Three quick takeaways on how CSR improves business value

In my earlier post this week I interviewed Alex Edmans of Wharton and London Business School, about his research on the links between CSR and business value.

A friend asked Alex for three simple takeaways for the busy executive. He kindly sent some. They are below, and provide a handy at-a-glance assessment.

The longer interview is here

Three key points to remember about the latest research on the business case for CSR:

1.      Employee welfare is positively related to firm value. While the idea that “companies do better if their workers are happier” is seemingly intuitive, this idea is contrary to traditional ways of managing workers, which holds that a dollar paid to workers is a dollar taken away from shareholders. Human resource departments are not just cost centres, but a positive source of value creation.
2.      CSR can improve firm value. Traditional thought is that considering other stakeholders (e.g. employees, customers, the environment) is at the expense of shareholders. Thus, socially responsible investing should underperform traditional investing, since responsible companies are distracted from the bottom line. My paper suggests that there need be no tension between CSR and profit.

3.      The market does not fully value intangibles such as stakeholder capital. The Best Companies lists are highly public, and I don’t start calculating returns until a month after each list is published. Thus, if the market were efficient, the stock prices of the companies listed in (say) April 2012 should rise as soon as the list is published, and so I should not earn superior returns by buying the firms in May 2012. My results suggest that the market doesn’t immediately recognise the benefits of stakeholder capital. As a result, we need to move beyond evaluating managers according to short-term performance to encourage them to consider the long-run health of their firms – and society. 


A slightly fuller (but still brief) non-technical summary of Alex's paper can also be found here.


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Three focused, detailed and practical sustainable business events for your diary

Upcoming Innovation Forum events in 2014:
Collaborate effectively with suppliers and NGOs, understand policy and enforcement trends
28th-29th October, 2014, London. More details here.

With: Unilever, Lord Mandelson, Greenpeace, Nestle, Wilmar, TFT, ADM, Mondelez, M&S and many others 

An exclusive two-day executive training workshop, certified by the CSR Training Institute
30-31 October, 2014, London. More details here.

With direct experience from: Arcelor Mittal, BP, Anglo American, Rexam, Golden Star, BHP Billiton, Shell, and many others 

How to get beyond policy, manage risk and build relationships

10 November, 2014, London. More details here.

With: John Lewis, ABB, Ericsson, Novartis, PUMA, the Economist, Oxfam and many others. 
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