Is there a market for virtue? The business case for corporate social responsibility

California Management Review

Volumn 47, Issue 4, 2005, Pages

  Vogel, David J ^a,b  

^a Department of Business Ethics ^*  (United States)

^b UNIVERSITY OF CALIFORNIA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 24644506696     PISSN: 00081256     EISSN: None     Source Type: Journal    
DOI: 10.1177/000812560504700401     Document Type: Review

References (104)

1. See Jules Cohn, The Conscience of the Corporation: Business and Urban Affairs,1967-1970 (Johns Hopkins University Press, 1971), p. 4.
2. See James W. McKie, "Changing Views," in Social Responsibility and the Business Predicament, edited by James W. McKie (Brookings, 1974), p. 32.
3. Cohn, The Conscience of the Corporation, p. 7.
4. Milton Friedman, "The Social Responsibly of Business Is to Increase Profits," New York Times Magazine, September 13, 1970, pp. 32-33.
5. Christine Arena, Cause for Success: Ten Companies That Have Put Profits Second and Come in First (Novato, Calif.: New World Library, 2004);
6. Bob Willard, The Sustainability Advantage: Seven Business Case Benefits of a Triple Bottom Line (Gabriola Island, B.C.: New Society, 2002;
7. Charles O. Holliday Jr., Stephan Schmidheiny, and Philip Watts, Walking the Talk: The Business Case for Sustainable Development (Sheffield, England: Greenleaf, 2002);
8. Malcolm McIntosh, Deborah Leipziger, Keith Jones, and Gill Coleman, Corporate Citizenship: Successful Strategies for Responsible Companies (London: Financial Times, 1998);
9. Tedd Saunders and Loretta McGovern, The Bottom Line of Green Is Black: Strategies for Creating Profitable and Environmentally Sound Businesses (HarperSanFrancisco, 1993);
10. and Ira Jackson and Jane Nelson, Profits with Principles: Seven Strategies for Delivering Value with Values (New York: Currency/Doubleday, 2004).
11. Chris Laszlo, The Sustainable Company: How to Create Lasting Value through Social and Environ-mental Performance (Washington: Island Press, 2003), p. xxiii;
12. Sandra Waddock, Leading Corporate Citizens: Vision, Values, Value-Added (New York: McGraw-Hill, 2002), p. xvii.
13. Mary Scott and Howard Rothman, Companies with a Conscience: Intimate Portraits of Twelve Firms That Make a Difference (New York: Citadel, 1992);
14. Kevin T. Jackson, Building Reputational Capital: Strategies for Integrity and Fair Play That Improve the Bottom Line (Oxford University Press, 2004);
15. Marc Gunther, Faith and Fortune: The Quiet Revolution to Reform American Business, p. 43.
16. Stuart Hart, "Beyond Greening: Strategies for a Sustainable World," Harvard Business Review, (January-February, 1997): 67-68, 76.
17. Amory Lovins, L. Hunter Lovins, and Paul Hawken, "A Road Map for Natural Capitalism," Harvard Business Review, (May 1999): 158.
18. Jane Simms, "Business: Corporate Social Responsibility - You Know It Makes Sense," Accountancy, 130, no. 1311 (2002): 48-50.
19. Stan Friedman, "Corporate America's Social Conscience," Fortune, Special Advertising Section, May 16, 2003.
20. Wayne Norman and Chris MacDonald, "Getting to the Bottom of "Triple Bottom Line,'" Business Ethics Quarterly, 14, no. 2 (2004): 245.
21. See Willard, The Sustainability Advantage, p. 3.
22. Michael Porter and Mark Kramer, "The Competitive Advantage of Corporate Philanthropy," Harvard Business Review, (December 2002): 67.
23. Craig Smith, "The New Corporate Philanthropy," Harvard Business Review, (May-June 1994): 106.
24. See Richard Steckel, Robin Simons, Jeffrey Simons, and Norman Tanen, Making Money While Making a Difference (Homewood, Ill.: High Tide Press, 1999), p. 105.
25. Ibid., p. 5.
26. Porter and Kramer, "The Competitive Advantage of Corporate Philanthropy," p. 57.
27. Hollender and Fenichell, What Matters Most, p. 6.
28. Quoted in Gunther, Faith and Fortune, p. 42.
29. Quoted in Hollender and Fenichell, What Matters Most, p. 163.
30. 〈www.UNglobalcompact.org/content/NewsDocs/WhoCaresWins〉
31. The presumed financial benefits of ethical investing are also reflected in many book titles; see, for example, Amy Domini, Socially Responsible Investing: Making a Difference and Making Money (Chicago: Dearborn Trade, 2001);
32. and Peter Kinder, Steven Lyderberg, and Amy Domini, Investing for Good: Making Money While Being Socially Responsible (New York: Harper-Business, 1993).
33. Other examples are Hall Brill, Jack A. Brill, and Cliff Feigenbaum, Investing with Your Values: Making Money and Making a Difference (Gabriola Island, B.C.: New Society, 2000), which "shows you how to put your money to work to support your ethical beliefs while earning returns that are as good or better than those earned by traditional investments." It "explains . . how to unlock the power of investments to accomplish the dual goal of growing a nest egg and improving the world" (first page of book, n.p.); Peter Camejo's The SRI Advantage is subtitled Why Socially Responsible Investing Has Outperformed Financially (Gabriola Island, B.C.: New Society, 2002); and Amy Domini with Peter Kinder, Ethical Investing: How to Make Profitable Investments without Sacrificing Your Principles (Reading, Mass.: Addison-Wesley, 1986).
34. Michael Porter and Claas van der Linde, "Green and Competitive: Ending the Stalemate," Harvard Business Review, (October 1995): 120-34.
35. One of those was the Seminar on the Business Case for CSR, European Commission, Enterprise Directorate-General, Brussels, June 17, 2004.
36. See Joshua Daniel Margolis and James Patrick Walsh, People and Profits? The Search for a Link between a Company's Social and Financial Performance (Mahwah, N.J.: Lawrence Erlbaum,2001), for the most comprehensive list of these studies.
37. Ibid., pp. 4-5.
38. For descriptions and analyses of relationships between firms and NGOs, see Dennis Rondinelli and Ted London, "How Corporations and Environmental Groups Cooperate: Assessing Cross-Sector Alliances and Collaborations," Academy of Management Executive, 17, no. 1 (2003): 61-76;
39. and Michael Yaziji, "Turning Gadflies into Allies," Harvard Business Review, (February 2004): 112-15.
40. Quoted in Leonard Silk and David Vogel, Ethics and Profits: The Crisis of Confidence in American Business (New York: Simon and Schuster, 1976), p. 145.
41. Walter Lippmann, Drift and Mastery (Englewood Cliffs, N.J.: Prentice-Hall, 1961), pp. 22, 23.
42. A Standard Oil executive speaking in the early 1960s, ibid., p. 134.
43. Marina v. N. Whitman, New World, New Rules: The Changing Role of the American Corporation (Boston: Harvard Business School Press, 1999), p. 7.
44. Ibid., p. 11.
45. Duncan Norton-Taylor, "The Private World of the Class of '66," Fortune, February 1966, p. 13D.
46. "Why Business Faces Campus Ire," Business Week, August 9, 1967, p. 74.
47. Gordon Fich, "Students in Business: What Do They Think about It? Why?" Vital Issues, March 1969, p. 1.
48. David Vogel, Fluctuating Fortunes: The Political Power of Business in America (New York: Basic Books, 1989), pp. 54-55.
49. According to a British study, the average SRI investor was middle-aged and worked in a managerial or professional occupation. His or her income and education were higher than those of the public as a whole. Russell Sparkes, Socially Responsible Investment (New York: John Wiley, 2002), p. 77.
50. Cohen quoted in Hollender and Fenichell, What Matters Most, p. 263;
51. see also Carmel McConnell, Change Activist: How to Make Big Things Happen (New York: Prentice Hall, 2001). Its author, formerly a radical activist, is now a management consultant. The theme of her book is that you can make good money and still stay true to your values. Roddick quoted in McConnell, Change Activist, p. 12. And see, for example,
52. Peter Kinder, "Values and Money," KLD Research & Analytics (〈www.kld.com/resources/papers/values〉 [2004]).
53. Roger Cowe, "From First Tuesday to Green Tuesday," Financial Times, May 20, 2004, p. 8.
54. See Margolis and Walsh, People and Profits? for a list and summary of twelve "reviews of reviews," pp. 20-24.
55. Stuart Hart and Gautam Ahuja, "Does It Pay to Be Green?" Business Strategy and the Environment, 5, no. 1 (1996): 30-37.
56. Glen Dowell, Stuart Hart, and Bernard Young, "Do Corporate Global Environmental Standards Create or Destroy Market Value?" Management Science, 46, no. 8 (1999): 1059-74.
57. Michael Russo and Paul Fouts, "A Resource-Based Perspective on Corporate Environmental Performance," Academy of Management Journal, 40, no. 3 (1997): 534-59.
58. Dinah Koehler, "Capital Markets and Corporate Environmental Performance - Research in the United States" INSEAD, Fontainebleau, France, p. 11.
59. See also Khaled Elsayed and David Paton, "The Impact of Environmental Performance on Firm Performance: Static and Dynamic Panel Date Evidence," Nottingham University Business School, October 2003.
60. Donald Reed, Green Shareholder Value: Hype or Hit? (Washington: World Resources Institute, 1998).
61. Margolis and Walsh, People and Profits? p. 8.
62. For a comprehensive and thoughtful assessment of the literature on the financial impact of environmental performance that reaches a different conclusion, namely that environmental leaders tend to outperform the stock market, see Frank Dixon, "Financial Markets and Corporate Environmental Results," in Environmental Performance Measurement, edited by Daniel Esty and Peter K. Cornelius (Oxford University Press, 2002), pp. 54-65.
63. Margolis and Walsh, People and Profits? p. 8.
64. See Brad Brown, "Do Stock Market Investors Reward Companies with Reputations for Social Performance?" Corporate Reputation Review, 1, no. 2 (1996): 275-76;
65. and Alan Richardson, Michael Welker, and Ian Hutchison, "Managing Capital Market Reactions to Corporate Social Responsibility," IJMR (March 1999): 38, for critical analyses of this measure. For a debate on its usefulness, see
66. Research Forum, Business and Society Review, 34, no. 2 (August 1995): 197-240.
67. See Anne Ilinitch, Naomi Soderstrom, and Tom Thomas, "Measuring Corporate Environmental Performance," Journal of Accounting and Public Policy, 17 (1998): 383-408.
68. Abigail McWilliams and Donald Siegel, "Corporate Social Responsibility and Financial Performance: Correlations for Misspecification, " Strategic Management Journal, 21, no. 8 (2000): 608. The study they critique is
69. Sandra Waddock and S. Graves, "The Corporate Social Performance-Financial Performance Link," Strategic Management Journal, 18, no. 4 (1997): 305-8.
70. Jennifer J. Griffen and John Mahon, "The Corporate Social Performance and Corporate Financial Performance Debate: Twenty-five Years of Incomparable Research," Business and Society, (March 1997): 12.
71. See ibid., pp. 7, 20-24; and
72. John Mahon and Jennifer J. Griffen, "Painting a Portrait," Business and Society, (March 1999): p. 130,
73. Margolis and Walsh, People and Profits? p. 13.
74. Ronald Roman, Sefa Hayibor, and Bradley Agle, "The Relationship between Social and Financial Performance," Business and Society, 38, no. 1 (March 1999): 121.
75. As one recent scholarly article put it after an extensive literature review, "As findings about the positive relationships between CFP (corporate financial performance) and CSR become more widely known, managers may be more likely to pursue CSR as part of their strategy for attaining high CFP." Mark Orlitzky, Frank Schmidt, and Sara Rynes, "Corporate Social and Financial Performance: A Meta-analysis" Organization Studies, 24, no. 2 (2003): 426.
76. Every book written by an executive whose firm is widely recognized for its CSR initiatives urges other managers to follow his company's example. See, for example, Ray C. Anderson, Mid-Course Correction: Toward a Sustainable Enterprise (White River Junction, Vt.: Chelsea Green, 1998);
77. Charles Holliday, Stephan Schmidheiny, and Philip Watts, Walking the Talk: The Business Case for Sustainable Development; and Hollender and Fenichell, What Matters Most.
78. Dan diBartolomeo and Lloyd Kurtz, "Managing Risk Exposures of Socially Screened Portfolios," Northfield Information Services, September 9, 1999 (〈www.northinfo.com〉), p. 8.
79. Another study notes that the DSI also had different macroeconomic exposures than the S&P 500. Lloyd Kurtz and Dan diBartolomeo, "Socially Screened Portfolios: An Attribution Analysis of Relative Performance," Journal of Investing, (Fall 1996): 35-41.
80. For a detailed discussion of the composition of this index and its performance, see Alois Flatz, "Corporate Sustainability and Financial Indexes," in Environmental Performance Measurement, edited by Daniel Esty and Peter K. Cornelius (Oxford University Press, 2002), pp. 66-81.
81. See, for example, Alan Gregory, John Matatko, and Robert Luther, "Ethical Unit Trust Financial Performance: Small Company Size Effects and Fund Size Effects," Journal of Business Finance & Accounting, (June 1997): 705-23, which found that the most important reason why a group of British unit trusts (mutual funds) outperformed matched pairs of funds was that the former were most heavily invested in smaller firms, which performed better during the time period of their analysis. Similarly, an unpublished paper by Kelly Young and Dennis Proffitt, "Socially Responsible Funds: Recent Performance and Other Issues Relating to Portfolio Choice" (dproffitt@grand-canyon.edu) reports that while the returns of most SRI funds were comparable to traditional funds of the same type, all size categories of growth funds had significantly lower returns, largely because the "typical SRI fund is over invested in high-tech industry" (p. 17).
82. Russell Sparkes, Socially Responsible Investment (New York: John Wiley & Sons, 2002), p. 270.
83. See, for example, Kelly Young and Dennis Proffitt, "Socially Responsible Mutual Funds: Recent Performance and Other Issues Relating to Portfolio Choice," Grand Canyon University, College of Business and Professional Studies, p. 17;
84. Alicia Munnell and Annika Sunden, "Social Investing: Pension Plans Should Just Say 'No,'" paper prepared for the conference "Cost and Benefits: "Socially Responsible' Investing and Pension Funds," Washington: American Enterprise Institute, June 7, 2004, p. 7. This is also the conclusion of the two studies considered by the Socially Responsible Investment Forum to represent "the most rigorous and insights quantitative studies of socially screened funds' performance" (2003 Report on Socially Responsible Investing Trends in the U.S., Social Investment Forum, p. 44);
85. Bernell Stone, John Guerard Jr., Mustafa Gultekin, and Greg Adams, "Socially Responsible Investment Screening: Strong Evidence of No Significant Cost for Activity Managed Portfolios," Journal of Investing, (forthcoming);
86. and Rob Bauer, Kees Koedijk, and Roger Otten, "International Evidence on Ethical Mutual Fund Performance and Investment Style," Discussion Paper (London: Centre for Economic Policy Research, January 2002). For a list of the extensive literature on this subject, see Appendix 3 of the 2003 Report on Socially Responsible Investing Trends.
87. See, for example, Camejo, The SRI Advantage;
88. and Jeroen Derwall, Nadja Gunster, Rob Bauer, and Kees Koedijk, "The Eco-Efficiency Premium Puzzle" (〈www.erim.eir.ni〉).
89. Susannah Goodman, Jonas Kron, and Tim Little, The Environmental Fiduciary (Oakland, Calif.: Rose Foundation for Communities and the Environment), p. 2.
90. Joanne Rickness and Paul Williams, "A Descriptive Study of Social Responsibility Mutual Funds," Accounting Organizations and Society, 13, no. 4 (1998): 397.
91. For this criticism, as well as a series of more wide-ranging criticisms of SRI, see Jon Entine, "The Myth of Social Investing," Organization & Environment, (September 2003): 1-17.
92. Paul Hawken and the Natural Capital Institute, Socially Responsible Investing (〈www.natural-capital.org/images/NCI〉[October 2004]); the quotes are from p. 17.
93. James C. Collins and Jerry I. Porras, Built to Last: Successful Habits of Visionary Companies (New York: Harper Business, 1994), pp. 2, 3.
94. For a list of the most socially responsible firms of the 1970s, see the corporations included in Thornton Bradshaw and David Vogel, eds., Corporations and Their Critics: Issues and Answers to the Problems of Corporate Social Responsibility (New York: McGraw-Hill, 1981).
95. Peter Landers and Joann Lublin, "Merck's Big Bet on Research by Its Scientists Cornes Up Short," Wall Street Journal, November 28, 1993, p. 1;
96. see also "Face Value: The Acceptable Face of Capitalism," Economist, December 14, 2002, p. 61.
97. Alison Maitland, "Winner's New Leaders Face a 'Healthy Challenge,'" Financial Times, July 8, 2004, p. 1.
98. Jonathon Porritt, "Does Philip Green Understand?" (letter to the editor), Financial Times, July 9, 2004, p. 14.
99. Simon Zadek, "Doing Good and Doing Well: Making the Business Case for Corporate Citizenship" (New York: Conference Board, 2000), p. 19.
100. Michael Skapinker, "Why Corporate Laggards Should Not Win Ethics Awards," Financial Times, July 21, 2004, p. 8.
101. Martin Dickson, "Good, Not Great," Financial Times, July 7, 2004, p. 20.
102. Sara Silver, "How to Grow a Good Name on Green Bananas," Financial Times, November 26, 2004, p. 8.
103. See also J. Gary Taylor and Patricia Scharlin, Smart Alliance (Yale University Press, 2004).
104. Rogelio Oliva and James Quinn, "Interface's Evergreen Services Agreement," Harvard Business School case 9-603-112, July 4, 2003, p. 5.