Research finds new way to measure CSR impact for investors

A new study has found a way for investors to measure the impact corporate social responsibility has on company performance.

Andy Moniz of Rotterdam School of Management, Erasmus University, examined the impact of corporate culture, reputation and environmental sustainability on businesses’ bottom lines.

Moniz says: “Financial reports often overlook these ‘intangible’ data sets as recording them can be costly and difficult. This leads investors to rely on unsatisfactory and disorganised information.”

Using his experience in equity investment, Moniz created an algorithm that scanned 105,958 newspaper articles, blogs and magazines published between 1981 and 2014 for the context of negative reviews about poor corporate social behaviour.

Moniz says: “Rather than using basic analysis to find key words, this algorithm can go further, probing into the issues which can drastically affect a company’s corporate standing. It is undeniable that big data is disrupting all areas of business and can heavily inform long-term investors. Yet where the difficulty of finding relevant information – even from companies’ own lengthy and often unstructured reports – has reigned in the past, this new tool can gather material from selected sites written by consumers, journalists, employees and regulators to provide a more holistic view of the company’s workings.”

The research also provides a framework to determine each negative review’s impact on the company’s future performance and stock return.

Moniz adds: “An increasing demand for environmental information and a growing discontent with accepting statistics and data that the company publishes is fuelling the need for an objective means to assess each businesses’ actions, rather than its words. By scanning corporate sustainability reports for – often confusing – information, it is possible to translate such things as the success of a company’s environmental policy. Likewise, finding reviews on Glassdoor, a website that allows employees to rate their companies, and contextualising them with data such as work/life balance can give a far more honest overview of the company’s policy and standing. All this information is invaluable to equity investors, who must rely on concrete data as well as predictions and forecasts.”

For more information please contact Natalie Bishop at BlueSky PR on natalie@bluesky-pr.com or +44 (0)1582 790709

Rotterdam School of Management, Erasmus University (RSM) is one of Europe’s leading business schools, and ranked among the top three for research. RSM provides ground-breaking research and education furthering excellence in all aspects of management and is based in the international port city of Rotterdam – a vital nexus of business, logistics and trade. RSM’s primary focus is on developing business leaders with international careers who carry their innovative mind-set into a sustainable future thanks to a first-class range of bachelor, master, MBA, PhD and executive programmes. RSM also has offices in Chengdu, China, and Taipei, Taiwan. www.rsm.nl