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

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.

How to Lead the Board of Directors to a Sustainable Development of Business with the CSR Committees

“…The literature review explains the establishment of CSR committees with the aim by the BoDs to improve environmental impacts [22,25,37,48], voluntary CSR disclosure [26,[49][50][51][52][53] or corporate social performance in general [21,23,[54][55][56][57][58]. So, many researches emphasize CSR committees as a characteristic of the board structure to improve the corporate governance and positively influence the corporate performance.…”

Does CSR Governance Improve Social Sustainability and Reduce the Carbon Footprint: International Evidence from the Energy Sector

“…When the energy firms have an effective CSR committee and control carbon footprints, then the company has the opportunity to sell their surplus of carbon footprint allowances [24]. Therefore, the presence of effective CSR systems improves the CSR commitment and also saves the environmental cost for the energy sector [22,25]. Improved CSR policies aid in controlling the carbon footprint that could lead a company to improve the financial performance.…”

“…If the companies have the existence of a CSR committee, it reduces the risk and cost, and improves the capital structure of the company. In this paper, we use the CSR committee as an independent variable [25]. If the company has an effective CSR committee, this characteristic will be helpful to grow in the market.…”

“…In contrast, the absence of a CSR committee leads towards less informed stakeholders [31]. Therefore, in response, the management does not drive sustainable decisions and does not give effective advice to the stakeholders [25].…”

“…The existence of the CSR committee increases the confidence of investors in the firm's fund management [32]. A CSR committee composition reduces the agency problems (conflict of interest between the principal (owner) and agent (manager)) in the company [25]. The CSR committee has an impact on the different types of qualitative and quantitative characteristics of the firm.…”