Corporate social responsibility increases company value
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.
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.’
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.
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
The most recent press releases about innovation >>>
Die letzten 5 Focus-News des innovations-reports im Überblick:
At the LASYS 2018, from June 5th to 7th, the Laser Zentrum Hannover e.V. (LZH) will be showcasing processes for the laser material processing of tomorrow in hall 4 at stand 4E75. With blown bomb shells the LZH will present first results of a research project on civil security.
At this year's LASYS, the LZH will exhibit light-based processes such as cutting, welding, ablation and structuring as well as additive manufacturing for...
There are videos on the internet that can make one marvel at technology. For example, a smartphone is casually bent around the arm or a thin-film display is rolled in all directions and with almost every diameter. From the user's point of view, this looks fantastic. From a professional point of view, however, the question arises: Is that already possible?
At Display Week 2018, scientists from the Fraunhofer Institute for Applied Polymer Research IAP will be demonstrating today’s technological possibilities and...
So-called quantum many-body scars allow quantum systems to stay out of equilibrium much longer, explaining experiment | Study published in Nature Physics
Recently, researchers from Harvard and MIT succeeded in trapping a record 53 atoms and individually controlling their quantum state, realizing what is called a...
Next-generation gravitational wave detector in space will complement LIGO on Earth
The historic first detection of gravitational waves from colliding black holes far outside our galaxy opened a new window to understanding the universe. A...
A team led by Austrian experimental physicist Rainer Blatt has succeeded in characterizing the quantum entanglement of two spatially separated atoms by observing their light emission. This fundamental demonstration could lead to the development of highly sensitive optical gradiometers for the precise measurement of the gravitational field or the earth's magnetic field.
The age of quantum technology has long been heralded. Decades of research into the quantum world have led to the development of methods that make it possible...