Does Corporate Responsibility and a Focus on Sustainability Pay?

In a word, Yes!

Case Western Reserve University compiled the most compelling facts, figures and cases in a presentation titled "The Top 10 Reasons Why the Business Case for Sustainability is Strong."  The presentation suggests the top avenues or drivers a company might use to achieve sustainable value creation.

Does it Cost More?
No! Contrary to the conventional wisdom that it costs more to be responsible than it is worth: the fact is, the exact opposite is true. Responsible companies on average outperform their less responsible peers by up to 25%.

The Morgan Stanley Capital International World Index of 602 companies found that the 186 highest-ranked companies outperformed the remaining 416 companies by 23.4 percent between January 2000 and October 2003.

Lynn Sharpe Pains, a Harvard Business Professor and author of Value Shift, reviewed 95 academic studies for the relationship between corporate financial and social performance. Although there is much to question about these studies, it is worth noting that only 4 of the 95 studies found a negative relationship between social and financial performance, and fifty-five studies found a positive correlation between better financial performance and better social performance.

Consider: An Innovest Strategic Value Advisors report looked at 60 research studies over six years, finding that 85 percent showed a positive correlation between CSR and financial performance.

Meanwhile, a meta-analysis (study of studies) by professors Marc Orlitzky, Frank Schmidt, and Sara Rynes looked at 52 studies over 30 years, finding a statistically significant positive association between CSR performance and financial performance.  This paper highlights the key findings of the 2004 report that won the Moskowitz Prize for excellence in social investment research.  View a presentation by professor Orlizky.

There has been extensive research on the subject.  A few more we would  recommend include:  

The European Business Forum developed a report in 2004 which provides a nice overview of the arguments for and againsts corporate responsibility, with case studies which support business sustainability.

Arthur D. Little report,"The Business Case for Corporate Citizenship" which does a nice job of outlining the benefit to business in eight areas.

KPMG developed a report titled "The Business Case for Sustainability."   In the report, Paul Anderson, BHP Managing Director and CEO says "From a business perspective, sustainable development is now a mainstream management issue for any company that believes it has a future in the 21st century."

Another Arthur D. Little report, "Innovation High Ground," describes "how leading companies are using sustainability-driven innovation to win tomorrow's customers."

Leading Investors
According to the Social Investment Forum, Socially Responsible Investing (SRI) is an investment process that considers social and environmental consequences of investments, both positive and negative, within the context of rigorous financial analysis.  In their 2005 Report on Socially Responsible Investing Trends in the United States, they state that as of the end of 2005, over $2.3 trillion was invested in SRI funds, a 15x increase since 1995.

Kummunalkredit Dexia Asset Management developed an analysis about the stock exchange performance of members of the World Business Council for Sustainable Development (WBCSD). 

Leading Businesses
The World Business Council for Sustainable Development (WBCSD) is a CEO-led, global association of some 190 multinational corporations dealing exclusively with business and sustainable development.

The WBCSD developed a report titled From Challenge to Opportunity: The role of business in tomorrow's society. This Tomorrow’s Leaders group signed a “Manifesto for tomorrow’s global business” in the beginning of their report.

According to the CEOs,“Our major contribution to society will… come through our core business rather than through our philanthropic programs,” the manifesto says, offering a traditional view of business that would comfort most CEOs.

Further, they say “We believe that the leading global companies of 2020 will be those that provide goods and services and reach new customers in ways that address the world’s major challenges – including poverty, climate change, resource depletion globalization and demographic shifts."