Working Paper: NBER ID: w17950
Authors: Robert G. Eccles; Ioannis Ioannou; George Serafeim
Abstract: We investigate the effect of corporate sustainability on organizational processes and performance. Using a matched sample of 180 US companies, we find that corporations that voluntarily adopted sustainability policies by 1993 - termed as High Sustainability companies - exhibit by 2009 distinct organizational processes compared to a matched sample of companies that adopted almost none of these policies - termed as Low Sustainability companies. The boards of directors of High Sustainability companies are more likely to be formally responsible for sustainability and top executive compensation incentives are more likely to be a function of sustainability metrics. High Sustainability companies are more likely to have established processes for stakeholder engagement, to be more long-term oriented, and to exhibit higher measurement and disclosure of nonfinancial information. Finally, High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.
Keywords: Corporate Sustainability; Organizational Performance; Stakeholder Engagement
JEL Codes: G31; M14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| High sustainability companies (Q01) | Organizational processes (L23) |
| Type of market influences sustainability's impact on performance (L10) | High sustainability companies outperform low sustainability companies (Q01) |
| Adoption of sustainability policies (Q52) | Governance structures (G38) |
| High sustainability companies (Q01) | Stock market performance (G10) |
| High sustainability companies (Q01) | Accounting performance (M41) |