Corporate Sustainability & Social Responsibility
A number of critical global trends, including the growing acute scarcity of natural resources, climate change and the massive demographic changes around the world, combined with increasing levels of income inequality and an unprecedented shift of middle-class consumption from the developed to the developing world, are radically shifting the world’s competitive landscape.
The winning Sustainable Organizations of the future will be the ones that acknowledge these tectonic shifts today, and are able to strategically and uniquely integrate such broader social and environmental issues into their business models, their corporate cultures and their strategies. They are the organizations that will be able to synergistically generate economic as well as social and environmental value, while remaining sustainable within their economic, their environmental and their social domains.
The emergence of Sustainable Organizations not only challenges but also redefines the role of the modern corporation in civil society and its contribution towards tackling the world’s biggest future challenges. It is therefore high time for bold, unique, innovative and sustainable business strategies and for rebuilding the trust between business and society.
Prof. Ioannis Ioannou
Featured Latest Research
We investigate how U.S. companies adjusted their investments in key strategic resources ― i.e., human capital, tangible, and intangible resources ― during the Great Recession of 2007-2009. To obtain exogenous variation in the severity of the recession, we exploit the differential intensity of the house price collapse across U.S. regions, instrumenting changes in house prices with Saiz’ (2010) topological measure of housing supply elasticity. Our findings indicate that during the Great Recession, companies significantly reduced their workforce and capital expenditures. Yet, and this is a remarkable finding, they maintained the same level of investments in R&D and CSR. Referring to the opening quote of our study, this result is a “non-barking dog”―i.e., the interesting finding is not so much what companies did, but rather what they did not do: they did not cut back on R&D and CSR investments, despite the cost-cutting pressures and other disruptions that are inherent in periods of recession. Consistent with our theoretical arguments, these findings suggest that intangible resources such as innovation and stakeholder relations are instrumental in sustaining a competitive advantage during and after recessionary times. In auxiliary analyses, we further document that―although on average firms do not cut their investments in R&D and CSR―firms operating in less R&D-intensive and less CSR-sensitive industries, respectively, are more likely to do so. This result is intuitive, yet it offers additional verification for the mechanisms we argue for in our study. For example, in less R&D-intensive industries, firms’ competitiveness is less likely to depend on their innovative capabilities. Similarly, CSR is less likely to enhance competitiveness in industries in which CSR engagement is less salient. Finally, we examine whether companies that sustain their investments in R&D and CSR perform better once the economy recovers, and we find that they do. Specifically, they achieve higher operating performance—as measured by the return on assets (ROA) and net profit margin (NPM)—in the post-recession years (2010-2011).
Watch below an interview Prof. Ioannou gave to Karl Moore, discussing the findings of this paper.