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http://ssrn.com/abstract=1964011
 
 

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The Impact of Corporate Sustainability on Organizational Processes and Performance


Robert G. Eccles


Harvard Business School

Ioannis Ioannou


London Business School

George Serafeim


Harvard University - Harvard Business School

November 23, 2011

Management Science, Forthcoming

Abstract:     
We 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 many years ago – 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 instead of companies, companies compete on the basis of brands and reputations, and products significantly depend upon extracting large amounts of natural resources.

Number of Pages in PDF File: 46

Keywords: sustainability, corporate social responsibility, culture, governance, disclosure, performance

JEL Classification: M14, M40, M20, M52, G34

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Date posted: November 25, 2011 ; Last revised: April 15, 2014

Suggested Citation

Eccles, Robert G. and Ioannou, Ioannis and Serafeim, George, The Impact of Corporate Sustainability on Organizational Processes and Performance (November 23, 2011). Management Science, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1964011 or http://dx.doi.org/10.2139/ssrn.1964011

Contact Information

Robert G. Eccles
Harvard Business School ( email )
Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
Ioannis Ioannou
London Business School ( email )
Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom
02070008748 (Phone)
HOME PAGE: http://www.london.edu
George Serafeim (Contact Author)
Harvard University - Harvard Business School ( email )
381 Morgan Hall
Boston, MA 02163
United States
HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=15705
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