Impact of Environmental, Social, and Governance Information on Economic Performance: Evidence of a Corporate ‘Sustainability Advantage’ from Europe

Marco Taliento, Christian Favino and Antonio Netti
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Marco Taliento: Department of Economics, University of Foggia, 71121 Foggia, Italy
Christian Favino: Department of Economics, University of Foggia, 71121 Foggia, Italy
Antonio Netti: Department of Economics, University of Foggia, 71121 Foggia, Italy

Sustainability, 2019, vol. 11, issue 6, 1-26

Abstract: Both UN Agenda 2030 and the Directive n. 2014/95/EU have recently promoted a marked improvement in sustainability disclosure, especially for larger companies or groups. Starting from this premise, we carried out an original study on the financial materiality of the E-S-G (environmental, social and governance) information of primary companies listed on major European indices in Belgium, France, Germany, Italy and Spain (BEL, CAC, DAX, FTSE-MIB, IBEX). Within the Stakeholder Theory and the Corporate Social Responsibility (CSR)–Corporate Social Perfomance (CSP) framework, our empirical analysis examined the impact of non-financial results (assessed through sustainability indicators) on economic (financial and market) performance in the timespan 2014–2017. We propose a different approach from previous studies, based on a PLS (Partial least squares)/SEM (Structural equation modeling) methodology together with the unprecedented consideration of “ESG” measures (Environmental, Social and Governance), either absolute (scores) or relative (extra-performance over industry sector). We find that, despite the absolute level of the individual ESG scores not being impactful, the “distance” from the industry average–normal figures (excess or abnormal ESG performance) is positively relevant, collaterally revisiting the notion of competitive advantage in sustainability terms. Corporate size is shown to be a significant background factor (as slack resources proxy). Social, environmental and governance responsibility (to all stakeholders) appear to be important as a competitive factor of the modern firm.

Keywords: environment; social; corporate governance; ESG metrics; corporate size; financial performance; Stakeholder Theory; sustainability disclosure; Structural Equations Model (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (57)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:11:y:2019:i:6:p:1738-:d:216263

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