The Impact of Corporate Sustainability on Organizational Processes and Performance

TLDR

The study examines how corporate sustainability influences organizational processes and performance. The authors compare 180 U.S. firms that adopted sustainability policies early with matched firms that did not, assessing differences in organizational processes by 2009. High sustainability firms have sustainability‑focused boards, executive pay linked to sustainability metrics, stronger stakeholder engagement, long‑term orientation, greater nonfinancial disclosure, and outperform peers in stock market and accounting performance.

Abstract

We investigate the effect of corporate sustainability on organizational processes and performance. Using a matched sample of 180 U.S. 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 companies that adopted almost none of these policies—termed as low sustainability companies. The boards of directors of high sustainability 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. 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, high sustainability companies significantly outperform their counterparts over the long term, both in terms of stock market and accounting performance. This paper was accepted by Bruno Cassiman, business strategy.