The Impact of Corporate Sustainability on Organizational Processes and Performance

Eccles, R, Ioannou, I and Serafeim, G (2014) The Impact of Corporate Sustainability on Organizational Processes and Performance. Management Science, 60 (11). pp. 2835-2857. ISSN 0025-1909

Abstract

We investigate the effect of corporate sustainability on organizational processes and performance. Using amatched sample of 180 US companies, we find that corporations that voluntarily adopted sustainability policies by 1993 -- termed as High Sustainability companies -- exhibit by 2009, distinct organizationalprocesses compared to a matched sample of firms that adopted almost none of these policies -- termed as Low Sustainability companies. We find that the boards of directors of these companies are more likely to be formally responsible for sustainability and top executive compensation incentives are more likely to bea function of sustainability metrics. Moreover, High Sustainability companies are more likely to have established processes for stakeholder engagement, to be more long-term oriented, and to exhibit higher 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 as well as accounting performance.