The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance
AbstractWe investigate the effect of a corporate culture of sustainability on multiple facets of corporate behavior and performance outcomes. Using a matched sample of 180 companies, we find that corporations that voluntarily adopted environmental and social policies by 1993 – termed as High Sustainability companies – exhibit fundamentally different characteristics from a matched sample of firms that adopted almost none of these policies – termed as Low Sustainability companies. In particular, we find that the boards of directors of these companies are more likely to be responsible for sustainability and top executive incentives are more likely to be a function of sustainability metrics. Moreover, they are more likely to have organized procedures for stakeholder engagement, to be more long-term oriented, and to exhibit more measurement and disclosure of nonfinancial information. Finally, we provide evidence that High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance. The outperformance is stronger in sectors where the customers are individual consumers, companies compete on the basis of brands and reputation, and in sectors where companies’ products significantly depend upon extracting large amounts of natural resources.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17950.
Date of creation: Mar 2012
Date of revision:
Publication status: published as Robert G. Eccles, Ioannis Ioannou, George Serafeim. "The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance," in Luigi Zingales and James Poterba, Organizers, "Causes and Consequences of Corporate Culture" Elsevier, Journal of Financial Economics (2014)
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Find related papers by JEL classification:
- G3 - Financial Economics - - Corporate Finance and Governance
- M14 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-04-10 (All new papers)
- NEP-BEC-2012-04-10 (Business Economics)
- NEP-ENV-2012-04-10 (Environmental Economics)
- NEP-HRM-2012-04-10 (Human Capital & Human Resource Management)
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