Abstract
This chapter proposes a corporate sustainability evaluation framework by creating a composite index, the Perceived Sustainability Index, which integrates the company's environmental, social, and corporate governance (ESG) score and the consumer perception of corporate sustainability. This index uses MSCI ESG ratings and X data. The framework conceptually aligns with the multidimensional nature of sustainability, the stakeholder theory, and the customer-centric nature of companies. The index enables researchers to examine corporate sustainability from a dual perspective: the consumers and the rating agencies. It also provides companies with an indicator to progress on their sustainability journey while meeting the consumers' societal needs, which, if not met, might adversely impact the corporate reputation and, eventually, the business performance. The authors illustrate their argument by analyzing the Perceived Sustainability Index for 100 companies and then discuss three case studies – a high performer, a low performer, and a potential greenwashing.
TopIntroduction
The common objective of today’s world is to achieve sustainable development. The United Nations (UN) defines the concept of sustainable development as meeting the needs of the present without compromising the ability of future generations to meet their own needs. Sustainable development is an integrative concept aiming to balance environmental, social, and economic issues in a mutually beneficial way (Steurer et al., 2005). In 2015, the United Nations introduced a ‘shared blueprint’ named the Sustainable Development Goals (SDGs) to achieve a more sustainable world. It is an agreement between governments, citizens, civil society, and businesses on sustainability-related priorities. The UN's resolution on the SDGs specifically urges businesses to channel their creativity and innovation toward addressing sustainable development challenges (United Nations, 2015). Moreover, the 2030 Agenda designates the private sector as a key development agent (Scheyvens et al., 2016). Sustainable development can hardly be achieved without the support of businesses (Bansal, 2002; García-Sánchez et al., 2020; Mio et al., 2020; Sullivan et al., 2018; van Zanten & van Tulder, 2021). A recent report in 2023, the Sustainable Development Goals Report, underscores the slow progress made in several target areas and reiterates the indispensable role of the private sector in forging a more sustainable future (United Nations Department of Economic and Social Affairs, 2023). This critical role of companies has fostered the emergence of corporate sustainability (Hahn et al., 2015). Corporate sustainability serves as a model that seeks to balance corporations' short-term and long-term economic, societal, and environmental performance (Montiel & Delgado-Ceballos, 2014; Nikolaou et al., 2018; Steurer et al., 2005). Concurrently, Environmental, Social, and Governance (ESG) investing has witnessed remarkable growth (Meira et al., 2023), and asset managers have prioritized the integration of ESG factors into investment solutions (Cardillo et al., 2023). Driven by heightened investor expectations and burgeoning interest, most companies track and communicate their ESG performance in sustainability reports. ESG ratings have also gained significant popularity. Corporate sustainability demands simultaneous economic growth while addressing societal and environmental challenges (Elkington, 1997; Hahn et al., 2015). According to the managerial literature, stakeholder interests are critical for the company’s success (Freeman, 1984), and how those stakeholders perceive the company’s actions is essential to see economic benefits from responsible behaviors (Costa & Menichini, 2013).
Key Terms in this Chapter
Consumer Perception Index: Index that combines the company’s Consumer Engagement Index with the proportion of sustainability-related tweets.
Corporate Sustainability: The way of doing business that creates value for all company’s stakeholders by acting socially and environmentally responsibly.
Average Consumer Engagement: The average consumer engagement represents the total consumer engagement during the measurement period divided by the number of tweets published during the same period.
Consumer Engagement Index: Index measuring the average consumer engagement towards sustainability-related tweets compared to the average engagement towards the overall tweets published by the company during the measurement period.
Total Consumer Engagement: The total consumer engagement on X represents the sum of likes, retweets, and replies during the measurement period.
Perceived Sustainability Index: A composite index that combines the company’s ESG rating with Consumer Perception Index.
ESG Index: Index created by converting MSCI’s letter rating into numbers from 0 to 100.
Stakeholder: Any group or individual which can affect or be affected by the company’s activity.