HOME | SN-BRIEFS |
SYSTEM OVERVIEW |
EFFECTIVE MANAGEMENT |
PROGRESS PERFORMANCE |
PROBLEMS POSSIBILITIES |
STATE CAPITALS |
FLOW ACTIVITIES |
FLOW ACTORS |
PETER BURGESS |
SiteNav | SitNav (0) | SitNav (1) | SitNav (2) | SitNav (3) | SitNav (4) | SitNav (5) | SitNav (6) | SitNav (7) | SitNav (8) |
Date: 2024-04-19 Page is: DBtxt001.php txt00006662 |
Ideas | ||
Burgess COMMENTARY | ||
Gmail Peter Burgess
Does anyone see validity in the reasoning here: 'Does CSR have an economic dark side?'
Does CSR have an economic dark side?
Once upon a time, I thought that corporate social responsibility (CSR) and sustainability would lead to economic pay-offs. I believed in a win-win scenario: Firms that did good for society and nature would do better economically over time, and higher financial performance would in turn allow these 'socially responsible' organizations to do even more good. In fact, some of my early studies sought to provide evidence for such a virtuous cycle.
Today, I am a skeptic. Now I believe that the pursuit of CSR may in fact undermine financial market dynamics. In general, sustainability projects do not change companies' underlying economic fundamentals. And when investors (or other market actors, such as governments) support corporate sustainability unrelated to economic fundamentals, stocks of all companies can be expected to become more volatile. Moreover, the stock of sustainability leaders (so-called 'vanguard companies') can become overvalued in what might be called a 'sustainability bubble.' In turn, broad pro-sustainability (investment and other) movements, combined with further stock price increases, may push companies to increase their spending on sustainability.
Here's why my perspective has changed. More details can be gleaned from this recent publication [PDF].
The law of unintended consequences
We must assume that sustainability creates noise in financial markets for two main reasons:
Bottom line
Let's bury the myth that there are no trade-offs between social or green initiatives and a healthy economy. Relationships between sustainability and corporate performance are highly variable and complex. Business executives must become more strategic and economically rational about 'socially responsible' actions. We need to abandon wishful thinking about concepts that engender so many emotional and moral connotations. Financially prudent managerial choices based on economic fundamentals ultimately will be best for society and nature because there is some empirical evidence supporting reverse causality: High economic growth promotes social and environmental progress (see, for example, Benjamin Friedman's 'The Moral Consequences of Economic Growth'). It is probably not the other way around as so many CSR advocates seem to believe.
Network for Business Sustainability (NBS) Thought Leaders offer guidance on sustainable business models for the 21st century. Thought Leaders are leading academics and practitioners, world experts on sustainability issues. This post was written by Marc Orlitzky, who has done foundational work on the connection between CSR and financial performance.
The story was reprinted from Network for Business Sustainability. Money photo by Pakhnyushcha via Shutterstock.
|
SITE COUNT< Blog Counters Reset to zero January 20, 2015 | TrueValueMetrics (TVM) is an Open Source / Open Knowledge initiative. It has been funded by family and friends. TVM is a 'big idea' that has the potential to be a game changer. The goal is for it to remain an open access initiative. |
WE WANT TO MAINTAIN AN OPEN KNOWLEDGE MODEL | A MODEST DONATION WILL HELP MAKE THAT HAPPEN | |
The information on this website may only be used for socio-enviro-economic performance analysis, education and limited low profit purposes
Copyright © 2005-2021 Peter Burgess. All rights reserved. |