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RESEARCH BRIEF: How the corporate citizenship pioneers are faring today: the benefits of early CSR policy adoption


Takeaway: Companies that create formal corporate citizenship policies—complete with targets, measures, and consequences—outperform over the long-term companies that do not.

Suggested Audience: Boards of Directors, top leaders, corporate citizenship managers and professionals, investor relations departments.

A recent study examined 180 U.S. firms to identify the long term impacts of corporate sustainability policies. Researchers analyzed data from 1993-2009 from 90 companies that adopted a comprehensive set of corporate policies relating to the environment, employees, community, products, and customers, as well as 90 that did not to determine how companies that adopted voluntary policies in 1993 have fared versus those that did not. The study found that the companies that created formal policies related to the environmental, social, and governance (ESG) aspects of business in the mid-90s perform better financially, have greater executive and stakeholder engagement, and a longer-term orientation.

Key findings:

Financial performance:

  • Companies that voluntarily adopted corporate citizenship policies in the mid-90’s:
    • Outperform in both the stock market and in accounting performance.
      • A $1 dollar investment in a company with CSR policies in 1993 (in an equal weighted portfolio) would have grown to $22.6 by the end of 2010, compared to $15.4 for companies without policies.
    • Companies with robust CSR policies also have better return on equity (ROE) and return on assets (ROA).
      • This performance is more pronounced in companies that have some combination of the following attributes:
        • B2C
        • Compete on the basis of brand and reputation
        • Make substantial use of natural resources.

Practices more likely to be employed by companies that have adopted corporate citizenship policies include the following: 

  • Companies that voluntarily adopted corporate citizenship policies in the mid-90’s:
    • Are significantly more likely to assign responsibility of sustainability to the board of directors, and to form a separate sustainability board committee.
    • Are more likely to link executive compensation to environmental, social, and external perception metrics.
    • Have a longer-term orientation. They are owned by proportionately more long-term oriented investors and communicate more long-term information with sell-side analysts.
    • Are more likely to measure information related to key stakeholders such as employees, and suppliers, and are more likely to use auditing measures to increase credibility.
    • Are more likely to measure and disclose more nonfinancial data.

The researchers suggest that there is a relationship between the better financial performance and the practices note above.

If citing, please refer to original article: Eccles, R.G., Ioannou, I., & Serafeim, G. (2014). The Impact of Corporate Sustainability on Organizational Processes and Performance. Management Science: 60 (11), 2835-2857.

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