Rethinking How We Measure Corporate Social Responsibility

10617765806_b7f4f4ca12_z[We’re pleased to welcome Gunther Capelle-Blancard. Gunther recently published an article in Business & Society with co-author Aurélien Petit entitled “The Weighting of CSR Dimensions: One Size Does Not Fit All.”]

Companies could develop eco-friendly products or support social programs, and meanwhile damage the environment or experiment governance failures. Corporate Social Responsibility is multidimensional. Often, though, responsible investors (and customers) are interested in synthetic rankings that sum up the ESG (Environmental, Social and corporate Governance) scores.  Such composite scores raise fundamental questions which, surprisingly, are widely overlooked by academics and practitioners.

If the question of fungibility (“do good actions compensate bad ones?”) is essential and has been discussed in the literature, this article focuses on commensurability (the “apples and oranges” problem). For instance, Oil & Gas companies are mostly criticized on environmental issues, while corporate governance is the main stake for Banks. Overall ratings that sum equally environmental, social and corporate governance marks would not reflect the sectors’ concerns. One size does not fit all.

We develop a new method of CSR rating, based on news disclosed by the media and nongovernmental organizations. Thanks to the Covalence EthicalQuote database, we BAS Coveranalyze more than 70,000 positive or negative ESG news, regarding the world’s largest companies. Our results suggest that rating agencies and previous academic research underweight the environment and corporate governance. Mostly, our method allows fitting the ratings to the sectors’ specific stakes. It can be used to assess Corporate Social Performance better.

The abstract for the paper:

Although the concept of corporate social responsibility (CSR) is fundamentally multidimensional, most studies use composite scores to assess corporate social performance (CSP). How relevant are such composite scores? How the CSR dimensions are weighted? Should the weighting scheme be the same across sectors? This article proposes an original weighting scheme of CSR strengths and concerns, at the sector level, which is proportional to media and nongovernmental organizations (NGOs) scrutiny. The authors show that previous CSP assessments underweight environmental and corporate governance concerns. Moreover, findings suggest that firms that are exposed to the closest scrutiny are usually criticized on one single dimension: for instance, banks for bad corporate governance, and basic-resource firms for environmental damage. Composite scores based on equal weights hence misrepresent CSP and the difference in CSR between sectors.

You can read “The Weighting of CSR Dimensions: One Size Does Not Fit All” from Business & Society free for the next two weeks by clicking here. Want to know all about the latest research from Business & SocietyClick here to sign up for e-alerts!

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*Highrise image credited to Sonny Abesamis (CC)

gunther_IMG_20150922_164249_b41bfe265c.jpgGunther Capelle-Blancard (PhD, University of Paris 1) is professor of economics at the University of Paris 1 Panthéon-Sorbonne and research fellow at the Centre d’Economie de la Sorbonne and Labex RéFi (Regulation financière). His research examines socially responsible investment, corporate social performance, and financial market regulation. His articles have appeared in such journals as Business Ethics: A European Review, European Financial Management Journal, Journal of Environmental Economics and Management, and Journal of Investing.

Aurélien Petit

Aurélien Petit (PhD, University of Paris 1) is research fellow at the Centre d’Economie de la Sorbonne. His research interests focus on corporate social responsibility and information disclosure strategies.

This entry was posted in Corporate Social Responsibility, Environmental and Social Issues, Measurement and tagged , , , , , , by Cynthia Nalevanko, Editor, Management INK. Bookmark the permalink.

About Cynthia Nalevanko, Editor, Management INK

Founded in 1965, SAGE is the world’s leading independent academic and professional publisher. Known for our commitment to quality and innovation, SAGE has helped inform and educate a global community of scholars, practitioners, researchers, and students across a broad range of subject areas. With over 900 employees globally from principal offices in Los Angeles, London, New Delhi, Singapore, and Washington DC, our publishing programme includes more than 560 journals and over 800 books, reference works and databases a year in business, humanities, social sciences, science, technology and medicine. Believing passionately that engaged scholarship lies at the heart of any healthy society and that education is intrinsically valuable, SAGE aims to be the world’s leading independent academic and professional publisher. This means playing a creative role in society by disseminating teaching and research on a global scale, the cornerstones of which are good, long-term relationships, a focus on our markets, and an ability to combine quality and innovation. Leading authors, editors and societies should feel that SAGE is their natural home: we believe in meeting the range of their needs, and in publishing the best of their work. We are a growing company, and our financial success comes from thinking creatively about our markets and actively responding to the needs of our customers.

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