Corporate Social Responsibility, Ethics and Sustainable Prosperity

The following sections are included:

• Preface
• About the Editors
• Acknowledgments
• List of Contributors
• Contents

The study examines the impact of national culture on the four important aspects of corporate social responsibility (CSR) — community (COM), employee (EMP), environment (ENV), and governance (GOV). An empirical analysis is based on socially responsible performance of 8,333 corporations from 59 countries across nine different regions around the globe. The findings suggest that Hofstede’s four dimensions of national culture — power distance (PDI), individualism (IDV), masculinity (MAS), and uncertainty avoidance (UAI) — have significant impacts on socially responsible corporate performance, either positively or negatively, depending on a given aspect of CSR. Overall, the results explain substantial variations in the effects of different cultural typologies on the corporate social performance and are consistently robust across a variety of statistical methods, including ordinary least squares (OLS) regression, regression with robust standard error, censored normal regression (Tobit), and regression with the inclusion of industry-specific variables. The findings of this study establish useful strategic implications of CSR for business corporations and policymakers, as well as guidance for further academic inquiries.

This study examines empirically the relationship between the corporate social performance (CSP) of European firms, as given by Vigeo ratings, and their financial risk. We consider 2,626 social ratings of 447 companies in the Stoxx Europe 600 index from 2004 to 2011. Using multivariate analysis through OLS regressions, based on corporate social responsibility (CSR) fields, we show that companies with higher CSP have lower specific risk and volatility of return on assets, particularly when the human resources field is at stake. Considering the firms’ systematic risk and the analysts’ earnings forecast dispersion, we evidence a positive and strong relationship between these risk proxies and CSP. This suggests that both higher systematic risk and higher analysts’ earnings forecasting dispersion encourage companies to improve their social performance.

With a focus on banks operating in German-speaking countries, we investigate whether operational losses resulting from internal fraud or improper business and market practices correlate with firm-specific variables or financial institutions’ business environment. Based on a multiple regression model, we find that the factors associated with operational loss severity vary across banks’ business lines and that respective regression coefficients sometimes even have opposing signs. In particular, an increase in bank staff is associated with lower operational losses in the “retail banking” subsample but higher operational losses in the subsample including all other business lines. Similarly, while after the introduction of the Basel II accord operational losses are lower in retail banking, they tend to be higher in the non-retail banking subsample. Finally, we observe a negative correlation between operational losses in non-retail business lines and both profitability and bank age. Overall, our findings shed new light on the determinants of operational losses in the banking industry, and they emphasize the importance of maintaining a business line-specific approach to operational risk measurement and management.

The goal of this chapter is to analyze the effect of the recent global financial crisis on the efficiency of microfinance institutions (MFIs). The double-bottom line of MFIs is considered through the assessment of two distinct efficiency indices. On the one hand, the financial efficiency measures the financial revenues compared to the costs disbursed to generate them. On the other hand, the social efficiency measures the social outreach compared to the costs deployed to provide microfinance services to the poor. The study employs the DEA-based Malmquist Productivity Index methodology to assess the change in efficiency between two time periods. Using a dataset composed of 362 MFIs between 2005 and 2011, the results suggest a decline in both dimensions of efficiency during the crisis. The deterioration was the most marked for commercial MFIs that are closely connected to developed financial markets. The sources of deterioration were mainly related to regression in management practices rather than scale.

In recent years, a growing number of empirical studies have started to thoroughly analyze the nexus between corporate governance (CG) and corporate environmental performance (CEP). This chapter provides the first survey of the literature on this issue. In doing so, we describe the different ways of how internal (ownership, board of directors, and management) and external CG (market for corporate control, institutional, and regulatory environments) can impact CEP and synthesize the most recent findings on the relation between the two constructs. We find that CG has proved to be key in determining CEP. Moreover, the effects of both internal and external CG mechanisms are important drivers of CEP. Taking these findings into account is crucial to understanding the nature and direction of the relationship between CG and CEP.

Corporate social responsibility (CSR) has become an important area of managerial and scientific debate. Many researchers have contributed to the theoretical development of CSR and, on the basis of empirical evidence, they have tried to formulate theories to analyze the relative issues. These theories, however, are unable to explain why firms’ commitment to CSR varies over time and in different national contexts. This chapter contributes to the existing literature on CSR by providing a multidisciplinary framework to investigate how different national institutions and the governance of economic spheres influence firms’ behavior. The proposed theoretical framework highlights the relationship between the national model of capitalism, stakeholders’ institutional entrenchment, and firm’s choices regarding CSR. Legislators should take into account that the model of capitalism adopted by each country produces direct effects on stakeholders’ institutional entrenchment and therefore on CSR decisions adopted by firms. This chapter concludes by highlighting some implications for policymakers and regulators and suggests future lines of research.

The discovery of the nexus between corporate governance (CG) and corporate social responsibility (CSR) has evolved into something similar to finding the “golden standard”. However, most business studies on the nexus between CG and CSR combine these concepts without reference to ideologies behind them. The aim of this chapter is to review and systematize business literature on the convergence of CG and CSR, with a special emphasis on the ideologies of CG and CSR. The author finds that a better understanding of the nexus between CG and CSR at the ideological level is at least as important as the question of their causality. The development of non-economic theories of CG and of sustainability accounting together with new accounting statements can be particularly helpful for the potential convergence of CG and CSR. This chapter also reveals gaps and underexposed themes in CG–CSR research, and introduces a set of potential research avenues. The content of this chapter can stimulate and guide future research.

The circular economy represents a new way of thinking about resource use and sustainability, focused on minimizing waste along the consumption–production value chain. As the global population continues to grow, and as critical natural resources become constrained in various ways, we — as citizens of the earth — will need to structure economic systems to optimally use these resources. Moving from a linear economy based on “take-make-waste” systems to a circular economy where every resource is looped into multiple and regenerative uses can be the way forward. Adopting circular economy principles can create significant value for companies and communities by taking a long-term perspective; investing a little money and resources today can lead to enormous savings in the future as resource constraints lead to price volatility and critical outages. Getting to a circular economy will not be easy or costly: it will require significant planning, design, and innovation to create regenerative products and processes. But it will be worth it, as the value that it creates — whether in terms of financial value or social value — can be substantial.

This chapter provides an overview of recent developments in approaches to sustainable development financing in the Asian region, with a focus on the emerging role of the Asian Infrastructure Investment Bank (AIIB). In particular, it aims to explore how the AIIB is positioning itself in the world of sustainable development financing.

Despite the global initiatives for sustainable development, the environmental sustainability of the world has not been improved significantly with allocation of financial capital into responsible investments intended to reduce the world’s current unsustainability. This chapter aims to look into the emergence of a global financial system that attempts to enhance environmental and social sustainability while enabling financial sustainability with a balanced approach for economic development. Through the case of Hong Kong as the global financial center of China — the next economic and political power house — it suggests a convergence of institutional endorsement in addressing local and international stakeholders’ concerns over sustainability. However, the idealism of a global financial market taking an effective role to fully align investments for sustainability with a long-term prospect is yet to be realized.

To support the global economy’s transition to sustainability, we need to develop an alternative to traditional financing — “green finance”. Green finance includes a number of financial asset classes and institutions, both public and private, the foremost of which are green banking, green debt markets, and green structured funds. The main actors driving the greening of the financial system are institutional investors, international financial institutions (IFIs), regulatory authorities, and central banks. However, the amount of green finance is limited because of a number of challenges, both microeconomic and macroeconomic. These challenges should be addressed by designing an enabling environment that facilitates green finance. Greenwashing can only be prevented by means of a transparent definition of green financing. Voluntary principles and guidelines for green finance should be established and monitored for all asset classes: bank credits, bonds, and secured assets for institutional investors. These measures should be supported by all financial system actors.

In recent decades, socially responsible investment (SRI) emerged as an en vogue investment philosophy. Originating from religious and moral considerations, SRI evolved in the wake of socio-political deficiencies and corporate social conduct. In the global rise of financial social conscientiousness, differing national legislations and regulatory traditions have led to various SRI practices, which are harmonized by the United Nations (UN). Building on the historic advancement of Financial Social Responsibility in the wake of socio-ethical deficiencies, this chapter highlights the future potential of SRI in the aftermath of the 2008/2009 World Financial Crisis as a means to avert economic market downfalls. During the current financial market reform, additional micro- and macro-research on financial social conduct could foster the idea of Financial Social Responsibility and aid a successful implementation of SRI.

In this chapter, we present and analyze the main tentative definitions of sustainable finance as encountered in the literature. These definitions constitute some alternatives to the conventional finance that seems to be unable to meet the challenges of the 21^st century. Our discussion extends to explore the shortcomings of these restrictive definitions and displays a number of related concepts including corporate social responsibility, socially responsible investments, ethical investments, and cleaner production. We also propose a definition that attempts to be somewhat exhaustive and may represent a starting point towards a universally recognized definition. Our approach in developing the suggested definition is based on building five principles that complete and generalize existing ones. In particular, our principles inject important aspects such as the win–win model among all stakeholders, the intergeneration, the sustainable growth, some new behaviors and practices both at the micro and macro-levels, while preserving the fundamentals of conventional finance.

This chapter considers why sustainable value money (SVM) is needed and how to get it. It is required because no existing official currency has its value defined by any one or more real goods or services. Official money has become a social construct with no direct feedback from nature if human existence and their natural environment are sustainable. Twenty-four other reasons are identified why official currencies are not fit for purpose. All 25 deficiencies are compared with SVM tethered to an index based on the efficiency and dependency of each region of the planet being serviced by Kilowatt-hours (kWh) of electricity generated from benign source of renewable energy. Sustainable energy dollars (SEDs = $Z) would create a global unit of account, with its value determined in each currency region by the ability of the host environment to support humanity in perpetuity. Electricity is the most crucial resource for maintaining the necessities of life. The value of the index and so money would be highest in regions best capable of eternally servicing humanity. Market forces would arise to encourage humanity to become allocated sustainably while also reducing the incentive to burn carbon to reduce the need for carbon taxing or trading.

Corporate sustainability at the enterprise level can be defined as adapting the sustainability indicators of economic, social, and environmental factors to the business organizations and decision-making activities of the company for creating value for all stakeholders. Besides these indicators, a good administrative structure and financial factors should be integrated for properly evaluating a corporate’s sustainability performance. Given the importance of the banking sector in sustainable development and the need for further investigation, this paper provides an evaluation of Turkish Banking Sector’s disclosure practices concerning extended approach of corporate sustainability dimensions in corporate sustainability reports during 2014. Based on the results, the main indicators of corporate sustainability can be determined. The superior aspects and differences of the bank’s corporate sustainability are also demonstrated.

This chapter uses a survey of personnel in Libyan commercial banks, including general managers and credit managers, to investigate how banks perceive and process social responsibility and sustainability information declared by potential borrowers in their credit applications and other documentation. In particular, the chapter considers how the backgrounds and experiences of key bank staff in lending decisions may bias toward or against lending with the disclosure of potential borrower information on social responsibility and sustainability. We also consider the impact of institutional features, particularly the stance of government, in shaping these perceptions and links with action via regulation and the possible influence of business ethics through industry associations.

The following section is included:

• Index