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Building Your CaseResearch Findings on the Business Case for
Sustainability
09/08/09 1
Dr. John PelozaProfessor of Marketing, Florida State University
NBS Topic Editor
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09/08/09 1
Dr. John PelozaProfessor of Marketing, Florida State University
NBS Topic Editor
Building Your CaseResearch Findings on the Business Case for
Sustainability
The relationship between corporate social and financial performance is U-shaped. In other words: “If you’re gonna do CSR, go all in.”
Valuing Sustainability
Read more: CSR Pays When You Bake it In Or Ignore it Completely
Source: Barnett, M. & Salomon, R. 2012. Does It Pay to Be Really Good? Addressing the Shape of the Relationship between Social and Financial
Performance. Strategic Management Journal, 33, 1304–1320.
3 Sustainability Activities that Pay
1. Green Products2. Corporate Philanthropy3. CSR Reporting
How Green Products Pay
Customers will pay up to
5 to 10% more for responsible products or services if function and quality remain the same.
Read More: Socially Conscious ConsumerismA Systematic Review, NBS 2008
How Do We Get Customers to Buy Green?
Green Products
nbs.net/valuing
Green Products
How to Do it Right
Read more: Consumers Reward Companies for Ethical Production
Source: Trudel, R. & Cotte, J. 2009. Is It Really Worth It? Consumer Response to Ethical and Unethical Practices. MIT/ Sloan Management Review, 50(2): 61-
68.
1. Get third-party certifications to endorse your green products.
In one study, coffee drinkers were willing to pay
16% more per pound for Fair Trade Certified beans.
Read more: The Winning Formula behind Pink-Ribbon Toilet Paper
Source: Koschate-Fischer, N., Stefan, I., & Hoyer, W. 2012. Willingness to Pay for Cause-Related Marketing: The Impact of Donation Amount and Moderating
Effects. Journal of Marketing Research, 49: 910–927.
2. Increase the percentage of product sales going to charity.
Customers will pay more for utilitarian products like toilet paper if 10% of the purchase
price goes to a cause rather than 5%.
Green Products
How to Do it Right
Read more: Successful Marketers Make Buyers Feel Good, Not Guilty
Source: Peloza, J., White, K., & Shang, J. 2013. Good and Guilt-Free: The Role of Self-Accountability in Influencing Preferences for Products with Ethical Attributes. Journal
of Marketing. 77: 104-119.
3. Avoid guilt-inducing marketing that conjures negative feelings.
In a study of ethical consumption, people were more than
twice as likely to choose Fair Trade teas when the marketing
made them feel good about the ethical product rather than guilty about the unethical product.
Green Products
How to Do it Right
4. Offer a discount when functionality is compromised, or when the product is “risky.”
In a study from Ottawa’s Telfer School of Management, customers
demanded discountsfor green products with perceived safety or
functional issues, such as re-treaded tires or cell phones.
Read more: Understand W hen “Green” Means Premium — and When it Requires a Discount
Source: Essoussi, H., Linton, L., & Linton, J. 2010. New or recycled products: How much are consumers willing to pay? Journal of Consumer Marketing, 27(5):
458-468.
Green Products
How to Do it Right
Read more: Are Luxury and CSR Compatible?
Source: Torelli, C.J., Monga, A.B., & Kaikati, A.M. 2012. Doing Poorly by Doing Good: Corporate Social Responsibility and Brand Concepts. Journal of
Consumer Research, 38(5):948-963.
5. Realize CSR means little to luxury brands.
Researchers Carlos Torelli of the University of Minnesota and colleagues found participants
evaluated luxury brands like Rolex less favourably in CSR conditions.
Green Products
How to Do it Right
Questions/
Comments?
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Corporate Philanthropy•How Does My Company Benefit From
Corporate Giving?
•Will Philanthropy Fix Our Damaged
Reputation?
How Philanthropy Pays
Companies in retail and financial services saw increases of
$6 in sales for every $1 donated through corporate charity.
Read more: Use Corporate Philanthropy to Grow Your Top — and Bottom — Line
Source: Lev, B., Petrovits, C., & Radhakrishnan, S. 2010. Is doing good good for you? How corporate charitable contributions enhance revenue growth. Strategic
Management Journal, 31: 182-200.
How Does My Company Benefit From Corporate Giving?
…Customer Loyalty.
Corporate Giving
Read more: Use Corporate Philanthropy to Grow Your Top — and Bottom — Line
Source: Lev, B., Petrovits, C., & Radhakrishnan, S. 2010. Is doing good good for you? How corporate charitable contributions enhance revenue growth. Strategic
Management Journal, 31: 182-200.
1. Consumer satisfaction is key to the success of corporate donations.
A study of 251 firms on the Taft Corporate Giving Directory showed
those in consumer-focused industries performed best financially following their
donations.
Corporate Giving
How to Do it Right
Read More: The Perils of Excessive Corporate Philanthropy
Source: Wang, H., Choi, J., & Li, J. 2008. Too little or too much? Untangling the relationship between corporate philanthropy and firm financial performance.
Organization Science, 19(1): 143-159.
2. Donate to maintain competitive edge in a dynamic or unstable industry.
In a study of 817 companies on the Taft Corporate Giving Directory, firms in dynamic environments
who donated
benefited most financiallydue to greater stakeholder support.
Corporate Giving
How to Do it Right
Read more: CSR Pays When You Bake it In Or Ignore it Completely
Source: Barnett, M. & Salomon, R. 2012. Does It Pay to Be Really Good? Addressing the Shape of the Relationship between Social and Financial
Performance. Strategic Management Journal, 33, 1304–1320.
3. Give generously, or not at all.
A study of 1, 214 firms showed the relationship between financial and social performance is U-
shaped: firms that either gave nothing or gave generously had higher net income and
ROA than those in the middle.
Corporate Giving
How to Do it Right
Read More: Strong Financial Results Linked to Very High or Very Low Corporate Giving
Source: Brammer, S. & Millington, A. 2008. Does it pay to be different? An analysis of the relationship between corporate social and financial
performance. Strategic Management Journal, 29(12): 1325-1343.
3a. Don’t dabble in corporate philanthropy.
In a study of 537 large UK firms, those who
performed the worst financially had average levels of corporate giving.
Corporate Giving
How to Do it Right
3b. Know how much is too much.
Corporate Giving
How to Do it Right
Read More: The Perils of Excessive Corporate Philanthropy
Source: Wang, H., Choi, J., & Li, J. 2008. Too little or too much? Untangling the relationship between corporate philanthropy and firm financial performance.
Organization Science, 19(1): 143-159.
Data from Taft Corporate Giving Directories showed donations
stopped “paying off” past a certain point: eventually direct costs of
philanthropy
outweighed financial return.
Will Philanthropy Fix Our Damaged Reputation?
…Don’t Hold Your Breath.
Corporate Giving
Read more: Philanthropy is Not a Quick Fix for a Damaged Reputation
Source: Muller, A. & Kraussl, R. 2011. Doing Good Deeds in Times of Need: A Strategic Perspective on Corporate Disaster Donations. Strategic
Management Journal 32: 911-929.
1. Recognize corporate giving does not excuse past social irresponsibility.
In a study of Fortune 500 firms, companies with bad reputations that donated to Hurricane Katrina
experienced no significant stock price returns or reputational improvements.
Corporate Giving
How to Do it Right
2. Manage crises effectively before spending on charity.
In the same study, firms saw better financial return when they used money to manage their own hardships in difficult economic times rather
than donating to others.
Read more: Philanthropy is Not a Quick Fix for a Damaged Reputation
Source: Muller, A. & Kraussl, R. 2011. Doing Good Deeds in Times of Need: A Strategic Perspective on Corporate Disaster Donations. Strategic
Management Journal 32: 911-929.
Corporate Giving
How to Do it Right
Read more: How to Manage Your Com pany ’s Reputation Through a Crisis and Come Out on Top
Source: Janney, J. & Gove, S. 2011. Reputation and Corporate Social Responsibility Aberrations, Trends, and Hypocrisy: Reactions to Firm Choices in the Stock Option
Backdating Scandal. Journal of Management Studies 48:7.
3. Build a good reputation in the first place.
In a sample of 108 firms involved in the U.S. stock options backdating scandal, those with socially
responsible reputations saw price drops of 1.3% less
than socially irresponsible firms.
Corporate Giving
How to Do it Right
Questions/
Comments?
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CSR Reporting•Why Should I Report CSR Activities?
•What Activities Should I Report?
How CSR Reporting Pays
Read more: How Third-Party CSR Ratings Impact Your Share Price
Source: Doh, J.P., Horton, S.D., Horton, S.W. & Siegel, D.S. (2010). Does the market respond to an endorsement of social responsibility? The role of institutions,
information and legitimacy. Journal of Management, 36, 1461–1485.
Being added to a social index doesn't increase a company’s share price—but when a company is removed,
its stock takes a hit.
Why Should I Report on CSR Activities?
…Because Stakeholders Care.
CSR Reporting
1. Be transparent to boost stakeholder engagement.
In a study of 180 firms, those that integrated environmental and social activities into financial
reporting experienced lower stock price volatility than less sustainable peers.
CSR Reporting
How to Do it Right
Read more: The 5 Traits of Firms that Create Sustainability ROI
Source: Eccles, R.G., Ioannou, I., & Serafeim, G. 2011. The Impact of a Culture of Corporate Sustainability on Corporate Behavior and Performance. Working paper 12-
035, Harvard Business School..
Read more: Two Truths of How Social Performance Pays
Source: Wang, H. & Choi, J. 2013. A New Look at the Corporate Social-Financial Performance Relationship: The Moderating Roles of Temporal and Interdomain Consistency in Corporate Social Performance. Journal of Management. 39-2:
416–41. .
2. Report CSR activities consistently to strengthen market value.
In a study of 622 firms from S&P 500, DSI 400 or both, even firms with low but consistent levels of
CSR had
higher market values than firms with occasional spikes in CSR.
CSR Reporting
How to Do it Right
3. Report CSR activities for competitive edge in industries where product differentiation is difficult.
A multinational phone company that actively
sought CSR publicity saw improved brand integrity and employee willingness to pay
a premium.
CSR Reporting
How to Do it Right
Read more: Three Ways to Reap Value from CSR Initiatives
Source: Husted, B. & Allen, D. 2007. Strategic Corporate Social Responsibility and Value Creation Among Large Firms: Lessons from the Spanish Experience. Long
Range Planning, 40: 594-610.
What Activities Should I Report ?
…Results, Not Goals.
CSR Reporting
Read more: Investors Reward Environmental Results, Not Targets
Source: Busch, T. & Hoffmann, V. 2011. How Hot is Your Bottom Line? Linking Carbon and Financial Performance. Business & Society 50(2) 233-265
1. Report on results you have achieved.
In a study of 174 energy-intensive companies, firms that had achieved emission reductions had
higher Tobin’s q scores than their carbon-emitting peers.
CSR Reporting
How to Do it Right
2. Realize environmental targets mean little to investors.
In the same study, firms that just reported on emission targets had
lower ROE and Tobin’s q scores than companies who had achieved goals.
CSR Reporting
How to Do it Right
Read more: Investors Reward Environmental Results, Not Targets
Source: Busch, T. & Hoffmann, V. 2011. How Hot is Your Bottom Line? Linking Carbon and Financial Performance. Business & Society 50(2) 233-265
3. Disclose your mistakes.
Firms that voluntarily disclosed their involvement in the 2006 backdating scandal experienced stock
price declines of 2.7% compared to 3.5% for firms that were exposed by others.
CSR Reporting
How to Do it Right
Read more: How to Manage Your Company’s Reputation Through a Crisis and Come Out on Top
Source: Janney, J. & Gove, S. 2011. Reputation and Corporate Social Responsibility Aberrations, Trends, and Hypocrisy: Reactions to Firm Choices in the Stock Option
Backdating Scandal. Journal of Management Studies 48:7.
Questions/
Comments?
nbs.net/valuing
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