Corporate Social Responsibility, Environmental Leadership, and Financial Performance

In this study we statistically assess the relationship between corporate characteristics, environmental contribution, and financial performance. To this end, we compare the financial performance of all US corporations that have composed the Dow Jones Sustainability Indexs (DJSI), being the most proactive companies in providing services and goods while maintaining ethical responsibility and environmental sustainability. Performance is compared to mean performance of the related industry, sector, and the market portfolio. Our analysis suggest that firms who are proactive supporting Social Responsibility and Environmental Sustainability (SRER corporations) are characterized by significantly higher profit measures than the industry and the sector, though not higher than the entire market; have lower short term liquidity than that of the industry and the related sector, and surprisingly their long term leverage is significantly higher. High SRER corporations are characterized by significantly higher managerial efficiency ratios than the respective industry and the sector. Interestingly, the per-worker ratios are significantly lower than all the benchmarks. These results illustrate the strong relation between social and environmental sustainability and the long term business plan. Results extend existing literature that has restricted attention to Corporate Social Responsibility and financial performance, but have left aside sustainability.