This study examines the organizational and performance implications of integrating social and environmental issues into a company's strategy and business model. The researchers identify 90 "High Sustainability" companies that have adopted environmental and social policies since the early to mid-1990s, and compare them to 90 "Low Sustainability" companies that have adopted almost none of these policies. They find that High Sustainability firms have a distinct governance structure, a long-term approach to maximizing profits, an active stakeholder management process, and more developed measurement and reporting systems. These firms also outperform Low Sustainability firms in both stock market and accounting performance.
Top Highlights
Neoclassical economics and several management theories assume that the corporation’s objective is profit maximization subject to capacity (or other) constraints.
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 ...
We find that the boards of directors of these 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
Moreover, 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, we provide evidence that High Sustainability companies significantly outperform their counterparts over the long-term,...
The key agent in such models is the shareholder, acting as the ultimate residual claimant who provides the necessary financial resources for the firm’s operations
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