Corporate social responsibility, environmental leadership and financial performance

Abstract

In this study we statistically assess the relationship between corporate characteristics, environmental contribution, and financial performance. To this end, we compare the financial performance of all US corporations that have composed the Dow Jones Sustainability Indexs (DJSI), being the most proactive companies in providing services and goods while maintaining ethical responsibility and environmental sustainability. Performance is compared to mean performance of the related industry, sector, and the market portfolio. Our analysis suggest that firms who are proactive supporting Social Responsibility and Environmental Sustainability (SRER corporations) are characterized by significantly higher profit measures than the industry and the sector, though not higher than the entire market; have lower short term liquidity than that of the industry and the related sector, and surprisingly their long term leverage is significantly higher. High SRER corporations are characterized by significantly higher managerial efficiency ratios than the respective industry and the sector. Interestingly, the per-worker ratios are significantly lower than all the benchmarks. These results illustrate the strong relation between social and environmental sustainability and the long term business plan. Results extend existing literature that has restricted attention to Corporate Social Responsibility and financial performance, but have left aside sustainability.

Sustainable development and economic performance: Gaps and trends for future research

“…Many of the authors chose not to establish a proper method of measuring the environmental aspect of sustainability by comparing companies belonging to sustainability/social responsibility indices to their counterparts (Adegbite et al, ; DiSegni et al, ; Lee et al, ), analyzing the act of environmental disclosure and its effects on financial performance (Said et al, ), and possessing an environmental friendly certification (Krause, ). There is, however, a great variety of variables which were created to measure environmental performance specifically.…”

“…They found that there is a significant negative short-term impact of CSR adoption and business performance. The CSR-CFP Corporate Financial Performance (CFP) relationship was visited again by several authors (Škare & Golja, 2012;Pätäri, Arminen, Tuppura, & Jantunen, 2014;Vergini, Jacomossi, Turra, & Hein, 2015;Rodriguez-Fernandez, 2016;Carini, Comincioli, Poddi, & Vergalli, 2017;Choongo, 2017;Oh, Hong, & Hwang, 2017;Ang & Weber, 2018;Beck, Frost, & Jones, 2018;Hategan, Sirghi, Curea-Pitorac, & Hategan, 2018;Cherian et al, 2019;Lin, Hung, et al, 2019;Lin, Law, et al, 2019), some of which considered environmental leadership (DiSegni, Huly, & Akron, 2015), its impact on innovation, and firm performance as possible moderating variables (Martinez-Conesa, Soto-Acosta, & Palacios-Manzano, 2017). Ekatah, Samy, Bampton, and Halabi (2011) sought to explore whether CSR is linked to profitability employing simple statistic methods and linear regression.…”

“…The most commonly employed market valuation variables for financial performance were 5-year cumulative share increase (DiSegni et al, 2015), capital asset pricing model (Carini et al, 2017), and value in trading day compared to value on previous trading day (Ang & Weber, 2018).…”

Sustainability Matter and Financial Performance of Companies

“…ROA ratio represents the relative profitability of asset utilization and measures managerial efficiency [10,72,73]. In this way we intend to evaluate the effect of ROA, along with other control conditions, on the relationship between social performance and ROE.…”

Incorporating Role of Stakeholders into Corporate CSR Strategy For Sustainable Growth: An Exploratory Study

“…During this era, CSR is an action tool of top management for long-term success, as described in earlier research by Gray, Owen and Adams (1996), since many corporate organisations believe that success with CSR strategies will lead to success in organisation performance too, as it constitutes a benefit not only to the society but to the business itself also (Ditlev-Simonsen & Midttun, 2011;DiSegni, Huly, & Akron, 2015). Hence, a larger number of companies are engaged in a serious effort to define and integrate CSR strategies into all aspects of their businesses due to the globalization (Chen et al, 2015).…”