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The Environmental, Social, Governance, and Financial Performance Effects on Companies that Adopt the United Nations Global Compact

Author

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  • Eduardo Ortas

    (Accounting and Finance Department, Faculty of Economics and Business Administration, University of Zaragoza, C\ Gran Vía nº2, 50005 Zaragoza, Spain)

  • Igor Álvarez

    (Financial Economics Department, Faculty of Economics and Business Administration, University of Basque Country, C\ Oñati nº1, 20018 San Sebastián, Spain)

  • Ainhoa Garayar

    (Financial Economics Department, Faculty of Economics and Business Administration, University of Basque Country, C\ Oñati nº1, 20018 San Sebastián, Spain)

Abstract

This paper aims to investigate companies’ environmental, social, governance (ESG), and financial implications of their commitment to the United Nations Global Compact (UNGC). The focus is placed on companies operating in the three countries with the highest number of UNGC participants: Spain, France, and Japan. The results clearly reveal that adoption of the UNGC often requires an organizational change that fosters stakeholder engagement, ultimately resulting in improvements in companies’ ESG performance. Additionally, the results reveal that ESG performance has a significant impact on financial performance for companies that adopted the principles of the UNGC. These findings provide both non-financial and financial incentives to companies to commit to this voluntary corporate social responsibility (CSR) initiative, which will have important implications on companies’ strategic management policies that aim to foster sustainable businesses and community development. Finally, the linkages between the UNGC-committed companies’ ESG and financial performance may be influenced by geographical spread, mainly due to the appearance of differences in the institutional, societal, and cultural settings.

Suggested Citation

  • Eduardo Ortas & Igor Álvarez & Ainhoa Garayar, 2015. "The Environmental, Social, Governance, and Financial Performance Effects on Companies that Adopt the United Nations Global Compact," Sustainability, MDPI, vol. 7(2), pages 1-25, February.
    • Handle: RePEc:gam:jsusta:v:7:y:2015:i:2:p:1932-1956:d:45759
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