CR: Business Benefits and Media Mishaps

Julie Jack is a senior director in our New York office and has experience in corporate reputation, corporate responsibility and issues management.

I ran across two studies recently that together make a pretty compelling business case for CR.

The first was a Working Paper by faculty at HBS’s Accounting and Management school that finds statistically significant evidence that companies with superior environmental and social performance face significantly lower capital constraints.  Contrary to arguments that CR imposes costs on a firm, the authors assert that stakeholder engagement can cut down on agency costs, and greater transparency leads to greater accountability and better risk management, which together increases access to finance. Good news to those who see the potential in CR for long-run value creation.

The other HBS Working Paper looks at “CR records” and news coverage and argues against the popular wisdom that CR programs create good will that can protect companies in times of crisis.  The analysis finds that companies that are regarded as having strong CR programs (and, I would argue, aggressively promote themselves as such) are in fact subject to a higher and harsher standard in the media than companies that do not.  A clear cautionary tale for “green washing.”

Both studies reject the simple view that CR is just PR, with the latter stating that superior CR could actually hurt your PR performance. They also both suggest that companies that view and treat CR or ESG issues as an integral part of business strategy and management, as opposed to a reputation play, are more likely to reap the rewards in both the financial and media markets. Which I think is good news for the field.