IDEAS home Printed from https://ideas.repec.org/a/wly/corsem/v28y2021i2p786-795.html
   My bibliography  Save this article

Sustainability stewardship: Does roundtable on sustainable palm oil certification create shareholder value?

Author

Listed:
  • Yeong Sheng Tey
  • Mark Brindal

Abstract

The adoption of sustainability standards is often viewed as a profitability conundrum by palm oil firms and their shareholders. This study examines whether, considering the inherent risk, the Roundtable on Sustainable Palm Oil (RSPO) sustainability initiative creates shareholder value. Based on the panel information of plantation firms listed on the Indonesia and Kuala Lumpur Stock Exchanges, RSPO‐certified firms earned mixed risk‐adjusted performance results relative to non‐RSPO and total palm oil portfolios. They also demonstrated a limited probability for upside growth. Additionally, it is possible that institutionalized sustainability standards do not address all the environmental, social and governance pillars that should constitute sustainable investing. Consequently, business operators and investors seeking improved performance should focus on the fundamentals whilst incorporating sustainability standards.

Suggested Citation

  • Yeong Sheng Tey & Mark Brindal, 2021. "Sustainability stewardship: Does roundtable on sustainable palm oil certification create shareholder value?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(2), pages 786-795, March.
    • Handle: RePEc:wly:corsem:v:28:y:2021:i:2:p:786-795
    DOI: 10.1002/csr.2088
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/csr.2088
    Download Restriction: no
    File URL: https://libkey.io/10.1002/csr.2088?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Emiel Duuren & Auke Plantinga & Bert Scholtens, 2016. "ESG Integration and the Investment Management Process: Fundamental Investing Reinvented," Journal of Business Ethics, Springer, vol. 138(3), pages 525-533, October.
    2. Glasbergen, Pieter, 2018. "Smallholders do not Eat Certificates," Ecological Economics, Elsevier, vol. 147(C), pages 243-252.
    3. Radiah Othman & Rashid Ameer, 2010. "Environmental disclosures of palm oil plantation companies in Malaysia: a tool for stakeholder engagement," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 17(1), pages 52-62, January.
    4. Gunnar Friede & Timo Busch & Alexander Bassen, 2015. "ESG and financial performance: aggregated evidence from more than 2000 empirical studies," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 5(4), pages 210-233, October.
    5. Nazim Hussain & Ugo Rigoni & Elisa Cavezzali, 2018. "Does it pay to be sustainable? Looking inside the black box of the relationship between sustainability performance and financial performance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 25(6), pages 1198-1211, November.
    6. Yeong Sheng Tey & Mark Brindal & Suryani Darham & Shaufique Fahmi Ahmad Sidique & Marcel Djama, 2020. "Early mover advantage in Roundtable on Sustainable Palm Oil certification: a panel evidence of plantation companies," Post-Print hal-02544243, HAL.
    7. Clive Gaunt, 2004. "Size and book to market effects and the Fama French three factor asset pricing model: evidence from the Australian stockmarket," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 44(1), pages 27-44, March.
    8. Mansi Jain & Gagan Deep Sharma & Mrinalini Srivastava, 2019. "Can Sustainable Investment Yield Better Financial Returns: A Comparative Study of ESG Indices and MSCI Indices," Risks, MDPI, vol. 7(1), pages 1-18, February.
    9. Michael Cappucci, 2018. "The ESG Integration Paradox," Journal of Applied Corporate Finance, Morgan Stanley, vol. 30(2), pages 22-28, June.
    10. Schouten, Greetje & Bitzer, Verena, 2015. "The emergence of Southern standards in agricultural value chains: A new trend in sustainability governance?," Ecological Economics, Elsevier, vol. 120(C), pages 175-184.
    11. Manapon Limkriangkrai & SzeKee Koh & Robert B. Durand, 2017. "Environmental, Social, and Governance (ESG) Profiles, Stock Returns, and Financial Policy: Australian Evidence," International Review of Finance, International Review of Finance Ltd., vol. 17(3), pages 461-471, September.
    12. Ruysschaert, Denis & Salles, Denis, 2014. "Towards global voluntary standards: Questioning the effectiveness in attaining conservation goals," Ecological Economics, Elsevier, vol. 107(C), pages 438-446.
    13. Eusebius Pantja Pramudya & Otto Hospes & C. J. A. M. Termeer, 2017. "Governing the Palm-Oil Sector through Finance: The Changing Roles of the Indonesian State," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 53(1), pages 57-82, January.
    14. Yeong Sheng Tey & Mark Brindal & Suryani Darham & Shaufique Fahmi Ahmad Sidique & Marcel Djama, 2020. "Factors influencing sustainability certification among plantation companies in Malaysia: a panel approach," Post-Print hal-03127366, HAL.
    15. Switzer, Lorne N., 2010. "The behaviour of small cap vs. large cap stocks in recessions and recoveries: Empirical evidence for the United States and Canada," The North American Journal of Economics and Finance, Elsevier, vol. 21(3), pages 332-346, December.
    16. Verónica León‐Bravo & Antonella Moretto & Raffaella Cagliano & Federico Caniato, 2019. "Innovation for sustainable development in the food industry: Retro and forward‐looking innovation approaches to improve quality and healthiness," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(5), pages 1049-1062, September.
    17. Urquhart, Andrew & Hudson, Robert, 2013. "Efficient or adaptive markets? Evidence from major stock markets using very long run historic data," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 130-142.
    18. Yohanes B. Kadarusman & Astrid G. Herabadi, 2018. "Improving Sustainable Development within Indonesian Palm Oil: The Importance of the Reward System," Sustainable Development, John Wiley & Sons, Ltd., vol. 26(4), pages 422-434, July.
    19. Pye, Oliver, 2019. "Commodifying sustainability: Development, nature and politics in the palm oil industry," World Development, Elsevier, vol. 121(C), pages 218-228.
    20. Tim Verheyden & Robert G. Eccles & Andreas Feiner, 2016. "ESG for All? The Impact of ESG Screening on Return, Risk, and Diversification," Journal of Applied Corporate Finance, Morgan Stanley, vol. 28(2), pages 47-55, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tan, Yafei & Zhu, Zhaohui, 2022. "The effect of ESG rating events on corporate green innovation in China: The mediating role of financial constraints and managers' environmental awareness," Technology in Society, Elsevier, vol. 68(C).
    2. Ahmed Zainul Abideen & Veera Pandiyan Kaliani Sundram & Shahryar Sorooshian, 2023. "Scope for Sustainable Development of Small Holder Farmers in the Palm Oil Supply Chain—A Systematic Literature Review and Thematic Scientific Mapping," Logistics, MDPI, vol. 7(1), pages 1-24, January.
    3. Ford, Jansson M. & Gehricke, Sebastian A. & Zhang, Jin E., 2022. "Option traders are concerned about climate risks: ESG ratings and short-term sentiment," Journal of Behavioral and Experimental Finance, Elsevier, vol. 35(C).
    4. van der Ven, Hamish & Sun, Yixian & Cashore, Benjamin, 2021. "Sustainable commodity governance and the global south," Ecological Economics, Elsevier, vol. 186(C).
    5. Cordula Hinkes, 2020. "Adding (bio)fuel to the fire: discourses on palm oil sustainability in the context of European policy development," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(8), pages 7661-7682, December.
    6. Marola, Elena & Schöpfner, Judith & Gallemore, Caleb & Jespersen, Kristjan, 2020. "The bandwidth problem in telecoupled systems governance: Certifying sustainable winemaking in Australia and Chile," Ecological Economics, Elsevier, vol. 171(C).
    7. Bharat Kumar Meher & Iqbal Thonse Hawaldar & Latasha Mohapatra & Cristi Spulbar & Ramona Birau, 2020. "The Effects of Environment, Society and Governance Scores on Investment Returns and Stock Market Volatility," International Journal of Energy Economics and Policy, Econjournals, vol. 10(4), pages 234-239.
    8. Rodrigo Zeidan, 2022. "Why don't asset managers accelerate ESG investing? A sentiment analysis based on 13,000 messages from finance professionals," Business Strategy and the Environment, Wiley Blackwell, vol. 31(7), pages 3028-3039, November.
    9. Alaa Aldowaish & Jiro Kokuryo & Othman Almazyad & Hoe Chin Goi, 2022. "Environmental, Social, and Governance Integration into the Business Model: Literature Review and Research Agenda," Sustainability, MDPI, vol. 14(5), pages 1-20, March.
    10. Luigi Aldieri & Alessandra Amendola & Vincenzo Candila, 2023. "The Impact of ESG Scores on Risk Market Performance," Sustainability, MDPI, vol. 15(9), pages 1-16, April.
    11. Choi, Gahyun & Park, Kwangyeol & Yi, Eojin & Ahn, Kwangwon, 2023. "Price fairness: Clean energy stocks and the overall market," Chaos, Solitons & Fractals, Elsevier, vol. 168(C).
    12. Eusebius Pantja Pramudya & Lukas Rumboko Wibowo & Fitri Nurfatriani & Iman Kasiman Nawireja & Dewi Ratna Kurniasari & Sakti Hutabarat & Yohanes Berenika Kadarusman & Ananda Oemi Iswardhani & Rukaiyah , 2022. "Incentives for Palm Oil Smallholders in Mandatory Certification in Indonesia," Land, MDPI, vol. 11(4), pages 1-28, April.
    13. Meles, Antonio & Salerno, Dario & Sampagnaro, Gabriele & Verdoliva, Vincenzo & Zhang, Jianing, 2023. "The influence of green innovation on default risk: Evidence from Europe," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 692-710.
    14. Husain, Shaiara & Sohag, Kazi & Wu, Yanrui, 2022. "The response of green energy and technology investment to climate policy uncertainty: An application of twin transitions strategy," Technology in Society, Elsevier, vol. 71(C).
    15. Leonardo Becchetti & Emanuele Bobbio & Federico Prizia & Lorenzo Semplici, 2022. "Going Deeper into the S of ESG: A Relational Approach to the Definition of Social Responsibility," Sustainability, MDPI, vol. 14(15), pages 1-22, August.
    16. Clementino, Ester & Perkins, Richard, 2020. "How do companies respond to environmental, social and governance (ESG) ratings? Evidence from Italy," LSE Research Online Documents on Economics 103046, London School of Economics and Political Science, LSE Library.
    17. Li, WeiWei & Padmanabhan, Prasad & Huang, Chia-Hsing, 2024. "ESG and debt structure: Is the nature of this relationship nonlinear?," International Review of Financial Analysis, Elsevier, vol. 91(C).
    18. Lukas Benz & Stefan Paulus & Julia Scherer & Janik Syryca & Stefan Trück, 2021. "Investors' carbon risk exposure and their potential for shareholder engagement," Business Strategy and the Environment, Wiley Blackwell, vol. 30(1), pages 282-301, January.
    19. Eduardo Duque-Grisales & Javier Aguilera-Caracuel, 2021. "Environmental, Social and Governance (ESG) Scores and Financial Performance of Multilatinas: Moderating Effects of Geographic International Diversification and Financial Slack," Journal of Business Ethics, Springer, vol. 168(2), pages 315-334, January.
    20. Annebeth Roor & Karen Maas, 2024. "Do impact investors live up to their promise? A systematic literature review on (im)proving investments' impacts," Business Strategy and the Environment, Wiley Blackwell, vol. 33(4), pages 3707-3732, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:corsem:v:28:y:2021:i:2:p:786-795. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1002/(ISSN)1535-3966 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.