“The Sustainability Effect”: Making the Business Case for CSR

Sep 10, 2015 4:00 PM ET

“The Sustainability Effect”: Making the Business Case for CSR

The business case for CSR has been a common sense one. Improving the eco-efficiency and good governance of a business lowers costs, increases revenues, supports employee productivity and retention, and reduces risk. Now, research is digging deeper into data, finding that reputations of companies can be measured and tied to their market values, and that sustainability performance contributes significantly to those reputations. The new formula concludes that there is a “sustainability effect” on market value, a demonstrable ROI that introduces a new level of evidence to support the value of CSR programs and initiatives. The finding comes from Reputation Dividend, a U.K.-based consultancy. This firm performed a statistical examination of the reputational data reported in the Most Admired Companies studies published by Fortune in the U.S and by Management Today in the U.K. According to an in-depth report on the findings by Mark McElroy in a Sustainable Brands article, the analysis reveals that “market values are to a verifiable degree positively correlated with CSR performance.”  As McElroy notes, this is a business case for CSR that even Milton Friedman could love.

I’m John Howell for 3BL Media.

Episode Sources: 

Sustainable Brands

(The theoretical and statistical basis for this comes mainly from research performed over the past several years by Simon Cole and his team at Reputation Dividend, a UK-based consultancy with a presence in the U.S. Using reputation data reported in the Most Admired Companies studies published annually by Management Today in the UK and Fortune in the U.S., Cole and his colleagues have revealed the proportions of market caps directly attributable to corporate reputations, including their CSR performance. Market values, they have found, are to a verifiable degree positively correlated with CSR performance.)

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