Abstract
This article aims to detect how ESG adds value to the long-term shareholder value creation and to discover whether businesses are aware of positive ESG effects and, therefore, whether they will become more ESG-conscious. By conducting a qualitative content analysis on the academic literature, this article firstly aims to determine if shareholders’ value is positively affected by corporate ESG awareness. Secondly, to test whether companies are becoming more conscious about the importance of ESG, the mission statements of publicly listed Central and Eastern European (CEE) companies are compared to their decade-old versions. This analysis allows us to conclude on whether companies have shifted their attention to the ESG factors as a part of their purpose of existence and, therefore, for long-term shareholder value creation, which is one of the main goals of the exchange-listed enterprises. The content analysis results show that companies with higher sustainability awareness ensure shareholder value creation via improved financial performance, management quality as well as reduced risk metrics. Additionally, qualitative nonfinancial factors such as reputation, stakeholder trust, employee satisfaction and engagement provide an even more significant effect on the long-term value than the pure financial matters. The theoretical trend is found to be supported by the fact that sustainability practice and consumer-oriented keywords dominate the mission statements of CEE companies, while keywords related to shareholders and profit experienced the most significant decrease from 2012 to 2021. The present research is unique as it looks at how companies tend to become more ESG aware, integrating the sustainability perspective into their mission statements in response to the global sustainability trend.
Highlights
The mission statements of corporations have changed tremendously over the years
The results show that the most notable impact from high ESG performance comes from the financial factors
Improved financial performance is characterized in both accounting terms and the stock return performance, which are direct input variables in the firm’s value calculation, yielding higher value for the shareholders
Summary
If previously there was an open debate on whose interests should come first—shorter-term profit maximization, as suggested by Shareholder theory [1], or longer-term total value maximization for wider society, as described by the Stakeholder theory [2]—recently, the focus has heavily shifted towards the more sustainable, more long-term-oriented version of value creation. The stock markets and investors have proven this point by the fact that, as of 2019, 84% of the S&P500 company value consisted of intangible assets [3] This means that if historically investors were willing to pay mainly for physical assets such as property, equipment, and machinery, nowadays the value of the companies consists largely of intangible values such as reputation, corporate culture, and customer loyalty. While initially the shareholder value mainly described short-term profit orientation, nowadays the concept increasingly leans towards reflecting the need to act responsibly and sustainably for the organization to ensure its place in the economy in the long term
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