Measuring the impact of corporate social responsibility in the energy sector

Energy companies are in the spotlight regarding the environmental pressure to address the current environmental issues by initiating the sets of social responsibilities. Energy sector companies are actively adopting Corporate Social Responsibility (CSR) practices to address the increased pressure and enablement to manage and prevent the risks of environmental impact at the same time concentrating on the economic growth. The current study provides a systematic literature review identifying CSR initiative measures towards sustainability and proposes a framework of CSR measurements in the energy sector. The framework combines the Search, Appraisal, Synthesis, and Analysis (SALSA) method together with Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) and PSALSAR (Protocol, Search, Appraisal, Synthesis, Analysis and Report). Moreover, for setting the research scope, PICOC (Population, Intervention, Comparison, Outcome, and Context) is applied. As a result, eleven CSR measures for the energy sector were identified. The measurements were classified into 4 pillars: environmental pillar, stakeholder communication and external image, financial pillar, and organizational pillar. The environmental impact and GHG reduction align with the ecological modernization theories. Green energy innovations find theoretical resonance in the diffusion of innovation theories. Stakeholder engagement and branding link to the stakeholder theory, while financial performance, to the shareholder value theories. Occupational health and safety theory support the employee safety and corporate culture considerations. These measures, selected through theoretical lenses and systematic review, contribute to shaping a sustainable energy landscape. Furthermore, the research results were discussed, and the future research agenda together with policy recommendations were provided.

The nexus between corporate environment, social, and governance performance and cost of capital: evidence from top global tech leaders

The nexus between corporate environment, social, and governance (ESG) performance and the consequent financial performance have been extensively explored in the literature. However, little is known whether the investment in ESG endeavors has any implication for the cost of capital of an enterprise. The present study investigates the impact of ESG performance of top global technology leading firms on their cost of capital. Panel data fixed effects and random effects and generalized method of moment (GMM) regression estimation techniques have been applied to ascertain this relationship during a period of eight years (2010-2017). For a deeper insight, we segregate the cost of capital into the cost of equity and cost of debt. The empirical outcomes reveal that ESG performance is positively associated with both measures of the cost of capital i.e., cost of equity and cost of debt. It suggests that socially responsible top global technology leaders bear a higher cost of capital as investors perceive ESG as an additional financial burden and do not treat ESG costs as a value-added factor. Hence, corporate managers shall rationalize investment in ESG undertakings to curtail their cost of capital. Based on these findings, the policy prescriptions are discussed for the concerned stakeholders.

Monetary value of human capital disclosure for predicting future business earnings

Orientation: Human capital (HC) is a key dimension of intellectual capital (IC) that creates shareholder value when integrated with structural capital (SC) and relational capital (RC). The disclosure of HC reveals how the human resource (HR) practices support business growth.Research purpose: The primary focus of this study was to investigate the extent of how human capital disclosure (HCD) could predict organisational performance (expected future earnings) of the Johannesburg Stock Exchange (JSE)-listed companies.Motivation for the study: Human capital disclosure reduces information asymmetry, predicts future business performance and improves the investors’ buy-sell-hold decisions.Research approach/design and method: A causal, comparative design was applied quantitatively in a cross-sectional survey of 150 top- and low-performing JSE-listed companies sampled based on their market capitalisation. A self-constructed disclosure index with a seven-point scoring system was developed to examine the extent of disclosure across 81 items. Subsequently, multiple regression analysis was computed to test the relationship between the dependent and independent variables.Main findings: Human capital disclosure was associated with both the market capitalisation and book value. Overall, no mediation of human resource risk disclosure (HRRD) against organisational performance was found. Lastly, information disclosed on gender diversity yielded the interaction effect with both structural capital disclosure (SCD) and relational capital disclosure (RCD) but not with HCD.Practical/managerial implications: Human capital disclosure identifies key HR practices that drive organisational performance and create shareholder value. This information can potentially improve benchmarking and support investor decision-making.Contribution/value-add: The study provides a novel contribution to IC theory by demonstrating how HCD can be used to identify HR practices that leverage the monetary value of HC for business improvement.

Doing good does you good? The financial impact of individual CSR dimensions: A Malaysian context

Purpose

Although corporate social responsibility–corporate financial performance (CSR-CFP) research topics have been widely investigated, previous research has yet to examine the relationship between the specific dimension of CSR and CFP among Malaysian public-listed companies. Through literature review, it has been found that the CSR-CFP studies conducted in Malaysia have omitted the role of workplace diversity dimension in contribution to CFP. Failure to consider this variable may risk misrepresenting the relationship between CSR and CFP, thereby preclude consensus on the direction of the relationship between the variables. The purpose of this study is to investigate the relationship between individual CSR dimensions and CFP.

Design Methodology Approach

By using the CSR dimension disclosure-scoring method and cross-sectional data analysis, this research has conducted a content analysis on annual reports of the sample companies to evaluate the influence of CSR practices on companies’ profitability during 2015.

Findings

The results show that companies displaying CSR behavior are associated with higher CFP. That is to say, there is a positive relationship between CSR and CFP. However, the result has further revealed that the five CSR dimensions in isolation would differently associate with the two proxies of CFP.

Originality Value

To the best of the authors’ knowledge, this is the first study in Malaysia that considers workplace diversity issues as one of the dimensions of CSR. The findings will thus bring new insights into CSR application in Malaysia and its association with the CFP.

Impact of Sustainability Reporting and Inadequate Management of ESG Factors on Corporate Performance and Sustainable Growth

The purpose of this research study is to examine and explain whether there is a positive or negative linear relationship between sustainability reporting, inadequate management of economic, social, and governance (ESG) factors, and corporate performance and sustainable growth. The financial and market performances of companies are both analyzed in this study. Sustainable growth at the company level is introduced as a dimension that depends on sustainability reporting and the management of ESG factors. In order to achieve the main objective of the paper, the methodology here focuses on the construction of multifactorial linear regressions, in which the dependent variables are measurements of financial and market performance and assess corporate sustainable growth. The independent variables of these regressions are the sustainability metrics and the control variables included in the models. Most of the existing literature focuses on the causality between sustainability performance and financial performance. While most impact studies on financial performance are restricted to sustainability performance, this study refers to the degree of risk associated with the inadequate management of economic, social, and governance factors. This work examines the effects of ESG risk management, not only on performance, but also on corporate sustainable growth. It is one of the few studies that addresses the problem of the involvement of companies in controversial events and the way in which such events impact the sustainability and sustainable growth of the company.

Well-Governed Sustainability and Financial Performance: A New Integrative Approach

This study investigates the interlinkages between the dimensions of corporate social responsibility (CSR-economic, environmental, social), financial performance (ROA, ROE), and corporate governance (CG), by applying the structural equation modeling technique (SEM). It is based on a sample of 614 large companies from the European Economic Area, covering specific indicators published by the Thomson Reuters database, for the years 2013–2017. The equation models are structured starting from isolated dependencies between variables, up to the global ones (direct, indirect, and total dependencies). The mixed results obtained imply that the nature and heterogenous content of CSR lead to different statistical dependencies for each of the two financial performance indicators. ROA is positively influenced by the economic dimension of CSR, but, the level of this rate does not necessarily contribute to an increase in the involvement of the company in this type of CSR actions. At the same time, ROA is influenced and affects in a negative way the environmental and social dimensions of CSR. In the case of ROE, it is influenced and impacts the economic and social dimensions in a positive way. The environmental dimension of CSR influences ROE positively, but it is negatively affected by this profitability rate. Corporate governance exerts a positive impact on all of the model’s variables, both as a direct and indirect factor of influence.

Corporate social responsibility and financial performance nexus

Purpose

The paper aims to investigate empirically the impact of corporate social responsibility (CSR) on financial performance in South African listed firms.

Design/methodology/approach

The paper uses panel corrected standard errors to estimate the effect of CSR on firm financial performance and thus addresses contemporaneous cross-correlations across the panel cross sections. The study uses a broad base measure of CSR created by the Public Investment Corporation data set and the combination of accounting and economic means of measuring firm financial performance.

Findings

CSR is found to have a strong positive impact on firm financial performance in South Africa. When CSR is decomposed further into its major components, governance performance positively impacts a firm’s financial performance with no evidence of any relationship between social components and firm performance and between environmental components and firm performance. The positive impact of CSR on firm performance is greater in big firms. At the industry level, CSR is noticed to impact positively on financial performance in the extractive industry via good governance and responsible environmental behaviors. It however has no impact on firm performance in the financial sector.

Research limitations/implications

The results should be interpreted with caution and some limitations. Due to the limiting nature of the Public Investment Corporation data set (the survey was carried out on selected firms on the Johannesburg Stock Exchange for three years spanning from 2011 to 2013). This resulted in a sample of 56 firms. It is therefore very problematic to generalize the findings to a larger population over a long period of time. This is more limiting especially on individual sector studies where the sample has further shrunk to a smaller sample. As a result of the smaller sample size, the authors were unable to explore some other sectors which could have given more revealing findings. The authors recommend that future research should explore other data sets or use primary data approach that can allow for more sample size and elongated time period for a more holistic view and for easy generalization of the findings. The authors also identify an important lacuna necessitating further research effort. It would be interesting to empirically examine the threshold point of firms’ size beyond which CSR damages firms’ performance. Knowledge of this will guide managers of firms in their strategic CSR decision.

Practical implications

This study does not only serve as a reference work for subsequent investigations into the impact of CSR on firm performance in sub-Saharan Africa but also serves as a guide to policymakers on the financial impact of CSR adoption.

Originality/value

This study is one of the pioneering works that comprehensively examines the effect of CSR on financial performance amongst South African firms via size and sector and also controls for contemporaneous cross-correlation effects from the firms in the panel set.