Working Paper | HBS Working Paper Series | 2013

The Impact of Corporate Sustainability on Organizational Processes and Performance

by Robert G. Eccles, Ioannis Ioannou and George Serafeim

Abstract

We investigate the effect of corporate sustainability on organizational processes and performance. Using a matched 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 organizational processes 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 be a 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.

Keywords: Integrated Corporate Reporting; Corporate Disclosure; Policy; Corporate Social Responsibility and Impact; Organizational Culture; Performance Effectiveness; Business and Stakeholder Relations; Environmental Sustainability; Social Issues;

Citation:

Eccles, Robert G., Ioannis Ioannou, and George Serafeim. "The Impact of Corporate Sustainability on Organizational Processes and Performance." Harvard Business School Working Paper, No. 12-035, November 2011. (Revised May 2012, July 2013.)