A Simple Way to Boost Corporate Social Responsibility
1. A Simple Way to Boost Corporate Social Responsibility
Last Updated Apr 25, 2011 9:20 AM EDT
It's unrealistic to expect most CEOs to be in favor of more government
regulation, and mandatory reporting on corporate sustainability is no different. Now a new study
from Ioannis Ioannou of London Business School and George Serafeim of Harvard Business School
gives some evidence that might persuade at least some CEOs to rethink their positions.
Corporate sustainability reports are designed to allow companies to report their environmental,
social, and governance performance much the way they do their financial progress. While many
companies voluntarily issue such reports, Corporate America has generally been of the opinion that
mandating such reports would be a costly waste of time. That argument is bolstered by the fact that
studies of sustainability reports have failed to conclusively prove that they boost a company's return
on investment.
But there are other measurements, besides ROI, where mandatory corporate sustainability reporting
seems to make a big difference. Ioannou and Sarafeim looked at laws mandating various aspects of
sustainability reporting in 58 countries. They then examined other data for a five-year period after a
particular law was passed. After corporate sustainability reporting became mandatory:
Business leaders are perceived to be more socially responsible.
Employee training becomes a higher priority
Boards do a better job overseeing companies