DO SUSTAINABLE COMPANIES HAVE BETTER FINANCIAL PERFORMANCE? REVISITING A SEMINAL STUDY

Abstract

Do high-sustainability companies have better financial performance?  An extremely influential publication, “The Impact of Corporate Sustainability on Organizational Processes and Performance,” claims they do.  Its 2014 appearance preceded a boom in sustainable investing, and scholars and practitioners have used it to explain these investments.  Yet I report here that replication and extension of the original analysis fails to reveal evidence that corporate sustainability influences either stock-market or accounting returns.  I then show that the original study also lacks evidence to support an inference that corporate sustainability leads to superior financial performance.  Finally, I discuss the importance of my findings for the practical accretion of knowledge.

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

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