Social responsibility: Do outside ratings affect companies?

They found environmental performance subsequently improved more for firms that initially received poor ratings than for other firms. As well, such improvements were most likely

A study by two academics suggests that ratings by outside groups of corporate social responsibility do have an impact on corporate behaviour.

Aaron Chatterji of Duke University and Michael Toffel of Harvard Business School in a working paper looked at how nearly 600 firms in the United States responded to corporate environmental ratings issued by a prominent independent social rating agency, KLD Research & Analytics, avoiding any bias in their sample by focusing on what happened when the agency expanded the scope of its ratings.

They found environmental performance subsequently improved more for firms that initially received poor ratings than for other firms. As well, such improvements were most likely for firms in highly regulated industries and firms with more low-cost opportunities to exploit for improving their environmental record.

for firms in highly regulated industries and firms with more low-cost opportunities to exploit for improving their environmental record.