CSR Committees and Their Effect on ESG Performance in UK, France, Germany, and Spain

Elisa Baraibar-Diez,María D Odriozola

doi:10.3390/su11185077

Elisa Baraibar-Diez, María D Odriozola

Open Access

https://doi.org/10.3390/su11185077

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Journal: Sustainability	Publication Date: Sep 17, 2019
Citations: 77	License type: CC BY 4.0

Affiliation: Universidad de Cantabria

Abstract

The multidisciplinary nature of a corporate social responsibility (CSR) committee reflects the commitment as well as the expectations and demands of diverse stakeholders. So far, CSR committees have been mainly considered as variables of control in larger corporate governance models and independent variables that determine CSR or environmental, social, and governance (ESG) disclosure and its reporting quality. However, the effect on corporate performance has been biased to financial performance, so the potential of the analysis of the effect it may have on different facets of non-financial performance has not been exploited. Which it should, since it can be a fundamental tool to achieve sustainability. The objective of this contribution is to test whether companies with a CSR committee not only leads to higher economic scores, but also to higher ESG (environmental, social, governance) scores. To do this, we used regression panel data models in 197 listed firms in Spain, France, Germany, and the UK during the period 2005–2015 including the perspective of European organizations and completing the extant studies in US-based samples. Our results showed that 90% of companies in the sample had a CSR committee in 2014, and that those companies had significantly different ESG scores than those without a CSR committee. Having a CSR committee also triggered better non-financial performance when considering the four scores and the four countries independently (except for the economic scores in Spain). These results have great implications for practitioners, reflecting the importance of promoting these tools in an organization to enhance non-financial performance and sustainability.

Highlights

The creation of corporate committees has the purpose of making recommendations to corporate boards and assist board members in their functions
corporate social responsibility (CSR) committees emerge to assist corporate boards in social and sustainability issues. The existence of such committees has been mainly related to the quantity and quality of CSR/ESG disclosure, the effect on corporate social performance (CSP) or non-financial performance has been focused on US-based samples
This contribution is relevant because we analyzed this relationship in the listed companies of four European countries, confirming the effectiveness of CSR committees in several components of non-financial performance, in line with previous studies having disaggregated CSp

Summary

Introduction

The creation of corporate committees has the purpose of making recommendations to corporate boards and assist board members in their functions. In this advisory role, there are three committees that traditionally guarantee good functioning and independence of the boards, that is, the audit committee, remuneration committee, and nominating committee. An important part of those functions is related to social responsibility, sustainability, and their impacts on society. The creation of a CSR committee is, beyond the conviction and commitment of corporate boards on sustainability, one of the first steps that most international standards and guidelines will advise is its implementation to perform a CSR policy. Having a multidisciplinary team that promotes, monitors, and disseminates the socially responsible commitment of the company is a signal to the market [6,7,8] and to other competitors, as it indicates “an active strategic posture with regards to stakeholder relationships” [8] (p. 125)

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