure of choosing representative sample from a total population. This paper uses a survey design which intends to use two factors: independent factors and dependent factors. The independent factor is corporate sustainability. This factor uses metric of three sub-factors which are economic, environmental and social elements. On the other hand, the dependent factor is financial performance.
This paper uses both quantitative and qualitative data collection method. The primary method used is quantitative method where the researcher performed a survey to collect important information regarding their experiences and viewpoints on the Baltic banks they work for. The goal of this type of research is to find out the connection between two different variables in a population (USC 2014). In this paper, the two variables are corporate sustainability and financial performance. This research method depends on random sampling and structured data gathering tools that fit different experiences into prearranged response groups. Data collection process performed on this research gives results that are easy to review, evaluate, and summarize.
On the other hand, the secondary method used is by qualitative method of collecting data where the researcher performed a review of literature from other related studies. According to USC (2014), qualitative method of collecting data is a process of selecting case studies on people, organizations, communities, cultures, events, critical incidences. These are reliable sources of information because they are "information rich" and illuminative. By reviewing case studies, a researcher discovers significant insight about a certain phenomenon. In literature review chapter, real-life case studies support corporate sustainability theories and principles. In the process of data collection, other sources of related data are bank websites and social media profiles of participants to confirm if they are really working in a Baltic bank.
The research approach which is by performing a survey is practical since the researcher was able to save money, effort and time. It overcame the distance issue between the employees in the Baltic States in and the interviewer who did the background check who is miles away from respondents at that time. The internet allowed the researcher to search and contact multiple people in a short amount of time. If given a chance, the researcher will choose to perform personal interviews to get more important information. In addition, it will facilitate easier communication between two parties where the researcher can ask follow-up questions and the interviewees will have a chance to explain themselves better by using both verbal and non-verbal communication.
Chapter V
5. Results & Analysis
This chapter includes the results and analysis of the findings and their background interpretation, presented in narrative structure to guarantee that individual voices and actual thoughts of the participants are included. The researcher sought to obtain an understandable suggestion of how these experiences differed for every respondent and whether corporate sustainability is useful in banking sectors in the Baltic States. The results illustrate the different viewpoints of bank employees.
This chapter presents a constructive analysis of the trends and patterns in the collected data, obtained predominantly for qualitative analysis. The researcher performed thorough analysis to record relevant information only to produce the appropriate representations of the scenarios within the population. The analysis identified trends in responses; after incorporating these data into the software, the researcher checked for patterns and common themes that dealt with banking sectors in relation to the research questions. Welman et al. (2005) suggested that analysis should also draw many explanations from the broad perspective of experiences as demanded by the research. The general codes used to express whether the experience was favorable or not were good and bad.
5.1 Results
Online interviews on participants lasted for 15 to 30 minutes duration. All were properly recorded. The researcher prepared questions regarding the participant's basic profile to confirm their identity and credibility. The participants were generally cooperative and rarely unable or reluctant to respond on specific (sensitive) questions. The researcher allowed all participants to review the draft of literature review for them to have an assurance that this study is for academic purpose. Enumerated below are the questions asked to all participants. These questions aim to verify their identity. However, names and other sensitive information are not provided on this paper to protect their privacy.
Name and Location
Current and previous jobs
Educational Background
Brief Job Description
Certifications
Affiliated Groups
For a better discussion of individual perceptions on the impact of corporate sustainability in banking sector, the participants were asked questions regarding the performance of the banks they work at. Figure 7 summarizes the result of surveys completed by respondents. The scale uses 5 as the highest value while 0 as the lowest value.
Groups
Economic
Social
Environmental
Total
1
4.2
3.4
3.2
10.8
2
3.8
4.2
3.2
11.2
3
3.4
3.2
4.5
11.1
4
4.6
4.5
2.9
12
5
4.8
4.1
3.3
12.2
Average
4.16
3.88
3.42
 
Figure 7. Summary of Survey Results on Three Dimensions
In the illustration, figures assigned in each box are the average values computed by dividing the total values provided by respondents into five. The fourth column is the sums of values indicated in Economic, Social and Environmental themes. Figure 7 shows that corporate sustainability is most profitable in economic dimension. Hence, there is a direct relationship between corporate sustainability and financial performance in banking industry. In addition, it indicates that financial profit is the key benefit of corporate sustainability in banking industry. Social dimension is next to economic dimension when it comes to receiving benefits from corporate sustainability. Lastly, environmental dimension has the least benefit on corporate sustainability.
Questionnaires include nine criteria found in EFQM Excellence Model which are Leadership, People, Policy & Strategy, Partnerships & Resources, Processes, People Result, Customer Result, Society Result and Key Performance Results (Neergaard and Pedersen 2012). Participants rate each criterion according to its influence in the Baltic banking sector. Figure 8 shows the summary of results. Leadership, People, Policy & Strategy, Partnerships & Resources, Processes are the criteria used to measure corporate sustainability while People Result, Customer Result, Society Result and Key Performance Results are objective-based results. Consequently, respondents ranked the first five criteria according to what they think corporate sustainability stands for. On the other hand, respondents ranked the four objective-based results according to the goals of banks they work for. Values assigned are 0 as lowest and 5 as highest.
Table 1 Summary of Survey Results based on EFQM Criteria
 
Group 1
Group 2
Group 3
Group 4
Group 5
Total Average
Leadership
3.2
2.2
4.1
3.5
3.2
3.24
People
4.3
5.0
5.0
4.5
4.8
4.72
Policy & Strategy
2.9
2.1
3.8
4.8
2.8
3.28
Partnerships & Resources
2.7
3.2
4.3
3.1
3.5
3.36
Processes
4.2
3.6
5.0
4.5
4.6
4.38
 
 
 
 
 
 
 
People Result
2.3
4.1
3.2
5.0
3.4
3.62
Customer Result
3.3
3.4
5.2
3.1
4.2
3.84
Society Result
2.3
4.2
3.8
2.9
2.5
3.14
Key Performance Results
4.3
4.6
5.0
5.0
5.0
4.78

Table 1 shows the summary of respondents' answers based on EFQM Criteria. The highest criteria are People and Key Performance Results. Respondents ranked "People" at the average of 4.72, which implies that it is the main driver of corporate sustainability. On the other hand, Key Performance Results has an average of 4.78 and respondents think that this is the main goal of banks they work at. Leadership has the lowest average which means that corporate sustainability has the least priority on it. Similarly, Society Result has the lowest average among the four objective-based results which suggests that most companies in the Baltic States have least priority on society.

Figure 8. Summary of Satisfactory Levels in Financial Performance
During the interview process, respondents were asked about their banks' financial performance. Figure 8 shows the satisfactory levels of Baltic banks' financial performance according to participants' point of view. The summary shows that 8.2% of the respondents think that financial performance of the Baltic banks is Excellent; 3.2% answered Good, 1.4% answered Fair and 1.2% answered Poor. Hence, the results showed that a vast majority of respondents think that corporate sustainability is best maximized to enhance financial performance or to generate profit.

Figure 9.Summary of Corporate Sustainability Levels of Leading Banks in Baltic States Based on Survey Performed
Banks
Baltic State
Sustainability Level
Swedbank
Latvia/ Lithuania/ Estonia
83.30%
Parex Banka 
Latvia
74.43%
ABLV Bank
Latvia
66.56%
DNB Bank AB
Lithuania
54.65%
Nordea Bank AB
Lithuania
58.87%
Eesti Pank
Estonia
51.80%
Figure 10. Percentage Summary of Sustainability Levels
Figure 9 shows the summary of corporate sustainability levels of leading banks in the Baltic States based on the survey performed. Swedbank has the highest sustainability level of 83.30% which shows that it has a well-built tradition of corporate social responsibility and moral principles. On the other hand, Eesti Pank has the lowest sustainability level of 51.80% which means that the bank is not competitive enough in terms of corporate sustainability. The results in Figure 10 are quite similar to another research survey conducted by SKDS center. According to an article by Kozlovs (2011), more people are familiar with Swedbank than Parex Banka. Their ratings are; Swedbank at 54.7%, Parex Banka at 40%. DnB Nordbank at 34.5% and SEB Bank have 34.4% rating. Hence, it should be noted that the more popular a bank is, the more chance it attracts creditors and sustainability level rises.
5.2 Analysis
Survey results shown in Figure 7 explain that corporate sustainability is most profitable in economic dimension. It implies that corporate sustainability best improves financial performance more than social and environmental dimension. There are many reasons why corporate sustainability is most profitable in financial aspects. As discussed in review of literature, external change that aims for corporate sustainability such as the upcoming EU membership of Baltic States in 2004, helped in the financial progress of the whole Baltic region. Secondly, Latvia has secure connections to the Commonwealth of Independent States (CIS) countries. As a result, Latvia's banking industry experienced very rapid growth rate from 57% of GDP in 2000 to 149% in 2007 (Eglitis, Forgo, Krastev, Toming, and Weise 2014). This made Latvia, Lithuania and Estonia attract more creditors and make them invest their money to the Baltic banks because of low tax rates. In addition, foreign companies moved their business establishments in the Baltic States to benefit from its improved productivity and stronger institutional setting.
Although social and environmental dimensions are only second to economic dimension, banks still consider social and environmental issues for many reasons. Figure 11 illustrates that most banks consider environmental and social issues to increase credibility and gain reputation. Based on the review of literature, basic business models such as European Corporate Sustainability Framework (ECSF) and the EFQM Excellence Model suggest that social and environmental factors are integral part of corporate sustainability, which can actually increase a bank's credibility and gain reputation in local and international society.
In Table 1, the researcher plotted the survey results using EFQM Excellence Model to identify the strengths of Baltic Banks. Respondents ranked "People" at the average of 4.72, as the main driver of corporate sustainability. This criterion pertains to stakeholders in banking sector who are employees, investors, and creditors. Employees serve as backbone in banking sector and they have a huge participation in creating and maintaining corporate sustainability. Other studies show that 80 percent of employees who are active in corporate sustainability programs will support other people to engage in social responsibility initiatives (Gibbs and Soell 2012). Moreover, 73 percent of working US adults can participate in promoting corporate sustainability even being away from workplace. The survey also suggests that 73 percent of employees hope their banks or workplace to engage in more sustainable business practices.
In addition, three in four employed adults suggest that they are likely to invest in banks if they implement environmentally-conscious practices.
The second reason why banks consider social and environmental issues is because of the demand by investors. In Chapter II's case study of PNC Financial Bank ruling, investors demand for assurance that the bank and the mining company are not involved in activities that add to climate risk and global warming. Hence, survey results in Figure 7 imply that financial gain is the primary benefit of corporate sustainability while social and environmental benefits are secondary.

Figure 11 Key Reasons Why Banks Consider Environmental and Social Issues
Figure 8 survey results show that majority of respondents think that corporate sustainability is best maximized to enhance financial performance or to generate profit. Chapter II discussed that all the Baltic States are performing very well in the international banking sector; Latvia's financial performance is fair in 2013 where it ranked 25 out of 185 economies. Other Baltic States such as Estonia and Lithuania are in line with Latvia's financial performance ranking as they place 21st and 27th respectively (IMF 2013). Hence, each country in Baltic region is among other nations with strong economic growth.
However, in Figure 8, 5.8% of the survey respondents believe that the Baltic States' financial performance is not yet at its peak for many reasons;
Entry of foreign banks
Privatization
Unemployment and elevated household debt
One of the reasons is the high concentration of foreign banks in the Baltic States. Although this phenomenon brings a substantial influx of foreign investors, it may also limit competition in the banking sectors and can be harmful for economic growth (Cizikova 2012). In the case of Estonia, for instance, small and medium-sized companies do not receive any financing from foreign banks, even though foreign banks own almost 100% of all banking assets (Haas and Naaborg 2005). Moreover, the entry of foreign banks in the Baltic States affects its financial institution structure such as changes in the lending infrastructure and more complex legal and accounting systems.
In spite of many advantages of privatization, it also affects the banking industry and the entire economy. As reviewed in Chapter II and other related studies, enumerated below are the disadvantages of privatization in Baltic banking sector.
Private sector focuses more on profit maximization which disregards the welfare of society and environment while public sectors initiate socially practical adjustments in case of calamities and disasters (Kousadikar and Singh 2013). This confirms that social and environmental factors are only secondary to financial gains in banking sector.
Another disadvantage is the lack of transparency in private sector and stakeholders. They tend to provide incomplete information about an organization's nature or function.
Privatization can be a bridge to corruption and illegal methods of accomplishments of licenses and business transactions (Bjorvatn and Sbreide 2005). Through privatization, depositing ill-gotten money in the banks is easier compared to local banks since they need to follow strict government regulations. Bribery is the common problem that ruins the efficient applicability of privatization.
Privatization encourages organizations to not adhere their mission and vision and the idea of profit maximization pushes malpractices like making of inferior quality products, increasing the hidden indirect costs, price increase etc.
Privatization causes high employee turnover and many investment must guide the lesser-qualified employees
Stakeholders may have conflict of interest. Moreover the transition of public banks to become private sector causes resistance to change among stakeholders which can hamper the performance of the banking sector.
According to studies, there is a direct connection between privatization and inflation. Privatization normally results in price inflation as privatized banks do not benefit from government subsidies (Mehmood and Faridi 2005).
In Figure 9, Swedbank has the highest corporate sustainability level among the leading banks in Baltic States based on the survey performed. According to Deijl (2008), there are many reasons why Swedbank is the leading bank in the Baltic States;
Accessibility
Excellent promotion strategy
Healthy work environment
Good customer relationship
Since it is the largest foreign-owned bank, its branches are easy to find even in small towns in the Baltic States. It has head offices in the heart of villages and towns. It allows customers to reach their offices even to those who are living in the remote town or village. Swedbank offers almost all kinds of banking services through every channel. It also uses multiple communication channels to attend to customers requests through personal sales, mass communication, direct mail, and internet. Since this foreign-owned bank maximize the use of advanced technology, Swedbank use less phone banking given that most customers nowadays prefer online banking.
To attract potential employees, Swedbank focus mostly on students by arranging meetings at universities. Moreover, the bank also organizes master classes for academic students. Swedbank also eyes potential employees in other banks. It provides their employees several activities in order to keep them satisfied with their job such as job-rotation, trips and group activities, education, incentives and personal development. Lastly, Swedbank also maintains certain values when dealing with customers. These values include openness, result-driven, innovation and engagement, as well as learning and involvement Deijl (2008). Moreover, Swedbank believes that customer is priority number one where they must be handled with integrity, ethics to give quality service.
In terms of financial performance, Swedish banks such as Swedbank and SEB lend 400 billion SEK in the Baltic States. According to a speech by Ingves (2010), these banks, their subsidiaries and branches dominate the markets in the Baltic and comprise 80 per cent of the Estonian market, 55 per cent of the Lithuanian market and 60 per cent of the Latvian market. Moreover, around 16 per cent of Swedbank's total lending is to the Baltic countries. This bank's success is due to corporate sustainability which Swedbank refers as an intergral part to their daily business activities.
Chapter VI
6. Conclusion & Recommendations
Implications of the Study
This research has increased the researcher's ability to make a comparison research. It has shaped a better insight in the many aspects in the Baltic banking sector. The researcher discovered that the questions asked during the interview process differ depending on the perception of participants.
6.2 Limitations of Study
There are many issues that the writer faced to finish this paper. These are limitations to study are; a) Lack of experience: Being an undergraduate student, I have no past practical experience of collecting data from a population. It limits my ability as I have a difficult time to distinguish credible information from inaccurate ones. b) Lack of time. Since I am new to writing dissertations, time limitation is one of the problems I encountered. c) Small sample size:
Given that the participants of the survey must come from the Baltic States, it is difficult to gather respondents since most of the come from faraway places. As a result, only 60 out of 120 respondents were able to participate on the study. d) Fund unavailability. I don't have much financial support to perform the research so I had to resort to the use of internet to communicate with the respondents. Face to face interview or by phone is not possible because of money issues. e.) Participant willingness. Most of the respondents are bank employees. Since they work in a busy industry, their willingness to answer the survey took a very long time for them to fill up questionnaire. As a result, their time is also a factor. Moreover, some of them are not willing or afraid to give specific data about the banks they work for.
6.3 Conclusion
The goal of this research is to examine the relations of to corporate sustainability to financial performance in the Baltic States of Estonia, Latvia and Lithuania by achieving the research objectives provided in Chapter 1. The first objective is to explore the elements affecting corporate sustainability. These elements are economic, environmental and social elements. The survey performed by the researcher suggests that these elements differ on how they help in creating corporate sustainability and how the banking industry prioritizes them. Results show that the Baltic banking industry prioritizes economic elements to boost corporate sustainability. These economic elements pertain to financial aspects such as GDP, GNP and stock prices. In the review of literature, all of these aspects show a significant growth after the economic crisis in the Baltic States.
The second objective of this research is to discuss the business models related to corporate sustainability. These two models are the European Corporate Sustainability Framework (ECSF) and the EFQM Excellence Model. The survey performed for this research used the criteria in EFQM Excellence Model to evaluate the priorities of the Baltic Banks. Result shows that corporate sustainability best improves financial performance more than social and environmental dimension. However, social and environmental factors are integral part of corporate sustainability, which can actually increase a bank's credibility and gain reputation in local and international society.
The third objective of this paper is to learn the characteristics of the banking sector in the Baltic States. In Chapter II discussion, Estonia is one of the European countries with highest overall debt. This economic condition in Estonia is a financial opportunity for their banking sectors especially to those foreign-owned banks. Moreover, Estonia's successful macroeconomic reforms such as early privatization, low and simple taxation and successful monetary and banking reorganization (Sõrg and Tuusis 2009) resulted to the country's more improved financial performance. On the other hand, Lithuanian banking industry is relatively small and the amount of the financing that the banks can lend is modest. In 2002, Lithuania sold its last domestic bank (IMF 2009). At present, the favourable financial performance of Lithuanian banks and the upcoming EU membership have improved investments and the demand for banking services is likely to continue in the future. Today, Vilniaus Bank and Hansabank own approximately 70% of the assets of the entire industry. Swedish SEB owns the largest bank in Lithuania, Vilniaus Bank. The Lithuanian banking industry is significantly smaller than Estonia and Latvia's banking sectors. In measuring the financial performance in relation to these three Baltic States' sustainability in banking sector, Estonia and Latvia are in good condition already today.
Lastly, the Latvian banking sector differs from Estonia and Lithuania in many ways. For instance, Latvia has more banks within the country than Estonia or Lithuania. At present, there are 22 banks and one branch of a foreign bank that are working in Latvia. The review of literature found out that Latvian banking sector is not yet privatized unlike the rest of Baltic States. Its largest bank is Parex Bank, which is locally owned.
The fourth objective of this paper is to evaluate the financial performance of Baltic banking sectors from international competitiveness viewpoint. Chapter 2 discussed the key determinants of financial performance in the Baltic States based on the World Economic forum's report. The illustration determines economic growth by measuring five factors which are (Rupeika-Apoga 2013); Availability of financial services; Affordability of financial services; Financing through local equity market; Ease of access to loans; Venture capital availability; Soundness of banks; Regulation of securities exchanges; and Legal rights index. In relation to international ratings of World Economic forum's report, the Baltic States financial performance is in a good position in international markets.
6.4 Recommendation
Based on the evidences presented on this paper, financial performance is the primary aspect that corporate sustainability has impact on while social and environmental aspects are secondary only. Hence, Baltic banks must balance the priority between these dimensions to benefit from the full potential of their financial performance. For many years, there are many questions about the ways in which banks and businesses contribute to society and environment. This paper suggests the following actions that may help the Baltic banks to balance economic aspect from social and environmental aspects to maximize profit and increase opportunities;
Creating programs to promote social and environmental welfare may cause resistance among stakeholders of Baltic banks as it requires tremendous efforts and time and large amount of resources. The management must allocate enough budgets for social and environmental programs to ensure its success and attract more investors and creditors.
Baltic banks must ensure that their creditors are not involved in activities that are harmful to society and environment. They must update policies with regards to lending money to creditors. They must exercise transparency and perform tougher background checks with the profile of organizations or people they lend money to, so that stakeholders know that these banks are pro-society and environment.
Aside from advocating social and environmental programs, bank employees must practice sustainable usage of resources. For instance, the management may change policies on waste management and consumption of water. In that way, they create credibility since being an advocate to social and environmental welfare is already a part of their organizational culture.
Baltic banks may create different funding mechanisms and systems to organizations that promote greener environment. They may offer higher interest rates or prioritize them in lending transactions.
These recommendations aim to achieve the following benefits;
Baltic banks will gain credibility by dealing with social and environmental issues.
They build corporate sustainability which will attract more creditors that boost their financial gains.
Sustainability improves reputation, lessens reputation risk
It will give banks good customer relationship














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Appendix
Profile information of 60 respondents;
Respondent 1
 
Current
Danske Bank, Group Services Lithuania - Head of Marketing and Sales

May 2013 – Present (1 year 6 months)Vilnius, Lithuania
Previous
1. Ernst & Young Baltic, 

2. Arthur Andersen
Education
1. Baltic Management Institute (BMI)

Danske Bank, Group Services Lithuania

- Development of marketing strategy for entering European, USA markets
- Six-sigma in Copenhagen




Respondent 2
 
Current
Danske Bank - Account Manager
Previous
A/S Lithuania
Education
ISM University of management and economics, Executive school
-- Networking, public relationships
Sundbybergs Tennisklubb


Respondent 3
 
Current
Danske Bank A/S Lithuania Branch - Director

English International School of Prague, 

LCC International University
Education
Vadybos ir ekonomikos universitetas (ISM)/Norvegian School of Management (BI)
Websites
Company Website
-Funding and partnerships
- Internet technology trends, innovations and audience behavior
-Cogmed Systems AB


Respondent 4

Current
Danske Bank - Deputy General Manager (Sales&Marketing)
Previous
Danske Bank A/S Lithuania Branch, 

Medicinos diagnostikos ir gydymo centras, 

Lietuvos telekomas
-Communication and marketing strategies, clients' services and relationships, clients' portfolio development.

Respondent 5
 
Current
DANSKE bank - Head of Strategy and Change Management
Previous
Danske Bank A/S Lithuania Branch, 

Danske Lizingas UAB
Education
Kauno Technologijos Universitetas
-Established and developed TVNET media sales and marketing business models. ( products, pricing policies, strategic development).
-Kungliga tekniska högskolan



Respondent 6
 
Current
DANSKE bank A/S branch of Lithuania - Senior project manager
Previous
Danske Bank A/S Lithuania Branch
Education
Kaunas University of Technology
-financial follow-up and reporting; advertising sales forecasting


Respondent 7
 
Current
Danske Bank A/S Lithuania branch - Head of Retail and Private Banking
Previous
SEB lizingas
Education
Vilniaus Universitetas
-Responsible for brand strategy implementation via different channels - marketing and advertising, internal communication, sponsorship projects and service enhancement.


Respondent 8
 
Previous
Transcom WorldWide Vilnius UAB; Transcom WorldWide Latvia SIA
Education
ISM University of Management and Economics, Executive School
-Responsible for planning, budgeting and implementing - sales support, sales campaigns, employees training, customer and market research, product packaging, marketing and communication activities


Respondent 9
 
Previous
Hermis Bank, SEB -Brand manager
Education
INSEAD
-Marketing project management for SEB Large Corporate customer department and SEB daughter companies.
-Attended IMS 2004 4th International Symposium on Intelligent Manufacturing Systems


Respondent 10
Current
Nordea Bank Finland PLC, Lithuania Branch
Previous
Nordea Bank Finland PLC, Lithuania Branch, 

Hansabankas,

Hansa Asset Management
Education
Vilnius Gediminas Technical University
Websites
Company Website
-Marketing strategy planning and implementation, budget planning and control, contacts with mass media
- Member of the Software development team in Garanti Technology

Respondent 11
 
Current
Personal banking advisor at Nordea Bank Finland Plc Lithuanian branch
Previous
Nordea Bank Finland Plc Lithuania Branch
Education
Vilnius University
-Internal and external communications, local newspaper, intranet, employees' events.


Respondent 12
 
Current
RD Baltic, SIA, - Sales person (pensions)

Publishing house Alma Littera / ALMA LITTREA GROUP
Previous
VRS Group, 

Idea Publica, VSI
Education
BI Norwegian Business School
-Organizing and maintaining marketing in Shopping Centre Domina Shopping. Developing a new marketing strategy


Respondent 13
 
Current
Marketing specialist
 
Rimi Baltic
Previous
 

Nordea, 

Swedbank
Education
Rīgas Ekonomikas augstskola - Stockholm School of Economics in Riga
-Branding. Retail marketer and strategist.

Respondent 14
 
Current
Marketing and PR Manager at Rimi Lithuania
Previous
Rimi Lithuania
Education
ISM University of Management and Economics
-Creation of a new website and maintenence.


Respondent 15
 
Current
Rimi Baltic - Marketing Manager
Previous
Rimi Baltic, 

Realtus UAB, 

Audimas AB
Education
Mykolas Romeris University
 
Work with advertising, media and PR agencies.
With CS 308 Software Engineering Course


Respondent 16
 
Previous
Eesti Energia AS, Marketing Director

Swedbank
Education
Estonian Information Technology College
Websites
Company Website
-Daily work and communication with tenants.

Respondent 17
 
Current
Rimi Lietuva - CRM Manager
Previous
Rimi Lithuania
Education
Vilniaus Universitetas
-Marketing plan and Campaigns - creation, control, supervision, implementing.


Respondent 18
 
Current
Danske Bank A/S Estonia Branch, 

AS Eesti Telefon
Education
Leningrad Institute of Electrotechnical Communication (University)
-Marketing budget - planning expenses, controling. Daily work with advertising, media and PR agencies.


Respondent 19
 
Current
Danske Bank A/S Estonian branch, 

Estonian Information Technology College
Previous
Hansapank, 

Eesti Telefon, 

Tallinna Polutehniline Instituut
Education
Tallinna Tehnikaülikool
-Stock, budget, motivation programms, selection of collections, decorations, shop windows, merchendising etc.

Respondent 20
 
Current
Danske Bank - Head of Marketing and Sales
Previous
Eesti Töötukassa, 

SEB, 

Cresco
Education
Estonian Business School
-Developed the content strategy, audience positioning and communication strategies
-Has Degree of master (one year), System Science Program: Informatics


Respondent 21
 
Current
Nordea Bank Estonia
Previous
Swedbank
Education
London Business School
Websites
Company Website
Raised funding and start-up investments for the company including but not only governmental and EU funds support

Respondent 22
 
Current
Estonian Skiing Association, 

Nordea Finance Estonia AS
Previous
Nordea Finance Estonia AS, 

Hansa Liising Eesti AS
Education
Concordia International University Estonia
-Networking, public relationships


Respondent 23
 
Current
Helmes AS, Nordea Bank - E-Services Development Manager
Previous
Estonian Air Forces, Air Surveillance Division
Education
The Estonian Information Technology College
-Developed the content strategy, audience positioning and communication strategies

Respondent 24
 
Previous
Nordea Finance Estonia AS - Web Project Manager
Education
Tartu Ülikool
-Main responsibility for the annual sales budgets, forecasts and analyses. Brand strategic development and promotion, audience development.
-Enfo Pointer Sweden AB


Respondent 25
 
Previous
Danske Bank A/S Estonia branch
Education
Tallinn University of Technology
-contract making and network establishing with biggest existing and targeted clients


Respondent 26
 
Previous
Nordea Finance Estonia AS - Head of Asset Finance at Nordea Finance Estonia AS
Education
Tartu Ülikool
 
financial follow-up and reporting; advertising sales forecasting
Respondent 27
 
Current
Nordea Finance Estonia
Previous
Palgardi Kraana OÜ
Education
Estonian Business School
-Prepare, process and administrate personnel related documents in accordance with local legislation and Company regulation


Respondent 28
 
Current
Nordea - Senior HR specialist
Previous
Nordea
Education
Göteborgs universitet
-Act proactively and show initiative in process improvements
-Magister/Master's degree, Computer Science.

Respondent 29
 
Previous
Nordea Estonia, - Assistant, Corporate Banking

Tele2 Estonia
Education
Tallinna Tehnikaülikool
Websites
Company Website
-Conduct job interviews and provide adaptation of new employees in the company;


Respondent 30
 
Current
Nordea Bank AB Estonia Branch - Relationship Manager
Previous
Nordea Bank Finland Plc Estonia Branch, 

Danske Bank A/S Estonia Branch, 

Mõtlev Maja OÜ
Education
Tallinna Tehnikaülikool
-Secure internal information flow related with personnel processes in timely manner

Respondent 31
 
Previous
LHV Pank, - Business Unit Manager

Webmedia, 

Äripäev
Education
Eesti Humanitaarinstituut
-Participate in other processes of personnel selection and administration.
-Södertörn University (Basic course, Business)


Respondent 32
 
Current
Nordea Bank Finland Plc. Latvia branch - Head of Cash Management Solutions Baltics
Previous
Nordea Bank Finland Plc. Latvia branch
Education
Banku Augstskola
-Developing a good understanding of client companies, their industry, what they do and their work culture and environment;


Respondent 33
 
Previous
Nordea Bank Finland Plc Estonian Branch, - Sales manager

Swedbank
Education
Tallinn University of Technology
-Using social media to advertise positions, attract candidates and build relationships with candidates and employers
-Has background on Enterprise Architecture - Trends and Success factors(Link)



Respondent 34
 
Current
Nordea - Head of Connections
Previous
Nordea
Education
University of Uppsala
- Headhunting - identifying and approaching suitable candidates who may already be in work;
using candidate databases to match the right person to the client's vacancy;

Respondent 35
 
Current
Nordea Bank AB Latvia branch, - Cash management adviser

Co-owners Association "Krāslavas 7"
Previous
Nordea Bank Finland Plc. Latvia branch, 

SARL Le Bayonne
Education
EuroFinance training
- Reviewing recruitment policies to ensure effectiveness of selection techniques and recruitment programmes.


Respondent 36
 
Previous
Nordea Bank AB Latvia branch, - AR team Supervisor

Nordea Latvia, 

SEB Latvijas Unibanka
Education
BA School of Business and Finance
- Working towards and exceeding targets that may relate to the number of candidates placed, a value to be billed to clients or business leads generated;
-Organizing interviews for candidates as requested by the client;


Respondent 37
 
Current
Nordea - Cash management specialist at Nordea bank Finland Plc Latvia branch
Previous
Nordea
Education
Banku Augstskola
-Requesting references and checking the suitability of applicants before submitting their details to the client;


Respondent 38
 
Current
DNB banka AS - Cash Management Expert
Previous
Nordea Bank Finland Plc Latvia branch, 

AS Swedbank,

Hansabanka AS
Education
Biznesa Augstskola 'Turiba'
-making Industry analysis and valuation for investors

Respondent 39
 
Current
Nordea Bank FInland Plc - Cash management adviser at Nordea Bank Finland Plc Lithiania branch
Previous
"EVP International", UAB
Education
Vilniaus Universitetas
-Consulting on Mergers and Acquisitions


Respondent 40
 
Current
Nordea, - Cash Management Adviser

Lege Artis - grožio salonas
Previous
SEB bankas, 

UAB "Zepter International", 

SEB Merchant Banking
Education
Vilniaus Universitetas / Vilnius University
Websites
Portfolio
-Consulting on M&A, making industry analysis


Respondent 41
 
Current
Nordea - Cash Management Adviser at Nordea Bank Lithuania
Previous
UAB Medicinos bankas, 

O'Reilly's and Sons
Education
Šiauliai University
- providing share buy back services for quoted companies etc

Respondent 42
 
Current
Pohjola Lithuania - Cash Management Manager at Pohjola Bank Plc
Previous
AB bankas "Snoras", 

Unicredit bank
Education
Vilniaus Universitetas
-Financial Markets (forex, derivatives)


Respondent 43
 
Current
DNB- Corporate Banking Division Cash management advisor at DNB
Previous
DNB, 

Bank SNORAS, 

Creditreform
Education
Vilniaus Universitetas
-Run operations in the position of finance editor

Respondent 44
 
Current
Nordea Bank Finland Plc. Latvia branch - Head of Cash Management Solutions Baltics & acting Head of CM Manual Operations Baltics
Previous
Nordea Bank Finland Plc. Latvia branch
Education
Banku Augstskola
-Distributive ratio of development depending on the operation results


Respondent 45
 
Current
DNB Bankas - Head of Business region at DNB Bankas
Previous
DNB Bankas, 

UAB Intractus, 

NORD/LB Bankas
Education
Vilnius University
-Experienced B2B and B2C Marketing Professional

Respondent 46
 
Current
SEB Lietuvoje - Client Executive at SEB Large Corporate Department
Previous
DNB, 

Lietuvos Geležinkeliai, AB
Education
Vilniaus Universitetas
-Market research, Strategic planning, Communication,


Respondent 47
 
Previous
DNB, - Head of Marketing and Sales

Aurela
Education
Mykolo Romerio Universitetas
-Resources/ process optimization, Team leadership and supervision,


Respondent 48
 
Previous
UniCredit Bank Estonian Branch - Senior Consultant
Development Manager at DNB Pank
-Business development, Representation, Project management.
-Certified Project Designer (CPD)

Respondent 49
 
Previous
DNB, - Recruitment Manager

DnB NORD, 

KredEx
Education
Tallinn University of Technology, Estonia
Websites
Personal Website

Blog
-Company Restructurization and Resourses Optimization, Branding and Identity
-London - Microstrategy Education


Respondent 50
 
Current
DNB - Sales & service specialist
Previous
UAB Markuciai, 

Alytaus rajono svietimo ir pedagogines psichologines pagalbos centras
Education
Vytauto Didžiojo universitetas
-Media production and distribution, Client Service and Loyalty program


Respondent 51
 
Current
DNB Lithuania - Client consultant
Previous
DNB Lithuania, 

Bite Lietuva
Education
Vilnius Gediminas Technical University
-Employee/Consultant with focus in: Banking & Financial Services
-Microstrategy University Bootcamp - USA


Respondent 52
 
Current
Vivalte & Co, - Short-term credit analyst

Hansanet, 

Noblessa Baltic
Previous
Business IT Partner, 

SEB IT Partner Estonia, 

Eesti Ühispank (SEB Estonia)
Education
Rīgas Ekonomikas augstskola - Stockholm School of Economics in Riga
-Markets Capital Management; Risk Managing

Respondent 53
 
Current
Lattelecom BPO - Senior short-term credit analyst
Previous
FORUS Bank, 

Citadele banka, 

AS Parex Banka
Education
Great Britain "Chartered Institute of Bankers"
-RWA processing data base, reporting


Respondent 54
 
Current
Citadele banka - Short-term credit products project manager
Previous
SEB banka Latvia, 

Vidzeme Region, 

Sigulda branch
Education
Latvijas Universitate
Credit products with focus in: Banking & Financial Services


Respondent 55
 
Current
Lattelecom BPO - Product development and sales support project team leader
Previous
FORUS Bank, 

Citadele banka, 

AS Parex Banka
Education
Great Britain "Chartered Institute of Bankers"
-manage and supervise sales and marketing activities

Respondent 56
 
Current
Citadele banka - Payment Card Product Development Division
Previous
Rīgas pirmā garāža SIA
Education
University of Latvia
-end-user training, consulting, best practices


Respondent 57
 
Current
TKB, - Head of payment card development and loyalty department

JSC "Citadele Banka"
Previous
JSC Citadele Banka
Involved in all aspects of the development life-cycle: Requirement Analysis


Respondent 58
 
Current
Superum AG, - Deputy Head of Support Division

Strategy Investment Sia
Previous
Citadele banka, 

Citadele Asset Management, 

Someplace Else
Education
Banku Augstskola
-Microstrategy and with skills in database technologies.

Respondent 59
 
Previous
Swedbank, - Risk Manager

SEB, 

SEB Merchant Banking
Education
Latvijas Universitate
-Configuration Management, Project Management and System Integration.


Respondent 60
 
Current
Bank M2M Europe AS - Head of Product Development Division
Previous
Citadele banka, 

Parex Bank, 

Swedbank
Education
University of Latvia
Websites
Company Website
-Business Intelligence, Data Warehouse, Data Modeling