Comment and Replication: The Impact of Corporate Sustainability on Organizational Processes and Performance

Abstract

Do High Sustainability companies have better financial performance than their Low Sustainability counterparts? An extremely influential publication in Management Science, “The Impact of Corporate Sustainability on Organizational Processes and Performance”, claims that they do. It has been cited thousands of times, referenced by Wall Street fund managers, and used in testimony before the U.S. Senate. Yet, after reviewing the report, I conclude that its critical findings are unjustified by its own evidence: its main method appears unworkable, a key finding is miscalculated, important results are uninterpretable, and the sample is biased by survival and selection. After correcting these problems, I replicate the original analysis and conduct additional empirical tests. Despite considering estimates from thousands of models, I find no reliable evidence for the proposed link between sustainability and financial performance.

Keywords: sustainability, corporate social responsibility, culture, governance, disclosure, performance, ESG (Environmental, Social, and Governance)

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