The Impact of Corporate Sustainability on Organizational Processes and Performance

Management Science, Volume 60, Issue 11, pp. 2835-2857, February 2014

46 Pages Posted: 25 Nov 2011 Last revised: 1 Feb 2017

Robert G. Eccles

University of Oxford - Said Business School

Ioannis Ioannou

London Business School - Department of Strategic & International Management

George Serafeim

Harvard University - Harvard Business School

Multiple version iconThere are 2 versions of this paper

Date Written: December 23, 2014

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.

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

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

Suggested Citation

Eccles, Robert G. and Ioannou, Ioannis and Serafeim, George, The Impact of Corporate Sustainability on Organizational Processes and Performance (December 23, 2014). Management Science, Volume 60, Issue 11, pp. 2835-2857, February 2014. Available at SSRN: https://ssrn.com/abstract=1964011 or http://dx.doi.org/10.2139/ssrn.1964011

Robert G. Eccles

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Ioannis Ioannou

London Business School - Department of Strategic & International Management ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom
02070008748 (Phone)

HOME PAGE: http://www.ioannou.us

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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