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http://www.strategy-business.com/blog/Are-Good-Corporate-Citizens-Rewarded?gko=!"#c$utm%source=itw$utm%medium=&!'(!)&$utm%campaign=resp

Are Good Corporate CitizensRewarded?

Bottom Line:Large U.S. firms with a sustainability program see an

uptick in financial performance and have a positive impact on the

environment around them.

In the last several years, few business issues have provoked as much debateand disagreement as the value and sincerity of corporate responsibility

activities CRAs!" #ome people are willing to give companies the benefit of

the doubt and applaud their sustainability campaigns as a step in the right

direction" $ut the many skeptics see it differently" %hey view CRA initiatives

as merely &greenwashing,' no more than a marketing ploy designed to curry

favor with environmentally conscious consumers, investors, and employees"

(herever the truth lies, one thing is certain) *ore and more firms are

making a point of releasing an annual report about their social responsibility

practices via their own websites or a third+party assessor" In ust one

e-ample, the number of companies that documented their sustainability

initiatives with the widely respected nonprofit Global Reporting

InitiativeGRI! . which provides a publicly accessible and comprehensive

framework for evaluating CRAs . surged nearly five+fold between /01/ and

/012, according to GRI3s data"

4et, despite all the talk and activity surrounding sustainability, a looming

dispositive 5uestion remains" 6o CRAs actually boost a firm3s financial

performance and improve the social and environmental landscape?

According to a new study, whose authors carefully disentangled the

http://www.strategy-business.com/blog/Are-Good-Corporate-Citizens-Rewarded?gko=4089c&utm_source=itw&utm_medium=20160524&utm_campaign=resphttp://www.strategy-business.com/blog/Are-Good-Corporate-Citizens-Rewarded?gko=4089c&utm_source=itw&utm_medium=20160524&utm_campaign=resphttps://www.globalreporting.org/Pages/default.aspxhttps://www.globalreporting.org/Pages/default.aspxhttp://onlinelibrary.wiley.com/doi/10.1111/basr.12075/abstracthttps://www.globalreporting.org/Pages/default.aspxhttps://www.globalreporting.org/Pages/default.aspxhttp://onlinelibrary.wiley.com/doi/10.1111/basr.12075/abstracthttp://www.strategy-business.com/blog/Are-Good-Corporate-Citizens-Rewarded?gko=4089c&utm_source=itw&utm_medium=20160524&utm_campaign=resphttp://www.strategy-business.com/blog/Are-Good-Corporate-Citizens-Rewarded?gko=4089c&utm_source=itw&utm_medium=20160524&utm_campaign=resp

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multifaceted effects of corporate responsibility among 7ortune 200 firms,

the answer is a decided yes"

In line with most research, the authors defined corporate responsibility asvoluntary corporate activities designed to improve or respond to social,

environmental or economic conditions8that are undertaken to build a

corporate social performance (CSP) posture" Given this description, the

breadth of activities under the corporate responsibility umbrella is massive,

encompassing both internal and e-ternal initiatives" 6eveloping

environmentally friendly products, working with local communities,

investing in employee relations, taking a stand on human rights issues, and

reducing the carbon footprint of a supply chain are ust a few ways that firms

try to behave in a socially responsible manner"

#ince /002,ortune has published a ranking of the top 200 global firms in

terms of gross revenue" 9imiting their focus to :"#" companies, the authors

analyzed 1/; firms that made the list in /00< to determine how many had

adopted social responsibility programs" 7or those that had, the researchers

assessed the effectiveness of the programs3 efforts as well as their impact on

financial performance a year later"

About

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companies with CRAs improved their rating the following year, showing that

an investment in sustainability has tangible aftereffects" %he improvement

was especially pronounced, the authors found, for so+called secondary

stakeholders . the communities, partners, and labor pools affected by thebusiness activities of large firms" %his finding clashes with the prevalent

view, the authors note> many people suspect that corporate sustainability

initiatives do not improve local lifestyle and environmental conditions in

areas impacted by big business"

And the positive effects are also felt on the accounting side" #ocially

responsible firms had a higher %obin3s ratio . a commonly used metric

that measures the stock market value of a firm against its overall assets" In

addition, firms with CRAs e-perienced positive revenue flow, had higher

asset levels, and saw the ratio of their market value to asset value increase by

0"/ percent over the subse5uent year"

Although they clearly found evidence of significant corporate responsibility

activity, the authors were not able to determine how e-tensive these

sustainability efforts really are and whether altruism or marketing was

motivating corporate activities" @owever, the researchers posit that firms

launch CRA campaigns because they fear the backlash that comes from

harming the environment or communities that they operate in" lus, the

authors write, most people still have low e-pectations of firms3 CRAs, so even

a relatively minor investment in doing good is likely to create a favorable

opinion"

In an ideal world, as the authors note, managers who oversee their firm3s

CRAs would be able to invest in a full range of internal and e-ternal

sustainability initiatives, including environmental programs, employee

training, charitable contributions, and more" $ut companies in all industries

face substantial cost constraints, especially as globalization continues to take

hold, and those responsible for sustainability initiatives face increasing

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scrutiny of their choices" %hey are e-pected to opt for proects that dovetail

with the firm3s overall strategic outlook"

%hen again, difficult business conditions may provide the perfect

opportunity for companies to differentiate themselves by pledging their

increasingly scarce resources to CRAs in the broadest possible conte-t, the

authors suggest, especially as social responsibility becomes an ever more

viable and valuable aspect of doing business on a global scale"

Source:&6oing (ell by Reporting Good) Reporting Corporate

Responsibility and Corporate erformance,' by Begoo 9ee #tonehill College!

and #ylvia *a-field rovidence College!,!usiness and Society "eview, 6ec"

/012, vol" 1/0, no" =

http://onlinelibrary.wiley.com/doi/10.1111/basr.12075/abstracthttp://onlinelibrary.wiley.com/doi/10.1111/basr.12075/abstracthttp://onlinelibrary.wiley.com/doi/10.1111/basr.12075/abstracthttp://onlinelibrary.wiley.com/doi/10.1111/basr.12075/abstract