Social Sustainability and Firm Performance

Category: Management & Microeconomics Brown Bag Seminar
When: 25 May 2023
, 12:30
 - 13:30
Where: RuW 4.201
Speaker: Erika Bognar

Title: Social Sustainability and Firm Performance

Abstract: In an empirical study, we examine the interplay of firms’ performance in social sustainability, mandatory disclosures of social sustainability, firms’ financial performance, and informativeness of social sustainability indicators. We use data from Refinitiv and the exogenous change in the regulatory environment (Directive 2014/95/EU in 2014 and CSR-RUG in 2017) to investigate whether mandatory disclosures of social sustainability lead to better social performance and if social performance is related to firm performance. Moreover, we match the social sustainability metrics disclosed by firms with the exposure drafts for sustainability disclosure standards by the European Financial Reporting Advisory Group (EFRAG) to identify whether the metrics that will most probably become part of future regulation for mandatory disclosures are also informative with respect to financial performance. We find that mandatory disclosure requirements increase social performance and that social and financial performance are positively linked. Moreover, we find that several metrics included in the exposure drafts for sustainability disclosure standards are not informative with respect to financial performance, whereas other metrics that are currently not included in the standards are highly informative. Our results have important implications for firms’ disclosure strategies as well as for regulators and standard-setters regarding the implementation of disclosure standards on sustainability issues.