stakeholder groups and firms’ corporate …

DRAFT: DO NOT CITE WITOUT PERMISSION

1

STAKEHOLDER GROUPS AND FIRMS’ CORPORATE SUSTAINABILITY DECISIONS

Nicholas Reksten and Ranjula Bali Swain

June 18, 2020

Reksten: University of Redlands, California, USA ([email protected]); Bali Swain, Stockholm School

of Economics and Department of Economics, Södertöorn University, Stockholm ([email protected]). Research

funding for Bali Swain from Swedish Research Council for Sustainable Development (Formas) is gratefully

acknowledged. Usual disclaimer applies.


2

Abstract

We develop a novel theoretical framework to explain the mechanism through which firms

make decisions on corporate sustainability (CS). CS is modeled as the proportion of clean capital

that firms use in their production process. Stakeholder groups such as consumers, communities

(activists and non-governmental organizations), regulators, workers and shareholders have

preferences for CS, which impact a firm’s profit function and constraints. When firms are

confronted with stakeholders who have knowledge about the negative externalities generated by

their production, they choose a mix of clean capital to maximize profits given stakeholder

constraints. The impact of the stakeholders depends on characteristics such as the size of the firms,

market structure, firm’s location, composition of the shareholders, and whether the firm makes a

final or intermediate goods. Our framework illuminates why different firms may pursue varying

levels of CS action even when they make similar products.

Keywords: Corporate Sustainability, clean capital, stakeholders

1. Introduction

Corporations are increasingly expected to have social and environmental performance

standards and practices while maintaining their financial and legal obligations, given the urgency

of addressing climate change. (Lankoski 2016; Dyllick and Hockerts 2002; Baumgartner and

Rauter 2017). Indeed, recent years have witnessed a growing move towards sustainability

initiatives by businesses. However, if their objective is profit maximization for shareholders as

traditionally defined, why they would embrace these standards is unclear. How do firms decide to

make pledges regarding environmental standards, and what determines how strict those standards

are? This paper argues that firms work to maximize profits given constraints placed upon them by

stakeholder groups such as communities of activists and non-governmental organizations,


3

customers (consumers or other firms), workers, and regulators that manifests as a demand for

incorporating “clean capital” with lower environmental impact into their production processes.

We examine these questions through the lens of corporate sustainability (CS), the

application of sustainable development at the firm/corporate level for short- term and long-term

economic, environmental and social performance of a corporation (Steurer et al. 2005;

Baumgartner and Ebner 2010; Lozano 2011; Dyllick and Muff 2015; Hahn et al. 2017). It requires

corporations to embed sustainability strategies into their business model through adopting new

governance strategies and performances that involve stakeholders’ responsibility and contribute to

the continuous improvement of social, environmental, and economic conditions on a regional

and/or global scale (Dyllick and Muff 2015; Szekely and Vom Brocke 2017).

CS has been defined by the largest global corporate initiative called Global Compact1 as a

company’s delivery of long-term value in financial, environmental, social, and ethical terms. The

group advocates five features of CS: Principled Business, which follows basic principles of human

rights, labor, environment and anti-corruption; Strengthening Society by taking action and

collaborating with others to advance global challenges; Leadership Commitment for effecting

long-term change with a company’s leadership; Reporting and Transparency in business practice;

and Local Action (Global Compact, 2014).

Such statements, though, are not limited to Global Compact. On Aug 19, 2019, CEOs of

181 large US corporations who are part of the Business Roundtable group issued a statement of

purpose in which they pledged to lead their companies for the benefit of all stakeholders including

customers, employees, suppliers, and communities and not just shareholders. The pledge includes

a promise to “respect the people in our communities and protect the environment by embracing

1 Global Compact is the world’s largest global corporate initiative towards sustainability, with over 8,000

companies and 4,000 non-business participants based in over 160 countries.


4

sustainable practices across our businesses” (Business Roundtable, 2019). This statement and a

follow-up initiative by a group of investors, academics and lawyers is pushing large companies to

provide details on how they will “profitably achieve a solution for society” (Edgeclife-Johnson,

2019) are examples of how the concept of corporate sustainability (CS) is being acknowledged

and mainstreamed.

In this paper, we investigate why firms engage in corporate sustainability, focusing on the

role of stakeholder groups in firm decision-making. More specifically, we examine how firms

make their choice between the use of ‘clean capital’ and that of standard capital, and how this

choice may be influenced by stakeholder groups such as investors, communities, consumers,

workers and regulators etc. We define clean capital as capital that produces CS in addition to the

firm’s production good. Clean capital is more efficient in terms of environmental impact than

standard capital and is treated as a third input into production. This implies that output is a product

of capital and labor, and capital is a mixture of clean and standard capital.

We construct a theoretical framework on how firms make decisions on whether or not to

take on corporate sustainability and identify ways in which the firm’s operation is influenced by

the preferences of various stakeholders. We begin with the firm’s choice in production inputs,

specifically clean and standard capital, in the context of their profit maximization objective. We

then extend the model in order to explore how different stakeholders (consumers, communities,

workers and shareholders) may influence the decision of the firm to engage in corporate

sustainability by replacing some or all of its standard capital with clean capital. The impact of

legislation and regulation by the government on corporate sustainability is also discussed.

The paper contributes to the literature at several levels. First, it brings together a number

of heretofore disparate issues within the business studies literature, which have traditionally


5

focused on stakeholder groups separately. Second, it investigates why firms choose to or engage

in corporate sustainability using the novel concept of corporate sustainability as the proportion of

clean capital used in production. Third, it provides a guide to understanding why firms may have

different levels of corporate sustainability.

The paper is organized as follows. Section two reviews the emerging literature on corporate

sustainability. In section three, we first present a simple model of firms’ decision regarding the use

of clean capital, standard (‘dirty’) capital, alongside labor, in the production process. Subsequently,

we include stakeholders in the framework and examine their likely impact on the decision-making

by the firms. The paper concludes with some reflections and ideas for future research.

2. Literature Review

An outgrowth from the concept of sustainable development, CS may be defined as meeting

the interests of the corporation’s shareholders and stakeholders without compromising the

corporation’s ability to meet the needs of the future generations (Dyllick and Hockerts, 2002;

Schwartz and Carroll, 2008; Montiel and Delgado-Ceballos, 2014; Hahn et al., 2017). In early

literature, CS was usually discussed as environmental sustainability, ecological sustainability, or

environmentally friendly activities (Reinhardt, 2000; Shrivastava, 1995; Chisholm et al., 1999).

Over time there was an emphasis on a multidisciplinary business strategy with balance between

the three pillars of social, environmental, and economic sustainability (Székely and Vom Brocke,

2017; Lozano, 2011).

Recent literature has adopted this multidisciplinary concept of CS, making reference to

the short-term and longer-term economic, environmental and social performance of a corporation

(Steurer et al., 2005; Baumgartner and Ebner, 2010; Lozano, 2011; Dyllick and Muff, 2015; Hahn

et al., 2017; Ashrafia et. al, 2018). It requires corporations to embed sustainability strategies into

their business model by adopting new governance strategies and operations that involve a broader


6

group of stakeholders beyond the shareholders, thereby making a contribution to the continuous

improvement of social, environmental, and economic conditions at a regional and/or global scale

(Dyllick and Muff, 2015; Székely and Vom Brocke, 2017).2 These stakeholders include local and

national governments (via implementation of regulations), customers, civil society and NGOs,

financial partners (through external pressure), workers (pressure from within the corporation), and

other rival and/or upstream firms (pressure from the business sector) (Keijzers, 2002; Lozano,

2015; Székely and Vom Brocke, 2017). It is also possible that corporate executives learn from the

growing evidence of climate change and the impact of environmental degradation, so that even

without external or internal pressure, they voluntarily decide to switch to clean capital. 3

CS and Corporate Social Responsibility (CSR) are voluntary business activities with the

objective of contributing to better performance of corporations in social, environmental, and

economic spheres (Lo, 2010 ).They may be used individually or in combination, however, CS is

usually considered CSR plus sustainable development (De Bakker et al., 2005). Van Marrewijk

(2003) associates CSR with ‘the communion aspect of people’, such as stakeholder dialogue and

sustainability reporting, and CS with ‘the agency principle’, such as value creation, environmental

management etc. Steurer et al. (2005), for example, describes CS as a normative micro-level

approach and CSR as management practices concerned with implementing CS in the short-term.

Other researchers perceive that CSR is a social strand of CS, which is mainly built on a sound

stakeholder approach (Ebner and Baumgartner, 2006; Linnenluecke et al., 2009). Lozano (2012)

states that CSR definitions may be confusing and contradicting, which is sometimes perceived as

2 The benefits and challenges of adopting sustainable practices have been widely discussed in the literature

(Azapagic 2003, Haanaes et al. 2012, Kiron et al. 2013). These studies conclude that economic success alone is

insufficient for attaining corporations’ success in the long run (Dyllick and Hockerts 2002; Bansal 2005, Rego et al.

2017). A growing number of corporations have begun to mitigate environmental risks and improve their reputation

through sustainability practices. 3 Intercorrelation between multi-stakeholders also impact CS (Sharma and Henriques 2005).


7

philanthropy and/or social dimension, for example, stakeholder engagement with links to

assessment and communication. Other scholars suggest that the two concepts are converging

(Montiel, 2008; Bansal and Song, 2017; Doh and Tashman, 2014).

A large body of literature explores the motivations of companies for undertaking some sort

of corporate social or environmental responsibility commitment. In most cases, they focus on the

dynamics between a firm and a particular stakeholder group such as activists, consumers,

employees, managers, shareholders, or regulators that explains CSR/CS investments.

The first of these frameworks has been developed by Kitzmuller and Shimshack (2012),

who argue that corporate responsibility can be categorized depending on the types of preferences

one assumes for stakeholders and shareholders. If shareholders have social preferences (that is, the

well-being of potential victims of pollution is included in their utility function), CSR may be

undertaken as a strategic tool even if it is not profitable for the firm. On the other hand, if

shareholders have classical (selfish) preferences, CSR becomes relevant only if there is a

possibility of increasing profits.4 Using a similar framework, Schmitz and Schrader (2013) suggest

that for profit-seeking corporations, motivation for corporate responsibility is explained as a

response to the interests of other stakeholders such as consumers, communities, and workers. In

the case without social preferences, corporate responsibility can act directly as an advertisement

signaling product quality, a strategy to avoid regulations, or a response to government failure.5 If

4 CSR is considered strategic in the sense that it allows a firm to capture a higher market share and

differentiate itself from competitors. 5 By government failure, Schmitz & Schraeder (2013) mean that CSR can be seen as the provision of public

goods or reduction in “public bads” provided by a firm. Governments may be unable to provide all of the public

goods that are desired due to regulatory capture, for example, or if the pollution in question originates in another

country. It may also be that the citizenry has different preferences for public good provision. If a large group, but not

a majority, wants to have a public good provided, they may be able to convince a company to provide it rather than

the government.


8

however, the stakeholders have social preferences, the firm may undertake corporate responsibility

in an effort to appease these groups.6

Moving from abstract notions of stakeholder and shareholder preferences, Kitzmuller and

Shimshack (2012) argue that CSR addresses these preferences through three mechanisms: markets

(for both products and labor), politics (both public and internal to the firm), and isomorphism (i.e.

social norms).7 Crifo and Forget (2015) make a similar argument, suggesting that corporate

responsibility is driven by considerations about regulation, competition, and incomplete contracts.8

However, they also argue that the existence of social preferences is not sufficient to explain the

range of actions that are observed. Instead, social preferences are assumed but corporate

responsibility is ultimately driven by market imperfections, such as the under-provision of public

goods, incomplete contracts, or imperfect competition.

There are however, several cases where CS can be profitable. In such cases, it is rational

for a firm to undertake corporate sustainability, regardless of the types of preferences that the

shareholders and managers have. This could be due to an accidental coincidence of outcomes, i.e.

companies that are improving the efficiency of their production process happen to reduce their

environmental impact with it (Lyon & Maxwell, 2002; Busch-Pinkse, 2012). Alternatively, it may

be that pressure to reduce emissions (whatever the source of that pressure) can prompt the firm to

innovate, improving its production process technology in an effort to reduce emissions that also

6 Schmitz & Schraeder (2013) consider shareholders to be a stakeholder group, while Kitzmuller and

Shimshack (2012) treat them separately. In this paper, the former approach is adopted. 7 For example, firms may use CSR in markets as a form of signaling to attract productive workers. They

use CSR in politics as a means to pacify activists who may threaten the firm with negative publicity. CSR may also

operate through social norms within communities or industries, as those that are relatively organized may be able to

impose their preferences on others. 8 Regulation can be thought of as analogous to Kitzmuller & Shimshack’s (2012) political motivations;

competition relates to the market drivers; contracts are analogous to isomorphic drivers. Because contracts are

typically incomplete, the discretion of executives can be needed to induce stakeholders to work with the firm (Crifo

and Forget, 2015).


9

reduces costs (Porter and van der Linde, 1995). This is also known as the Porter hypothesis, though

it has traditionally been discussed in the context of mandatory environmental regulations only

(Ambec et. al, 2011). However, some researchers question why the firm would be so ignorant of

its production process that it would leave cost-reducing changes undone (Prakash and Potoski,

2012) or permit their techniques and input mixes to be unsettled (Lyon and Maxwell, 2002). That

is, if there were a set of input choices that could both improve profitability and reduce emissions,

should not the firm know it and choose it? The growing attention to greenhouse gases (GHG)

emission impact has received has also spurred the development of new renewable energy

(especially wind and solar power generation) and energy-efficient technologies that allow firms,

in some cases, to both reduce emissions and costs.

Pressure to reduce emissions can also come from other stakeholder groups (Busch-Pinkse,

2012). Consumers may be considered “socially responsible,” and therefore motivate firms to

provide more of a public good, for example, cleaner air or water alongside a private good (Bagnoli

and Watts, 2003; Lyon and Maxwell, 2002). Corporate responsibility may also be driven by

activist threats, leading them to provide more socially responsible goods (Baron 2001, 2012;

Fedderson and Gilligan, 2001; Calveras, Ganuza, and Llobet, 2007). Firms operating in an area

with regulatory uncertainty, especially with respect to climate change, may make CS investments

in an effort to pre-empt or influence future regulations or avoid the enforcement of existing

regulations (Lyon and Maxwell, 2002; Lyon and Maxwell, 2004; McCluskey and Winfree, 2009;

Engau and Hoffman, 2011).

Agreement or consensus regarding the incentives for shareholders and managers to

undertake corporate sustainability is limited. For example, Baron (2007) argues that when

investors anticipate CSR, they do not bear its cost in the form of reduced dividends. Instead,


10

managers go through lowered income, and shareholders only pay for CSR when it is a surprise

(i.e. not approved by them in advance). Cespa and Cestone (2007), portray CSR as an

entrenchment strategy used by inefficient CEOs. These managers build relationships with

stakeholders to maintain their position against shareholders. Clark and Hebb (2005) take a more

positive view of the role of shareholders, postulating that they use corporate responsibility to

manage reputational risk.9 This has the added benefit of promoting transparency of the firm’s

behavior and allowing it to be more easily observed both by shareholders and other stakeholders.

To summarize, a number of mechanisms and relationships that encourage corporate

responsibility among firms have been identified. It is clear that various stakeholder groups are

thought to affect a firm’s decision to engage in corporate responsibility. However, there does not

seem to be a single, unifying framework that can explain holistically how this might push firms to

do more through different stakeholder channels.

3. Analytical Framework

Environmental externalities like greenhouse gas emissions are produced because the

private and social costs of emissions diverge. Thus, excessive emissions that lead to climate

change, considered a negative externality, could theoretically be corrected through a Pigouvian tax

or some similar regulation that would equalize the private and social costs and benefits of the

emissions. Voluntary reductions in GHG emissions therefore indicate that either the private

marginal costs and/or benefits of polluting have changed. That is to say, voluntary reductions are

made in response to new pressures or to new information that the firm receives about its production

9 For example, in the 1990s, after revelations that children were employed in its factories, Nike promised

improvements in standards, such as setting minimum ages of employment, expanding worker education programs,

and inviting NGOs to inspect factories (Wazir, 2001).


11

process. The firm then seeks ways to change the techniques or input mix used in order to reduce

emissions. Such actions are akin to technical innovations and may or may not be profitable.

Additionally, stakeholders’ preferences can cause the firm to internalize a portion of the

externality as it becomes more profitable in the long run to respond. It can lead to higher revenues

in the medium term, decreased risk of costly regulation, and/or more motivated employees. By

undertaking actions that reduce GHG emission, the severity of the market failure is lessened in a

manner that is consistent with the firm’s long-run profit maximizing objective. Such voluntary

actions address the environmental problem of over-pollution without being required by law and

are considered CS.

The goal of this framework is to understand the firm’s decision-making process regarding

voluntary reduction goals in the context of a firm’s profit and cost functions. We focus on large

firms and assume that they are in imperfectly competitive industries with differentiated products

and facing a downward-sloping demand curve.10 Given this market structure, CS can be a potential

tool for product differentiation (Bagnoli and Watts, 2003).11 We will use climate change as an

example of an environmental issue to which this framework can be applied, but it could be used

to analyze other areas of environmental impact with little change.

Crucially, one can think of this framework as proceeding in two stages between which

information regarding emissions is “revealed” to the firm about its own production process. In the

first stage (the simple or naive framework), the firm maximizes profits in the conventional manner

10 We would expect many firms to be in oligopolistic industries, though this is not the case exclusively. As

will be made clear below, in contrast to typical models of oligopolistic firms, we do not explicitly include actions

taken by competitors as a constraint for the representative firm analyzed here. Instead, competitive pressures can be

thought of as operating through consumer preferences for clean production. Modelling the effects of competition

more directly would be beyond the scope of this work. 11 The assumption of monopolistic firms is not necessary for assuming the existence of CSR. Even firms in

a perfectly competitive market will not necessarily maximize profits unless a number of relatively specific conditions

are met (Feinberg, 1975 & 1980). However, it will be used here as this better reflects real-world market conditions

for large firms.


12

i.e. without consideration of the environment impact, using two standard inputs: (standard) capital

and labor. Neither the issue of climate change nor the notion of clean capital is understood by the

firm’s shareholders and managers. Thus, clean capital use is not considered in the profit-

maximizing decision. Other stakeholders are also unconcerned about the issue because the issue

has not yet been publicized by scientists, governments, and/or activists, or they are simply not

aware of it. None of the external costs of GHG emissions are internalized by the firm unless they

happen to come from regulated co-pollutants, such as ozone depleting chemicals.12 The case

involving lack of knowledge or concern about climate change aptly describes the state of the world

for most firms before the mid-1990s- mid-2000s in most countries. Since the mid-1990s, a growing

number of firms began to pay attention to climate change. In the second stage, the firm becomes

aware of climate change and the possible effects of existing mitigating technologies on costs and

revenues.13

The model in the first stage is straightforward. First, the firm faces a downward-sloping

demand curve in an imperfectly competitive industry, producing a differentiated product, selling

at price p. The firm produces quantity, q, of its good according to a measure of responsiveness to

demand to price, B, and a measure of popularity of the good, A. Both A and B are positive. That

is, the quantity produced is:

𝑞 = 𝐴 − 𝐵𝑝 (1)

12 That is, the firm may engage in some GHG emissions abatement as a by-product of reducing other

emissions, but GHG emission reduction is not measured or considered by the firm. 13 This is similar to the Lyon and Maxwell (2004) firm decision-making model, where regulators

administering a voluntary environmental program provide the firm with information about green technology, which

is costly. Because this process has occurred in the case of many firms that have not joined a government-run voluntary

program, it is not modeled in the same way here. Instead, scientists or activists become aware of the problem, and

then activists work to educate consumers, policy makers, and managers about the issue and its impacts. Additionally,

some managers are educated by activists, and this group in turn attempts to educate all other parts of the company,

from upper management in order to influence the strategic plan of the business, to employees to influence behavior.


13

Re-writing this as an inverse demand curve, we solve equation (1) for p and substitute 𝛼 =𝐴

𝐵 and

𝛽 =1

𝐵:

𝑝 = 𝛼 − 𝛽𝑞 (1)

Total revenue for the firm is:

𝑇𝑅 = (𝛼 − 𝛽𝑞)𝑞 (2)

𝑇𝑅 = 𝛼𝑞 − 𝛽𝑞2 (3)

For simplicity, we assume that the firm faces a constant marginal cost, c. This is a function

of the costs of capital and labor, K and L. However, once the firm is made aware of the issue of

climate change, it becomes aware that there are two types of capital: standard capital and clean

capital, denoted by 𝐾𝑠 and 𝐾𝑐, respectively.14 They represent two different types of machines that

firms can employ, where clean capital produces CS in addition to the firm’s production good.

Clean capital is in some way more efficient (in terms of the environmental impact of interest) than

standard capital, either because it uses a cleaner fuel, employs energy efficiency improvements

and or employs sustainable processes and practices. Clean capital is treated as a third input into

production, meaning that while we assume that output is a product of capital and labor, capital is

a mixture of clean and standard capital. Additionally, clean capital is always a substitute for

standard capital. Clean capital, standard capital, and labor have exogenous prices 𝑟𝑐, 𝑟𝑠, and 𝑤,

respectively.

Both clean capital and standard capital have a declining marginal rate of technical

substitution. That is, in an operation where only standard capital is used, the first units of clean

14 This follows Acemoglu et al. (2012) who assume that firms can use either clean or dirty inputs in their

production process. For example, firms may be able to choose from two types of machines or processes for producing

output, and one of these may use less energy and therefore release fewer emissions than the other. The more energy-

efficient machinery would be considered clean capital.


14

capital can be substituted in for relatively low cost.15 The opportunities to easily replace some

standard capital with clean capital is typically referred to by managers in firms as “low-hanging

fruit.” Technology can be biased towards a particular type of capital, which brings about a higher

marginal productivity, and thus leads to a change in the type of capital that firms use. Additionally,

the firm is choosing between capital types with different prices, 𝑟𝑐 and 𝑟𝑠, which here are

exogenous. The firm will use clean capital to the extent that the ratio of marginal products between

clean and standard capital is equal to the ratio between the prices of the two inputs. Therefore,

𝑀𝑃𝐾𝑠

𝑀𝑃𝐾𝑐

=𝑟𝑠

𝑟𝑐 (4)

To understand how technology can impact the tradeoffs between clean and standard capital,

we will discuss a case where a firm might have a Cobb-Douglas production function.16

Additionally, total capital, 𝐾 is made up of standard and clean capital: 𝐾 = 𝐾𝑠𝜏 + 𝐾𝑐

𝜈 where 𝜏 +

𝜈 = 1 and represent the proportion of each type of capital used. Technology can impact the ratio

of clean to standard capital in two ways. First, there are some processes for which there may be no

clean capital available. 17 In that case, there is an absolute limit set on 𝐾𝑐 in the production process,

so 𝐾𝑐𝜈 < 𝑙, where 𝑙 represents the maximum amount of clean capital that may be used to produce

a good. Changes in technology may increase 𝑙 as clean capital can be used in more processes.

Alternatively, technology may evolve that makes clean capital relatively more cost-efficient. In

15 A simplifying assumption is made here to not consider changes in the use of labor that result from changes

in the types of capital employed. Often, clean capital is more labor intensive than standard capital. One example of

this is the use of wind turbines instead of coal to generate electricity. A large coal-fired power plant requires fewer

workers to maintain than many windmills scattered over a larger area. 16 The use of a Cobb-Douglas production function here is meant to illustrate a broader theoretical point only.

It is impossible to characterize the production of all firms with a general function, but the logic demonstrated here

should hold even in the case of other functions. 17 This assumption implies that there are limits to the amount of clean capital the firm can use to maintain

production in the medium-run. In this case, the medium-run is a period in which the firm could replace much of its

capital structure but where costs of lower-emission technologies do not change significantly.


15

that case, the parameter 𝜈 will increase, indicating that the same amount of output can be produced

using less clean capital. This is illustrated in Figure 1.

Figure 1: Tradeoffs between Clean and Standard Capital

The firm will choose its inputs in such a way that minimizes total costs, given the level of

output chosen. Profits for the firm can thus be estimated as:

𝜋 = 𝛼𝑞 − 𝛽𝑞2 − 𝑇𝐶(𝑟𝑠, 𝑟𝑐, 𝑤, 𝐾𝑠, 𝐾𝑐, 𝐿) (5)

The profit-maximizing quantity of output, 𝑞∗, where marginal revenue is equal to marginal

cost is:

𝜕𝜋

𝜕𝑞= 𝛼 − 2𝛽𝑞 − 𝑐 = 0 (6)

𝑞∗ =𝛼−𝑐

2𝛽 (7)

Before an environmental issue such as climate change is understood by the firm, this is the

process through which it chooses output levels and an input mix. It is unconcerned with the


16

distinction between clean capital and standard capital for any environmental purpose. It is also

unconcerned with CS (or clean capital) investments explicitly. Instead of defining CS related to

greenhouse gas emissions as its own separate entity, it can be defined based on the nature of the

type of capital that the firm uses. That is, it can be thought of as the ratio of clean capital to total

capital used by the firm, or y.

𝑦 =𝐾𝑐

𝐾𝑠+𝐾𝑐=

𝐾𝑐

𝐾 (8)

Note that a firm may have a high level of CS simply by choosing a high level of clean

capital that happens to be profit-maximizing.18 For example, a firm may claim that an upgrade of

a plant that reduces electricity usage is reducing air pollution (which may be true), but the firm is

driven to upgrade the plant because it will be cost-saving over a given time horizon, not out of any

concern for the environment or pollution damages. Because of efficiency gains that reduce overall

costs, the use of some clean capital may be profit-maximizing, even in the absence of other

incentives.

4. Stakeholder Roles in CS Motivation

So far, the decision-making process of the firm is based on the notion that the primary

concern of corporations is to satisfy only their shareholders’ interests by maximizing profits. Given

a high discount rate, this translates into short run profit maximization. Now, suppose that other

stakeholders such as consumers, communities, workers, etc. who have knowledge about the

negative externality on the environment and are concerned about the impact put pressure on the

company to address CS. Concerned stakeholders can affect corporate behavior in two ways. One

is a direct response in terms of consumer boycott leading to sales decline, workers’ dissatisfaction

18 That is, the firm appears to be making efforts to be environmentally friendly when such actions are simply

the profit-maximizing option for managers.


17

leading to lower productivity, and communities’ complaints and protests leading to negative

publicity and damaged reputation.19 A second approach is indirect in that the concerned

stakeholders pressure the government to undertake regulations that compel corporations to change

behavior or else face prosecution or substantial fines. Both types of response by concerned

stakeholders involve knowledge sharing with corporations about the effects of their production

activities on the environment/ecosystem.

In response to this new information, firms recalculate their optimal choice of inputs,

according to the additions to their costs and revenue functions described in subsequent sections.20

Such a two-stage approach explains why firms do not begin with a given amount of clean capital,

but instead choose it through a decision making process that, in reality, involves setting greenhouse

gas reduction goals. In order to meet such goals, firms start considering a switch from standard to

clean capital in a manner that is both profit-maximizing and emissions-minimizing.21 Firms that

already choose a high level of clean capital that they find to be profit maximizing will be less likely

to succumb to this pressure.

Previous studies reveal that different firms have various considerations when it comes to

choosing a level of CS, as discussed above. Therefore, a series of cases will be examined in which

19 In the beginning, only a few stakeholders will be involved. But as the frequency, intensity and magnitude

of the climate change and related information becomes available, there will be a greater impact on the direct

response. 20 This framework suggests that firms are able to make instantaneous and unlimited changes to their input

mix, but this can be thought of as occurring over a number of years. There are a number of examples of firms reducing

greenhouse gas emissions on the order of 30% to 50% within a decade of setting reduction goals. 21 A similar story has been told in the context of public voluntary programs (PVPs; another term for voluntary

environmental programs) by Lyon and Maxwell (2010). These programs for GHG emissions reductions usually offer

firms a framework for setting reduction goals (that is, establishing a level of clean capital to use) and offer technical

assistance for taking emissions inventories, which can be thought of as an examination of their production and cost

functions through a new lens. As Lyon and Maxwell (2010) argue: “We believe that progress in the empirical analysis

of PVPs will be facilitated if researchers emphasize that PVPs are information-oriented programs designed to diffuse

abatement technologies and practices. In this view, many firms are not operating on the production possibilities

frontier and environmental process improvements can be studied as a form of technology diffusion that may be

enhanced by PVPs” (70).


18

the firm faces different external constraints and makes profit-maximizing decisions based on these

constraints. The above framework will be used to illustrate how the firm chooses the ratio of clean

capital to total capital (CS), and the types of firms that the case might represent will be discussed.

However, it is important to note that what is considered “socially responsible” in this

framework is based on a general notion of a production process that produces less pollution or

reduces a negative externality. That is, in the absence of a carbon price to correct for the

externality, a socially responsible firm will be one where the marginal private cost of production

is closer to the marginal social cost of production. It is important to note as well that CS investment

in the framework refers to a given level of clean capital and is therefore a continuous variable,

whereas in much of the literature, and when many voluntary programs are considered, it is more

of a binary choice: a firm either makes a given commitment to the environment or it does not.22

Given that the levels and aggressiveness of voluntary goals can vary among firms, a continuous

conceptualization of CS commitments is considered appropriate.23 It should also be remembered

that while the framework presented here is static aside from the trivial first stage described above,

CS commitments and goals take place over time. They usually involve a pledge by the firm to

change from the current, lower proportion of clean capital to a higher level.24

The types of firms that typically pursue purely profit-maximizing CS (the only case

considered so far) without having to pay attention to stakeholders are primarily capital-intensive

with relatively old capital stock (Reksten, 2015; Reksten, 2018). This is not because there is no

22 For example, incorporating clean capital into the production process may involve re-tooling an entire

factory to run more efficiency or, perhaps, to be able to incorporate intermittent, renewable energy sources. The

firm cannot choose literally any proportion of its capital to convert; it must do so in discrete “chunks.” 23 The standard practice, depending on the growth trajectory of the firm, is to either have an absolute reduction

goal (that is a reduction of total emissions by a certain percentage by a given year) or a normalized goal, such that

emissions fall per-unit of something (such as per-dollar of revenue or per-unit of production). 24 One could think of the first stage as being pre-goal, the time between stages as the period in which a firm

enacts the goal, and the second stage as the immediate post-goal time. This assumes that the firm works to set a goal

as soon as the new information about its production process is “revealed.”


19

scope for labor-intensive firms to pursue CS, but rather because the benefits from stakeholder

groups that desire CS are relatively small in comparison to the investments that need to be made

to boost the level of CS in the firm.25 Capital-intensive firms would be most likely to benefit from

the fuel switching and energy efficiency improvements that come with the greater use of clean

capital, and the presence of old capital stock means that the firm will need to replace capital

regardless of considerations of sustainability. Obviously, since the use of more clean capital is

profit-maximizing, these firms will tend to pursue their intended level of clean capital use without

any additional incentives from a program. However, they would no doubt take advantage of such

incentives, and voluntary programs can induce additional investments on the margin.

4.1 Consumer Preferences

In many cases, such as when a firm produces intermediate goods or electricity, most

consumers will care little about the proportion of clean to total capital (Reksten, 2018). If one

defines ‘consumers,’ however, to include the buyers of intermediate products which may be other

businesses, the factor of consumer pressure may become important. Increasingly, firms are asking

questions to their suppliers about GHG emissions in order to measure the “upstream” emissions

of their products.26 These buyer firms are often responding to their own customer inquiries or

submitting disclosure forms to investor groups such as CDP or the Dow Sustainability Index.

There are many other cases where CS is done to appeal to more traditional conceptions of

consumers, even in the case of greenhouse gas emissions targets. Several retail firms joined EPA’s

Climate Leaders program, such as Abercrombie & Fitch, Best Buy, GAP, and Tiffany & Co. This

25 For example, firms in industries such as insurance and banking have set voluntary goals for their own

emissions, even though their production footprint is very small. 26 In this way, the paper addresses the supply chain considerations of firms. That is, a firm interested in

reducing the environmental impact of its production process would desire cleaner inputs, which would manifest,

from the perspective of the supplier, as higher willingness to pay for a product with a higher level of y.


20

was likely done in an effort to build a reputation among consumers as a “green” company. Also

found in Climate Leaders are many major government contractors, who may have wished to appear

proactive on climate change in order to cater to their government customer. Lockheed Martin,

Northup Grumman, Raytheon, General Dynamics, Boeing, and Honeywell, consistently the largest

recipients of Federal contracting money, were all members of the voluntary program in the 2000s

(Reksten, 2015).

The addition of consumer preference for CS to the framework is straightforward; the

strength of consumer preference for higher levels of CS in terms of willingness to pay is shown

through the parameter 𝛿. Thus, demand is now:

𝑝 = 𝛼 − 𝛽𝑞 + 𝛿𝑦 𝑤ℎ𝑒𝑟𝑒 𝛿 ≥ 0 (9)

The resulting profit estimation equation is given below:

𝜋 = (𝛼 + 𝛿𝑦)𝑞 − 𝛽𝑞2 − 𝑇𝐶(𝑟𝑠, 𝑟𝑐, 𝑤, 𝐾𝑠, 𝐾𝑐, 𝐿) (10)

Maximizing profits and finding optimal quantity, we now have:

𝜕𝜋

𝜕𝑞= (𝛼 + 𝛿𝑦)𝑞 − 2𝛽𝑞 − 𝑐 = 0 (11)

𝑞∗ =𝛼+𝛿𝑦−𝑐

2𝛽 (12)

The incorporation of consumer preferences for CS in this way both directly boosts demand and

reduces the price elasticity of demand for the product.27 Additionally, because 𝜕𝑞

𝜕𝑦= 𝛿 and 𝛿 ≥ 0,

a greater willingness to pay will boost production by the firm. Therefore, assuming a nonzero

willingness to pay by consumers, 𝑞∗ > 𝑞.

Here, marginal cost, c, appears to be independent of y. However, recall that y is actually a

measure of the ratio of clean capital to total capital inputs. That choice of inputs does directly

27 Price elasticity of demand is 𝜂 = |−

1

𝛽

𝑝

𝑞| = |−

𝑝

𝛼−𝑝+𝛿𝑦|. Therefore, as 𝛿 increases, |𝜂| falls.


21

figure into the cost function and thus 𝑐 = 𝑓(𝑦). This formulation simply describes the additional

benefits that the firm can receive from CS investments or choosing a cleaner set of inputs. This

may cause the firm to choose to increase costs in order to take advantage of the even greater

revenues to be gained from selling “green” products. That is, the firm may decide to employ more

clean capital that would raise costs but have a positive impact on its reputation and sales that justify

this.

Note, too, that path dependence would play a role here outside of the strict context of the

framework. If a firm has been building a reputation among consumers as a company that “cares”

about the environment in the past, for example, consumers will expect the firm to maintain that

level of clean capital or use even more in the future. These expectations may set the company on

a new path where investing in more CS and publicizing it is a route to higher profits. This also

suggests the importance not only of stakeholders’ preferences but also those who are employed by

the firm as managers and their preferences; firms, after all, are composed of individuals working

in concert who have a particular set of beliefs about the state of the world. Such preferences will

be discussed further below.

4.2 Pressure from communities (activists and NGOs)

Closely related to the notion that consumers care about CS is the idea that activists in the

form of environmental NGOs can organize to affect demand for a firm’s products if a desired level

of CS investment (clean capital) is not reached. This could happen through measures such as direct

calls for a boycott, or, more likely in recent years, a media campaign and negative publicity for the

firm.28 Here, activists can be viewed as a special actor; they are informed citizens and groups of

NGOs who pay close attention to environmental issues emerging from the scientific community.

28 In this paper, the confrontational activist threat is treated in a very similar fashion to Baron (2001), which

is the seminal work in this area and with a model that goes into more detail on this point than will be considered here.


22

Baron (2012) notes that the public has high trust in NGOs relative to other institutions, suggesting

that at least some will take purchasing cues from them. Reksten (2018) finds that some firms make

decisions about sustainability goals in order to diffuse potential activist threats.

In the framework, the activist threat impacts the demand curve in the following manner,

increasing the willingness of consumers to pay for CS by 𝜇. Threats therefore have the potential

to encourage CS investment by causing the firm to fail to maximize profits if it does not choose

the new and higher appropriate level of clean capital.

𝑝 = 𝛼 + (𝛿 + 𝜇)𝑦 − 𝛽𝑞 𝑤ℎ𝑒𝑟𝑒 𝜇 ≥ 0 (13)

Optimal quantity is now simply:

𝑞∗ =𝛼+(𝛿+𝜇)𝑦−𝑐

2𝛽 (14)

Because 𝜕𝑞

𝜕𝑦= (𝛿 + 𝜇), a greater activist threat that makes CS more valuable can also increase

output for the firm.

Through their activities, activists make CS, in the form of an increase in 𝑦, more valuable

for the firm. Therefore, the firm will be forgoing additional profits if it fails to invest in CS when

activists are demanding it. In practice, the ability of activists to impact demand depends on the

credibility of the threat. This, in turn, depends on the preference that consumers have for CS, as

well as the ability of the activists to organize in order to carry out their threat. That is, activists

may intend to carry out their threat, but they may not be able to effectively communicate their

message to the public.

4.3 Employees

The above cases assume that firms are relatively capital intensive, meaning that changes

occur in the composition of capital, which can impose significant costs or benefits upon the firm.

In reality, many firms that are not capital intensive also set environmental goals. In the case of


23

retail firms and service providers that have contact with consumers, this could be an effort to

improve reputation and promote the firm’s “green” brand. There are a number of business service

firms, though, which do not have significant contact with consumers or whose business customers

do not exert pressure for emissions reductions. Primarily, these are in the information technology

and financial service industries. They may decide to set GHG reduction goals in order to appeal to

their workers, who presumably prefer working for a “green” employer (Reksten, 2018).

Additionally, workers themselves may organize to put pressure on the firm to invest in CS,

threatening lower productivity if the firm does not comply (Sendlhofer, 2019).

To introduce this idea into the framework, the marginal product of labor is dependent on a

productivity measure, 𝜃(𝐾, 𝜎𝑦), which is in turn dependent on the amount of capital used by the

firm, the level of y, and 𝜎, an exogenous variable representing worker interest in CS. Additionally,

we assume that 𝜕𝑀𝑃𝐿

𝜕𝐾> 0,

𝛿𝑀𝑃𝐿

𝛿𝑦> 0,

𝜕2𝑀𝑃𝐿

𝜕𝑦2 < 0. That is, the productivity of labor is higher with

additional capital, and it is higher with additional investment in CS through the choice of higher

levels, but productivity increases at a declining rate with higher levels of CS. This also impacts the

marginal cost, as more productive workers make the labor input more efficient. Therefore, it

becomes:

𝑐 = 𝑓(𝐾, 𝜎𝑦) (16)

And profits are now:

𝜋 = 𝛼𝑞 + (𝛿 + 𝜇)𝑦𝑞 − 𝛽𝑞2 − 𝑇𝐶(𝑟𝑠, 𝑟𝑐, 𝑤, 𝐾𝑠, 𝐾𝑐, 𝐿(𝜎𝑦)) (17)

Optimal quantity of output simply becomes:

𝑞∗ =𝛼+(𝛿+𝜇)𝑦−𝑐(𝐾,𝜎𝑦)

2𝛽 (18)

If workers have a strong preference for CS, profits will be higher with greater investments

in CS through the use of more clean capital. The extent to which this occurs depends on the


24

relationship between the price of clean capital, the strength of worker preference for further CS,

and the specific cost and production functions of the firm. Similarly, as in the previous cases,

higher levels of CS boost optimal output because more productive labor lowers the need for a labor

input and reduces costs at any level of output.

4.4 Legislation and Regulation

Some firms may be more wary of additional regulations that could be imposed by the

government than threats from activists. This threat would take the form of a mandated proportion

of clean to standard capital that would yield the minimum allowed level of emissions of the

pollutant in question.29 The regulations in question take the form of an economy-wide pollution

tax or fee or may target a specific product (such as regulations of refrigerants, which are mostly

also greenhouse gases, often done under the Montreal Protocol).

In order to meet standards set by the government for emissions, the firm is forced to set

clean and standard capital at 𝐾𝑐𝑟 and 𝐾𝑠

𝑟, which are the levels required by regulations. This ensures

that emissions will fall within the acceptable range set by the government. We assume that non-

compliance incurs fines that raise costs to the point where firms will always choose to comply with

mandatory regulations. Such standards can be expressed in the following way. We define the

optimal level of clean and standard capital for the firm as 𝐾𝑐∗ and 𝐾𝑠

∗, respectively. The ratio of

clean to total capital, 𝑦, would be set in such a way that in order to meet the emissions standard,

the firm must use a higher-than-optimal level of clean capital (and thus a lower-than-optimal level

of standard capital):

𝐾𝑠𝑟 < 𝐾𝑠

∗ (19)

29 We use regulatory efforts and legislation somewhat interchangeably. Typically, legislators will develop

broad frameworks for addressing an environmental issue and then leave to civil servants the task of setting more

specific guidelines. The behavior that we detail from firms could be designed to placate either legislators or regulators,

depending on the stage of the rulemaking process and the specific framework of concern.


25

𝐾𝑐𝑟 > 𝐾𝑐

∗ (20)

This means that the level of CS investment will be greater than the profit-maximizing level of the

clean to total capital ratio, y, for the firm.

𝑦∗ < 𝑦𝑟 =𝐾𝑐

𝑟

𝐾 (21)

This may still increase the firm’s revenue and therefore offset the higher costs brought about by

clean capital investment. This will occur if the CS investment increases demand by convincing

consumers that it is due to the firm’s socially responsible actions even though it is simply

complying with mandatory regulations. However, for increased regulations to be a credible threat

that may change firm behavior, fines must be high enough to lower non-compliance profits and

the emissions reduction they must go beyond what the firm would have done on its own.

It may be that in order to stave off additional regulations, the firm can use a higher

proportion of clean capital than it might have done with no threat, but that is still less than the

regulatory amount, 𝑦𝑟. Let us suppose that a firm uses clean capital such that y is more than some

minimum that will trigger additional regulations, defined as 𝑦𝑚 < 𝑦𝑟. It is then assumed that 𝑦𝑚

will still be high enough to convince regulators that there is no need to impose additional

regulations on the firm. If the firm believes this is a possibility, then it will maximize profits

according to:

𝜋 = 𝛼𝑞 + (𝛿 + 𝜇)𝑦𝑞 − 𝛽𝑞2 − 𝑇𝐶(𝑟𝑠, 𝑟𝑐 , 𝑤, 𝐾𝑠, 𝐾𝑐 , 𝐿(𝜎𝑦)) (22)

subject to the following constraint:

𝑦 ≥ 𝑦𝑚 (23)

and choose the corresponding optimal 𝑞 and 𝑦.

Deriving further optimization conditions would require specifying a production function

for the firm that would act as an additional constraint, but this is not necessary to do for the


26

purposes of this paper, which focuses on specifying the role of CS. From this, it can be assumed

that a credible regulatory threat will induce investment in clean capital even in the absence of

mandatory regulations. However, it is also assumed that this level is lower than what would be

required with mandatory rules.

4.5 The Role of Shareholders and Production Choices

Choosing the profit-maximizing level of output given stakeholder preferences requires

several steps. This framework assumes that the firm has perfect information about the

stakeholders’ preferences and their potential impact on costs and revenues as a result of their

choice of 𝑦. Thus, the firm can calculate its cost and revenue functions according to the stakeholder

preferences and choose the appropriate level of output. Firms may not face pressure from all

stakeholders, but if they do, the higher preferences of one group for action may cause the firm to

“over-comply” with the preferences of other groups. For example, if a firm is concerned that it

faces potential regulations, such that it sets 𝑦 > 𝑦𝑚 but also faces pressure from activists that push

it to use even more clean capital, its ultimate level could be 𝑦 > 𝑦𝑟 > 𝑦𝑚, rendering mandatory

regulations irrelevant.30

This process to choose the appropriate level of clean capital ultimately means that the firm

believes it is maximizing profits in each of the periods described in the framework. However, as

Baron (2001) considers, it may be the case that the company’s shareholders have non-pecuniary

preferences such as gaining some non-monetary benefits from the knowledge that they own

“green” companies.31 If they do have a preference for CS that can only be acquired by sacrificing

30 One could also consider the case of a three period framework, where a higher level of 𝑦 in period 2

persuades regulators that the firm could meet even stricter standards and thus the threat of limits on emissions would

increase for the third period. 31 Baron (2001) refers to this as altruism. It is an impossible task to understand the “true” motivations of

shareholders that claim to have an interest in environmentally sustainable firms. They may simply have relatively

long time horizons and wish to ensure that the firm remains profitable even in the face of climate change and a future

price on carbon. Still, there is a case that at least some shareholders, such as institutional investors like state pension


27

profits, utility maximization is at odds with profit maximization, as shown by Feinberg (1975).

That is, investors may pressure a firm to use more clean capital, even though the resulting 𝑦 is sub-

optimal from a profit-maximizing perspective. The shareholders will, through an internal

negotiation process at meetings and through votes, determine their average preference for CS. If

they have no social preference for it or a preference that is less than or equal to 𝑦, they will simply

accept the profit-maximizing level that the firm has presented to them.32 This is because the level

of 𝑦 is assumed to be compatible with their goal of profit-maximization for the firm. However, if

their preference for CS is higher than what the firm arrives at through simple profit maximization,

they will ask the firm to produce a level of CS that maximizes their utility, despite the lower returns

to investment. That is,

𝑈𝑠 = 𝜌𝜋 + (1 − 𝜌)𝑦 (24)

where 0 < 𝜌 ≤ 1 represents the relative weights placed on profits and CS. Shareholders are willing

to accept a lower return because they will get satisfaction from knowing that the firm uses more

clean capital.

5. Determinants of CS Investment & Conclusions

The amount of CS (clean capital) investment by the firm therefore depends on several

things. First, clean capital can be thought of as a standard third input into production, one that is a

very good substitute for standard capital until a large proportion of standard capital has been

replaced (for example, use of electricity generation using renewable resources instead of fossil

funds or universities, have non-pecuniary preferences because of the occasional practice of divestment from socially

controversial firms. 32 Following Feinberg (1975), profit-maximization here is considered to be a useful assumption rather than a

necessary result.


28

fuels). Because of this, the absolute level of clean capital used will depend on technology, its

relative price, and the firm’s production decision.33

Second, firm characteristics determine which stakeholders matter. That is, a firm can be

described by a series of attributes, such as size, location, industry, composition of shareholders,

and whether it makes final or intermediate goods. These characteristics will then determine the

value of the parameters above, namely consumer (including business customer) willingness to pay

(𝛿), the degree of activist threat (𝜇), the degree of worker preference for CS (𝜎), and the preference

of shareholders for CS (𝜌). These shape the ultimate costs and benefits of using more clean capital

because they can act as institutional coordinates. A firm that has the characteristic of producing

final goods, for example, may set stronger reduction goals to appeal to consumers. A firm that has

the characteristic of being in the utility industry may be driven to reduce emissions by the fear of

regulations.

Stakeholders will then have an impact on the firm’s profit function through their

preferences for CS in the form of the ratio of clean to standard capital. It may be that consumers

will purchase more of the firm’s product with higher levels of CS, or activists will less aggressively

campaign against the firm, sparing it from reduced revenues. Capital-intensive firms may face

regulatory threats unless they appear to be making efforts to incorporate clean capital into their

production process, or they may find that workers are more productive if they believe they are

working for a “green” company. Finally, it may be that shareholders have non-pecuniary

preferences and wish for the firm to use a higher level of clean capital. Firms that build a reputation

for being environmentally friendly will be expected to maintain that image, meaning that there is

33 Just as in standard profit-maximization models, the firm’s choice here is to determine the profit-

maximizing quantity given the costs and revenues of different levels of production. The level of clean capital is simply

a byproduct of this process, though the appropriate level of clean capital is chosen by the firm in the same sense that

it chooses the appropriate level of any other input.


29

an element of path-dependence, especially if one imagines generalizing the framework to more

than 2 periods.

This framework is admittedly general in nature and only provides a basic rubric of the areas

in a firm’s decision-making process in which CS considerations are taken into account. Future

research can help refine it in order to arrive at more specific propositions regarding the types of

firms that would be likely to have stakeholders with CS or social preferences and explore in greater

depth the role of path dependence and discounting. Another fruitful area of research is a deeper

examination of the interaction of time and information about the environmental issue that enables

us to identify and assess the firm’s strategic reaction to the issue at hand.


30

REFERENCES

Acemoglu, D., Aghion, P., Bursztyn, L. and Hemous, D. (2012). ‘The Environment and Directed

Technical Change’. American Economic Review 102 (1), 131-166.

Ambec, S., Cohen, M.A., Elgie, S. and Lanoie, P. (2011). The Porter Hypothesis at 20: Can

Environmental Regulation Enhance Innovation and Competitiveness? RFF Discussion

Paper 11-01, Resources for the Future, Washington, DC.

Ashrafia, M., Adams, M., Walker, T.R. and Magnan, G. (2018). ‘How corporate social

responsibility can be integrated into corporate sustainability: a theoretical review of their

relationships’. International Journal of Sustainable Development and World Ecology,

25(8), 671-681.

Azapagic, A. (2003). ‘Systems approach to corporate sustainability: a general management

framework.’ Process Saf Environ Prot. 81(5), 303–316.

Bagnoli, M. and Watts, S.G. (2003). ‘Selling to Socially Responsible Consumers: Competition

and the Private Provision of Public Goods’. Journal of Economics & Management

Strategy, 12 (3), 419-445.

Bansal P. and Desjardins, M.R. (2014). ‘Business sustainability: It is about time’. Strategic

Organ, 12(1), 70–78.

Bansal P. and McKnight, B. (2009). ‘Looking forward, pushing back and peering sideways:

analyzing the sustainability of industrial symbiosis’. J Supply Chain Manag., 45(4), 26–

37.

Bansal P, and Song, HC. (2017). ‘Similar but not the same: Differentiating corporate

responsibility from sustainability’. Acad Manag Ann., 11(1), 105–149.

Baron, D. P. (2001). ‘Private Politics, Corporate Social Responsibility, and Integrated Strategy’.

Journal of Economics & Management Strategy, 10 (1), 7-45.


31

Baron, D. P. (2007). ‘Corporate Social Responsibility and Social Entrepreneurship’. Journal of

Economics & Management Strategy, 16 (3), 683-717.

Baron, D. P. (2009). ‘A Positive Theory of Moral Management, Social Pressure, and Corporate

Social Performance’. Journal of Economics & Management Strategy, 18 (1), 7-43.

Baron, D. P. (2012). ‘The Industrial Organization of Private Politics’. Quarterly Journal of

Political Science, 7(2), 135-174.

Baumgartner, R.J. and Ebner, D. (2010). ‘Corporate sustainability strategies: sustainability

profiles and maturity levels’. Sustainable Dev., 18(2), 76–89.

Baumgartner, R. J. and Rauter, R. (2017). ‘Strategic perspectives of corporate sustainability

management to develop a sustainable organization’. J Clean Prod., 140, 81–92.

Bénabou, R. and Tirole, J. (2010). ‘Individual and Corporate Social Responsibility’. Economica

77, 1-19.

Busch, T. and Pinkse, J. (2012). ‘Reconciling Stakeholder Requests and Carbon Dependency:

What is the Right Climate Strategy?’ In Lindgreen, A., Kotler, P., Vanhamme, J. and

Maon, F. (Eds), A Stakeholder Approach to Corporate Social Responsibility: Pressures,

Conflicts, and Reconciliation, Aldershot: Ashgate Publishing Ltd., 257-272.

Business Roundtable. (2019). ‘Business Roundtable Redefines the Purpose of a Corporation to

Promote “An Economy That Serves All Americans.”’ Press Release. Aug. 19.

Calveras, A., Ganuza, J.J. and Llobet, G. (2007). ‘Regulation, Corporate Social Responsibility

and Activism’. Journal of Economics & Management Strategy, 16 (3), 719-740.

Chisholm, M., Grainger, A., Bristow, A. and Tight, M. (1999). ‘Achieving sustainable

development: assessing the human spatial and temporal dimensions’. Int J Sustainable

Dev World Ecol., 6(4), 229–230.


32

Clark, G. L. and Hebb, T. (2005). ‘Why Should They Care? The Role of Institutional Investors in

the Market for Corporate Global Responsibility’. Environment and Planning A: Economy

and Space, 37, 2015-2031.

Crifo, P. and Forget, V.D. (2015). ‘The Economics of Corporate Social Responsibility: A Firm-

Level Perspective Survey’. Journal of Economic Surveys, 29 (1), 112-130.

De Bakker, F.G., Groenewegen, P. and Den Hond, F. (2005). ‘A bibliometric analysis of 30

years of research and theory on corporate social responsibility and corporate social

performance’. Business Soc., 44(3), 283–317.

Doh, J.P. and Tashman, P. (2014). ‘Half a world away: The integration and assimilation of

corporate social responsibility, sustainability, and sustainable development in business

school curricula’. Corporate Soc Responsibility Environ Manag. 21(3), 131–142.

Dyllick, T. and Hockerts, K. (2002). ‘Beyond the business case for corporate sustainability’. Bus

Strat Environ., 11(2), 130–141.

Dyllick, T. and Muff, K. (2015). ‘Clarifying the meaning of sustainable business: introducing a

typology from business-as-usual true business sustainability’. Organ Environ., 29(2),

156–174.

Ebner, D, and Baumgartner, R.J. (2006). ‘The relationship between sustainable development and

corporate social responsibility’. Paper presented at the Corporate Responsibility Research

Conference 2006, Dublin, 4-5 September.

Edgeclife-Johnson, A. (2019). ‘Companies under pressure to declare “social purpose”’.

Financial Times, 23 August.

Elhauge, E. (2005). ‘Corporate Managers' Operational Discretion to Sacrifice Corporate Profits

in the Public Interest’. In Hay, B,. Stavins, R. and Vietor, R. (Eds.) Environmental


33

Protection and the Social Responsibility of the Firm. Washington, D.C.: Resources for

the Future, 13-76.

Engau, C. and Hoffmann V.H. (2011). ‘Corporate Response Strategies to Regulatory

Uncertainty: Evidence from Uncertainty about Post-Kyoto Regulation’. Policy Science,

44, 53-80.

Fedderson, T. J. and Gilligan, T.W. (2001). ‘Saints and Markets: Activists and the Supply of

Credence Goods’. Journal of Economics & Management Strategy, 10 (1), 149-171.

Feinberg, R. M. (1975). ‘Profit Maximization vs. Utility Maximization’. Southern Economic

Journal, 42 (1), 130-131.

Feinberg, R. M. (1980). ‘On the Consistency of Non-Profit-Maximizing Behavior with Perfect

Competition’. Southern Economic Journal, 46 (4), 1163-1166.

Gunningham, N., Kagan, R.A. and Thornton, D. (2003). Shades of Green. Stanford, California:

Stanford University Press.

Global Compact. (2014). ‘Guide to Corporate Sustainability – Shaping a Sustainable Future’.

Report, United Nations Global Compact: New York.

Haanaes, K., Reeves, M., Velken, I.V.S., Kruschwitz, N,, Kiron, D. and Kruschwitz, N. (2012).

‘Sustainability nears a tipping point’. MIT Sloan Manag Rev., 53(2), 69.

Hahn, T., Figge, F., Aragón-Correa, J.A., and Sharma, S. (2017). ‘Advancing research on

corporate sustainability off to pastures new or back to the roots?’ Business Soc., 56(2),

155–185.

Hahn, T., Pinkse, J., Preuss, L. and Figge, F. (2015). ‘Tensions in corporate sustainability:

Towards an integrative framework’. J Bus Ethics. 127(2), 297–316.

International Organization for Standardization. (2010). ‘Discovering ISO 26000’. Geneva.


34

Keijzers, G. (2002). ‘The transition to the sustainable enterprise’. J Clean Prod., 10(4), 349–359.

Kiron, D., Kruschwitz, N., Haanaes, K., Reeves, M., and Goh, E. (2013). ‘The innovation bottom

line’. MIT Sloan Manag Rev., 54(3), 1.

Kitzmueller, M. and Shimshack, J. (2012). ‘Economic Perspectives on Corporate Social

Responsibility’. Journal of Economic Literature, 50 (1), 51-84.

Lankoski, L. (2016). ‘Alternative conceptions of sustainability in a business context’. J Clean

Prod., 139, 847–857.

Linnenluecke, M.K. and Russell, S.V. and Griffiths, A. (2009). ‘Subcultures and sustainability

practices: the impact on understanding corporate sustainability’. Bus Strat Environ.,

18(7), 432–452.

Lo, S.F. (2010). ‘Performance evaluation for sustainable business: a profitability and

marketability framework’. Corporate Soc Responsibility Environ Manag., 17 (6), 311–

319.

Lozano, R. (2011). ‘Addressing stakeholders and better contributing to sustainability through

game theory’. J Corp Citizsh, 43, 45–62.

Lozano, R. (2012). ‘Towards better embedding sustainability into companies’ systems: an

analysis of voluntary corporate initiatives’. J Clean Prod., 25, 14–26.

Lozano, R. (2015). ‘A holistic perspective on corporate sustainability drivers’. Corporate Soc

Responsibility Environ Manag., 22 (1), 32–44.

Lyon, T. P. and Maxwell, J.W. (2002). ‘Voluntary Approaches to Environmental Regulation’. In

Franzini, M. and Nicita, A. (Eds) Economic Institutions and Public Policy. Aldershot:

Ashgate Publishing Ltd., 75-120.


35

Lyon, T.P. and Maxwell, J.W. (2004). Corporate Environmentalism and Public Policy.

Cambridge: Cambridge University Press.

Lyon, T. P. and Maxwell, J.W. (2010). ‘Environmental Public Voluntary Programs

Reconsidered’. In deLeon, P. and Rivera, J.E. (Eds.) Voluntary Environmental Programs:

A Policy Perspective. Lanham, Maryland: Lexington Books, 51-84.

McCluskey, J.J., and Winfree, J.A. (2009). ‘Pre-empting Public Regulation with Private Quality

Standards’. European Review of Agricultural Economics, 36 (4), 525-539.

McWilliams, A., Siegel, D.S., and Wright, P.M. (2006). ‘Corporate Social Responsibilty:

Strategic Implications’. Journal of Management Studies, 43 (1), 1-18.

Montiel, I. (2008). ‘Corporate social responsibility and corporate sustainability: Separate pasts,

common futures’. Organ Environ., 21(3), 245–269.

Montiel, I. and Delgado-Ceballos, J. (2014). ‘Defining and measuring corporate sustainability:

are we there yet?’ Organ Environ., 27(2), 113–139.

Porter, M.E. and van der Linde, C. (1995). ‘Toward a New Conception of the Environment-

Competitiveness Relationship’. The Journal of Economic Perspectives, 9 (4), 97-118.

Rego, A.E., Cunha, M.P. and Polónia, D. (2017). ‘Corporate sustainability: A view from the

top’. J Bus Ethics., 143(1), 133–157.

Reinhardt, F. (2000). ‘Sustainability and the firm’. Interfaces, 30(3), 26–41.

Reinhardt, F. L., Stavins, R.N. and Vietor, R.H.K. (2008). ‘Corporate Social Responsibilty

Through an Economic Lens’. NBER Working Paper #13989, National Bureau of

Economic Research, Cambridge, MA.

Reksten, N. (2015). When Green Isn’t All There Is to Be: An Analysis of Voluntary Greenhouse

Gas Reduction Goals, Doctoral Dissertation, American University: Washington, D.C.


36

Reksten, N. (2018). ‘Stakeholders and voluntary climate reduction goals at large U.S. firms: An

institutional analysis’. The Social Science Journal, 55, 221-231.

Schwartz, M.S. and Carroll, A.B. (2008). ‘Integrating and unifying competing and

complementary frameworks’. Business Soc., 47(2), 148–186.

Schmitz, J. and Schrader, J. (2013). ‘Corporate Social Responsibilty: A Microeconomic Review

of the Literature’. Journal of Economic Surveys, 29(1), 27-45.

Sendlhofer, T. (2019). ‘Decoupling from Moral Responsibility for CSR: Employees’ Visionary

Procrastination at a SME’. Journal of Business Ethics, May, 1-18.

Shrivastava, P. (1995). ‘The role of corporations in achieving ecological sustainability’. Acad

Manag Rev., 20(4), 936–960.

Steurer, R., Langer, M.E., Konrad, A. and Martinuzzi, A. (2005). ‘Corporations, stakeholders

and sustainable development I: A theoretical exploration of business–society relations’. J

Bus Ethics, 61(3), 263–281.

Székely N. and Vom Brocke, J. (2017). ‘What can we learn from corporate sustainability

reporting? Deriving propositions for research and practice from over 9,500 corporate

sustainability reports published between 1999 and 2015 using topic modelling technique’.

PloS One, 12(4), e0174807.

Van Marrewijk, M. (2003). ‘Concepts and definitions of CSR and corporate sustainability:

Between agency and communion’. J Bus Ethics, 44(2), 95–105.

stakeholder groups and firms’ corporate …

Documents