Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Corporate social responsibility increases company value

11.02.2008
Limiting the waste produced by a factory, creating safer working conditions for personnel or introducing products to the market that have not involved child labour are all matters that affect company profits. According to Lammertjan Dam, the other side of the coin is that corporate social responsibility (CSR) increases the value of a company. He claims that responsible business practices can prove profitable in the long run. Dam has been awarded a PhD by the University of Groningen on 7 February 2008.

In four sub-research projects, Dam investigated the economics of corporate social responsibility, with the emphasis on the role of financial markets and institutions. A great deal of contradictory literature has appeared in the last thirty years concerning the relationship between CSR and corporate financial performance.

Goodwill
Dam shows that current literature reveals a paradox by differentiating between the profits and the value of an enterprise. CSR costs money and thus reduces profits, but there is another type of value that should also be taken into account. ‘There is no trade value in a healthy environment or better working conditions, but there is appreciation. That appreciation can influence market forces via investors.’ Investors prefer not to invest in companies who engage in child labour or ignore environmental factors. This is not always because investors themselves consider these matters important, but also because ‘irresponsible’ behaviour is actually very risky behaviour. Responsible entrepreneurs will thus create some form of goodwill with investors. As a result, although CSR may not result in instant profits for a company, in the long run it will increase the final value of the enterprise.
No negative reactions in the stock market
In supplementary research, Dam concludes that the stock market does not react negatively towards banks who strive for sustainable development. He investigated the differences between banks that did and did not sign the Equator Principles: a treaty that obliges banks to adopt certain social and environmental benchmarks. Dam found no significant differences, except in the field of social performance. What he did notice was that it was mainly the larger banks who signed the principles. Dam: ‘Perhaps there are some costs involved and large banks can profit from economies of scale. Or else these banks just cannot risk being irresponsible because all eyes are trained on them.’
Future generations
Dam also investigated socially responsible investments. The perennial problem is that future generations will have to cope with the consequences of the pollution of today’s generations. According to Dam, one solution could be responsible investment. A company that links social and environmental principles to its working methods must continue to abide by these principles in order to preserve the value of its shares. Responsible investment is thus a way to link generations to each other and to stimulate sustainable development.
Pollution paradises
Finally, Dam investigated whether supposed ‘pollution paradises’ actually exist. He concludes that strict European social and environmental legislation does indeed mean that irresponsible multinationals have to move to developing countries. Moving to developing countries is not actually an attractive prospect for responsible enterprises. Dam: ‘I want to demonstrate with my thesis that external effects, for example poor environmental policy, child labour or poor social circumstances, will eventually reflect on the value of a company. Investors who look to the future will invest in companies that are not only profitable now, but will also create value in the future.’

Eelco Salverda | alfa
Further information:
http://www.rug.nl/staff/l.dam/index

More articles from Business and Finance:

nachricht Corporate coworking as a driver of innovation
22.11.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO

nachricht Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Frictional Heat Powers Hydrothermal Activity on Enceladus

Computer simulation shows how the icy moon heats water in a porous rock core

Heat from the friction of rocks caused by tidal forces could be the “engine” for the hydrothermal activity on Saturn's moon Enceladus. This presupposes that...

Im Focus: Nanoparticles help with malaria diagnosis – new rapid test in development

The WHO reports an estimated 429,000 malaria deaths each year. The disease mostly affects tropical and subtropical regions and in particular the African continent. The Fraunhofer Institute for Silicate Research ISC teamed up with the Fraunhofer Institute for Molecular Biology and Applied Ecology IME and the Institute of Tropical Medicine at the University of Tübingen for a new test method to detect malaria parasites in blood. The idea of the research project “NanoFRET” is to develop a highly sensitive and reliable rapid diagnostic test so that patient treatment can begin as early as possible.

Malaria is caused by parasites transmitted by mosquito bite. The most dangerous form of malaria is malaria tropica. Left untreated, it is fatal in most cases....

Im Focus: A “cosmic snake” reveals the structure of remote galaxies

The formation of stars in distant galaxies is still largely unexplored. For the first time, astron-omers at the University of Geneva have now been able to closely observe a star system six billion light-years away. In doing so, they are confirming earlier simulations made by the University of Zurich. One special effect is made possible by the multiple reflections of images that run through the cosmos like a snake.

Today, astronomers have a pretty accurate idea of how stars were formed in the recent cosmic past. But do these laws also apply to older galaxies? For around a...

Im Focus: Visual intelligence is not the same as IQ

Just because someone is smart and well-motivated doesn't mean he or she can learn the visual skills needed to excel at tasks like matching fingerprints, interpreting medical X-rays, keeping track of aircraft on radar displays or forensic face matching.

That is the implication of a new study which shows for the first time that there is a broad range of differences in people's visual ability and that these...

Im Focus: Novel Nano-CT device creates high-resolution 3D-X-rays of tiny velvet worm legs

Computer Tomography (CT) is a standard procedure in hospitals, but so far, the technology has not been suitable for imaging extremely small objects. In PNAS, a team from the Technical University of Munich (TUM) describes a Nano-CT device that creates three-dimensional x-ray images at resolutions up to 100 nanometers. The first test application: Together with colleagues from the University of Kassel and Helmholtz-Zentrum Geesthacht the researchers analyzed the locomotory system of a velvet worm.

During a CT analysis, the object under investigation is x-rayed and a detector measures the respective amount of radiation absorbed from various angles....

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Ecology Across Borders: International conference brings together 1,500 ecologists

15.11.2017 | Event News

Road into laboratory: Users discuss biaxial fatigue-testing for car and truck wheel

15.11.2017 | Event News

#Berlin5GWeek: The right network for Industry 4.0

30.10.2017 | Event News

 
Latest News

Underwater acoustic localization of marine mammals and vehicles

23.11.2017 | Information Technology

Enhancing the quantum sensing capabilities of diamond

23.11.2017 | Physics and Astronomy

Meadows beat out shrubs when it comes to storing carbon

23.11.2017 | Life Sciences

VideoLinks
B2B-VideoLinks
More VideoLinks >>>