Being a good corporate citizen can also have a positive influence on the balance sheet.
According to the OECD, those with good environmental, social and governance (ESG) practices outperform low sustainability companies as measured by stock performance and in real accounting terms.
This chart shows the positive difference it makes to the financial performance of companies:
“However it should not be forgotten that a moral, and in some cases legal expectation towards business to do the right thing exists independently of financial incentives,” says Professor Roel Nieuwenkamp, chair of the OECD Working Party on Responsible Business Conduct.
The consequences can be significant.
Nieuwenkamp says the Volkswagen emissions scandal contributed to the company’s shares falling by a third in less than a week and costs associated with recalls are being reported to be around $US35 billion.
A study by Vigeo, a European expert in social governance, showed that corporate social responsibility-related sanctions for companies are common.
Nearly 20% of companies in the survey of 2,500 had been sanctioned between 2012 and 2013, with combined penalties of EUR 95.5 billion ($A146 million).
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