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The Impact of Corporate Sustainability on Organizational Processes and Performance

This 2011 report is a must-read for sustainability executives and a valuable go-to resource for engaging senior management in the benefits of sustainability integration.

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.

Authors:
Robert G. Eccles - Harvard Business School
Ioannis Ioannou - London Business School
George Serafeim - Harvard Business School

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