There is money to be made investing in publicly-traded companies that have voluntarily adopted corporate responsibility practices and accounting, according to a new working paper published this month by Harvard Business School.
The study of 180 companies from a wide range of industries (see table created from the study data by Dealmarket Digest) provides evidence that “High Sustainability” companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance, particularly companies that are consumer-oriented and natural resource extraction (that would be mining and oil exploration, for example), says the report.
One of the more interesting aspects of the study was a discussion about stakeholder engagement, which also contributes to higher valuations. Some of the companies have defined stakeholders that illustrate values that are more compelling than the typical business view.
For example, Southwest Airlines has identified employees and Novo Nordisk patients (basically, their end customers) as their primary stakeholders. Dow Chemical has been setting 10-year goals for the past 20 years and recently ventured into a goal-setting process for the next 100 years.
Another company, Natura, has committed to preserving biodiversity and offering products that have minimal environmental impact. (Image Source: HBS study)