Do Corporate Social Responsibility Engagements Lead to Real Environmental, Social and Governance Impact?
50 Pages Posted: 19 Oct 2016 Last revised: 28 Dec 2018
Date Written: August 31, 2018
We construct an event-based outcome measure of firm-level environmental, social, and governance (ESG) impact for public and private firms globally from 2007 to 2015 using data from RepRisk. Then, we measure the societal impact of corporate social responsibility (CSR) engagements using participation in the United Nations Global Compact as a proxy. We demonstrate a robust and striking difference between public and private firms: while private firms significantly reduce their negative ESG incident levels after UNGC engagements, public firms fail to do so and are more likely to engage in decoupled CSR actions---actions with no subsequent real impact. We then conduct a series of in-depth analyses to examine possible economic mechanisms. Our results are most consistent with shareholder--stakeholder conflicts of interest being the main moderator of decoupling. The intensity of this conflict is further moderated by three factors: ownership type, proximity to final consumers on the value chain, and specific ESG incident types. Other possible mechanisms such as selective entry into UNGC and heterogeneities in media exposure, country representation and entry timing do not survive our analysis. Our results suggest that existing CSR engagements and one-size-fits-all CSR policy mandates might not necessarily lead to better societal outcomes, and a multi-tiered policy targeting different ownership and industry types might be more efficient at maximizing ex-post ESG benefits.
Keywords: Corporate Social Responsibility, Environmental, Social and Governance, Shareholder and Stakeholder Interests
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