Political Factors Affecting Corporate Sustainability Decisions: The Impact of Tariffs and Corruption on Adoption of UN Global Compact Principles

The global construction industry faces significant environmental and social sustainability challenges that hinder its alignment with the United Nations Sustainable Development Goals (SDGs). This study investigates the impact of country-level corruption and trade tariffs, and the moderating role of Intellectual Property Rights (IPR) protection, on construction firm SDG engagement. A quantitative analysis was conducted using an original dataset of 195 observations of construction firms across 31 countries collected from 2003 to 2022, with SDG engagement scores derived from public sources and country and institutional data from the World Bank and the Heritage Foundation. Ordinal logistic regression tested the direct and moderated effects of corruption, tariffs, and IPR on SDG engagement, controlling for other variables. The findings reveal that higher perceived home-country corruption and higher home-country tariffs are significantly and negatively associated with company SDG engagement scores. Stronger home-country IPR protection was found to weaken the negative impact of corruption and enhance the positive effects of lower tariffs on SDG engagement. Finally, the results highlight that institutional environments have a critical role in shaping firms’ sustainability actions, suggesting that effective governance, an open trade perspective, and intellectual property protection are key enablers of corporate SDG alignment. These findings contribute to the literature by providing evidence of how institutional quality can foster responsible business strategies in the construction industry and offer practical insights for policymakers seeking to reduce barriers to sustainable development.