Abstract
In the context of increased awareness for complying with the multiple requirements for sustainable development, the stakeholders need to have the proper information for analyzing the corporate behaviors from various perspectives. Thus, the purpose of this research is to investigate and map the sustainability patterns of European companies at the beginning of 2019, in order to uncover valuable insights into the corporate sustainable behaviors. The Environmental, Social and Governance (ESG) performances of 1165 European companies were considered by applying the Kohonen neural network for clustering purposes at three main levels: (1) ESG overall level, including country and sectoral perspectives; (2) ESG thematic level; (3) ESG four-folded innovative level (stakeholder, perspective, management level and focus views). All three analyses carried out show a three-clustering solution—Lower, Middle and Higher ESG clusters. Most firms are top ESG performers and the companies with good ESG scores also have more related controversies. The results highlight the sustainability profiles of the examined companies. Firstly, the environmental and social priorities are preferred over corporate governance targets. Secondly, companies tend to implement a business-customized ESG approach for achieving organizational efficiency and competitiveness. Thirdly, there is a higher consideration of employees, external-directed measures, operational issues and process-orientation in the corporate ESG performance and development. The ESG approach of the European reporting companies is mainly mature, strategic and long-term oriented, aimed to increase the corporate competitiveness and to support the societal well-being altogether.
Highlights
In order to contribute to a comprehensive European perspective, a large sample of companies is employed: all ESG reporting corporations registered in Thomson Reuters EIKON/Refinitiv database that are simultaneously headquartered in European countries/territories and listed on European stock exchanges at the beginning of January 2019
Clustering based on corporate social responsibility” (CSR) or ESG performance has been rarely used in the specialized literature, but it is seen as an increasing trend in the context of sustainable development and organizational sustainability
We proposed and calculated a computed variable (ESG.Combined_A) to reflect the controversies impact on total ESG score, as an average between ESG_S and ESG.Controversies_S
Summary
The disclosure of corporate sustainability through integrated reporting and the enclosure of environmental, social and governance (ESG) criteria as part of the sustainable finance desideratum are topical concerns in mainstream academic studies, economic practice, and for European and other international policy makers and organizations [1,2,3,4,5,6,7,8,9,10,11,12]. The objective of the present research is to identify the European sustainability pattern by mapping the corporate ESG behavior through a neural network analysis, explicitly the Kohonen self-organizing map (SOM). The first level represents a general scrutiny developed around the clustering of the companies by the three main ESG pillars This examination reflects the ESG risk exposure and provides country and sector insights. The third level of the analysis is an original enquiry based on four distinct organizational sustainability facets (main beneficiaries, perspective, management level, and functional focus of the ESG behaviors) This last part is furthered through a set of ESG-based innovative composite scores proposed by the authors. The paper connects to more recent studies that apply Kohonen neural networks on rather large samples of European companies for mapping various forms of organizational performance [35,36]. The structure of the paper is the following: Section 2 presents a review of the specialized literature on ESG and the role of its components; Section 3 details the research data and applied methodology; Section 4 highlights the main results and a set of discussions for the three investigation levels; Section 5 outlines the conclusions of the research, the limitations and further research directions
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