Semelhante a Alex Wood Presentation - CIRANO & l'École Polytechnique de Paris Workshop: Corporate Social Responsibility and Firm Performance November 2010
Semelhante a Alex Wood Presentation - CIRANO & l'École Polytechnique de Paris Workshop: Corporate Social Responsibility and Firm Performance November 2010 (20)
3. CSR and financial performance
Starting point for SP – reflected in this
presentation – is understanding how a
corporation’s integration of environmental risks
and opportunities into its business translates
into enhanced performance (including financial
performance)
So: what is the relationship between CSR and
financial performance?
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4. A framework for understanding CSR
and financial performance
• First frame: short-term and long-term nature of
the issue
• Second frame: drivers of corporate financial
performance
• Assume that most basic calculus for firm
performance is that opportunity should
outweigh risk
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5. At first glance:
• With that basic framework, one concludes – in
relation to CSR and environmental “agenda” for
firms is:
– A long-term issue
– A driver of costs, and not revenues
– Largely involving or addressing risks, not
opportunities
• This “first glance” can explain why decision-
makers in firms and capital markets undervalue
CSR/environment
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6. Beyond first glance
What we know:
- Research shows correlation, but not causality,
between CSR/environment and financial
performance
- But “toolkit” available to analysts/researchers is
not fully developed
- In particular, “strategic advantage” of
CSR/environment integration is hard to
quantify
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7. Beyond first glance
• So...lots of proxies:
– Firm focus on CSR/environment reflects good
management practice
– Focus on CSR/environment boosts employee morale
and productivity
– Focus on CSR/environment provides reputational
“insurance”
• All of these have multiple drivers/explanations, so
difficult to quantify and to attach a causal
relationship to financial performance.
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8. Beyond first glance
Key issue is understanding role of
CSR/environment drivers of financial
performance
DANA: PLS DROP VISUAL#1 IN HERE
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9. Revenue Drivers
New markets:
Demand patterns
New revenue forms (carbon credits)
DANA; NEED ONE KEY $$$ NUMBER FOR
EACH: MESSAGE IS GROWTH IN EACH
OF THESE DRIVERS
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10. Cost Drivers
• Raw material costs
• New regulatory costs
• Higher electricity costs
DANA: TOUGHER TO QUANTIFY THESE, BUT
MESSAGE FROM ME WILL BE THAT COSTS
WILL INCREASE AND CSR/ENVIRONMENT
FOCUS IS A HEDGE AGAINST THESE COSTS
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11. In the long-run....
• Basic conundrum at heart of impact of
CSR/environment on financial performance:
• In short-term, CSR/environment does not
translate into “free cash flows”, and so isnot
prioritized
• Cash flows can be expected in long-term, though
• Question is why – when it comes to
CSR/environment – rate of growth matters less
than costs/risks (which is reverse of almost every
other investment opportunity)
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12. Role of policy
• Big part of the answer is that a major risk factor
comes from policy/political uncertainty around
CSR/environment
• This points to the need for policy and political
certainty
• Key drivers of CSR/environment integration will
emerge over time (i.e. resource constraints)
• Role of policy is to anticipate this and manage a
transition that will – in part – come through
creation of economic conditions that make
CSR/environment profitable.
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