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:
A newly developed laser technology has enabled physicists in the Laboratory for Attosecond Physics (jointly run by LMU Munich and the Max Planck Institute of Quantum Optics) to generate attosecond bursts of high-energy photons of unprecedented intensity. This has made it possible to observe the interaction of multiple photons in a single such pulse with electrons in the inner orbital shell of an atom.
In order to observe the ultrafast electron motion in the inner shells of atoms with short light pulses, the pulses must not only be ultrashort, but very...
A group of researchers led by Andrea Cavalleri at the Max Planck Institute for Structure and Dynamics of Matter (MPSD) in Hamburg has demonstrated a new method enabling precise measurements of the interatomic forces that hold crystalline solids together. The paper Probing the Interatomic Potential of Solids by Strong-Field Nonlinear Phononics, published online in Nature, explains how a terahertz-frequency laser pulse can drive very large deformations of the crystal.
By measuring the highly unusual atomic trajectories under extreme electromagnetic transients, the MPSD group could reconstruct how rigid the atomic bonds are...
International research team makes important step on the path to solving certification problems
Quantum computers may one day solve algorithmic problems which even the biggest supercomputers today can’t manage. But how do you test a quantum computer to...
For the first time, a team of researchers at the Max-Planck Institute (MPI) for Polymer Research in Mainz, Germany, has succeeded in making an integrated circuit (IC) from just a monolayer of a semiconducting polymer via a bottom-up, self-assembly approach.
In the self-assembly process, the semiconducting polymer arranges itself into an ordered monolayer in a transistor. The transistors are binary switches used...
Breakthrough provides a new concept of the design of molecular motors, sensors and electricity generators at nanoscale
Researchers from the Institute of Organic Chemistry and Biochemistry of the CAS (IOCB Prague), Institute of Physics of the CAS (IP CAS) and Palacký University...