1. Introduction
In recent years, the concepts of corporate sustainability, corporate social responsibility, corporate social performance, environmental management and corporate governance have gained significant prominence from both academics and practitioners. All relevant information is reflected in companies’ non-financial statements which, together with their financial statements, constitute the overall information of each company. Determining the qualitative and quantitative nature of the actions implemented within the framework of corporate responsibility of companies is a difficult task and is often considered in relation to other financial indicators.
A number of notable and important studies have identified a positive relationship between the financial and non-financial elements of companies in the areas of CSR and corporate governance (see, for example,
Van Beurden and Gössling 2008;
Wang 2010;
Tarczyński et al. 2020), while studies by institutions such as CSR Europe also converge in the same direction.
Many scholars have chosen to link CSR to the financial and economic performance of companies, directing their research to listed companies and stock market indices. In this approach we find several studies on different countries and different stock exchanges that conclude a positive correlation between CSR and financial performance (see among others the study by
López et al. (
2007) on listed companies in the Dow Jones Sustainability Index and Dow Jones Global Index,
Li et al. (
2009) for Shanghai Stock Exchange listed companies,
Nareswari et al. (
2022) for the Indonesian stock exchange and
Karagiorgos (
2010) and
Ziogas and Metaxas (
2021) for Greek listed companies). However, there are also those that show a negative correlation, such as
Harjoto (
2007) and
Nelling and Webb (
2009), or do not reach firm conclusions.
Besides the aforementioned approach of assessing the relationship between CSR and corporate financial performance which has objective limitations for Greek data due to the limited number of listed companies compared to the total, what seems to be closer to the Greek reality is the evaluation of companies’ CSR performance, depending on their financial performance, through the sustainability reports they issue.
Overall, despite the increased interest in the qualitative and quantitative identification of CSR and CG actions, as well as in determining the relationship between financial and non-financial information of companies, the literature is relatively limited and there has not been a commonly accepted measurement of these. Since the beginning of the 1990s Weber has demonstrated a way of capturing and quantifying the actions contained in CSR reports, which is still often followed today. More recently,
Vouros et al. (
2020) introduced their own method of CSR scoring with evaluation criteria and scale. Studies, such as the ones above but also those by
Hawn and Ioannou (
2016), tend to distinguish CSR actions into internal and external, often proceeding to an additional categorization of them, in order to separately study their correlation with other economic factors, finding differences in ratios.
However, there are no studies that holistically approach the issue of qualitative and quantitative determination of CSR and CG of companies by recording their actions, analysing them, measuring their results and correlating them with their purely financial data. Thus, the main objective of this study is to systematically record the corporate responsibility and environmental, social and governance (ESG) actions of the largest companies operating in Greece and to correlate them with their financial data.
More specifically, the objectives of this study are: i. To investigate the correlation between the individual criteria that shape the CSR and CG of the large companies in Greece with their financial data; ii. To assess whether this dynamic correlation is differentiated for CSR actions in the internal and external environment of the companies; iii. To examine other determinants that influence the CSR of firms, such as their listing on the stock exchange and the awards they receive in this area.
To investigate the above, we focused on the one hundred (100) largest companies operating in Greece. The survey period lasted from January 2019 to December 2021. In total and for the study period, data were collected for 11 variables regarding their financial situation and for 62 variables regarding their corporate responsibility and ESG actions. In particular, we divided their corporate responsibility initiatives into two categories, internal and external, further categorizing them into specific groups. We applied similarity analysis and the stepwise method and panel least-squares method.
The findings suggest that the correlation between CSR and financial size for large entities is positive, as was the case for those listed on the Athens Stock Exchange. On the other hand, the correlation between total sales and CSR is positive (although with a low correlation) only for CSR actions oriented towards the external environment of the companies, in particular those focusing on society, and negative for all other categories. It was also found that awards follow internal CSR, while being negatively correlated with all other CSR subcategories. Furthermore, corporate governance was shown to be influenced by the type of non-financial report companies have chosen to present their non-financial data, as well as by their total sales among the financial data we examined.
The results can have a significant impact for both investors and other stakeholders as this helps to understand and evaluate a company’s performance in areas such as sustainability, ethics and social responsibility and can lead to optimal and rational decision-making and orientation of funds and actions.
The rest of the paper is organized as follows:
Section 2 provides the literature review, while
Section 3 describes the data and the methodology followed. Next,
Section 4 details the methods used,
Section 5 analyses the findings and
Section 6 concludes the study.
2. Literature Review
All the information on CSR, corporate sustainability, corporate governance, etc. is reflected in the non-financial statements of the companies which, together with their financial statements, constitute the total information of each company.
Some common approaches to measuring CSR include: sustainability reporting, stakeholder engagement, external ratings and rankings and impact assessments. Overall, measuring CSR can be challenging, as it involves evaluating a company’s impact on a wide range of stakeholders and factors, and there is no one-size-fits-all approach. The key is to identify the most relevant metrics and measurement methods for a given company and context, and to continually monitor and evaluate CSR performance over time.
Specifically, for non-financial statements, it should be mentioned that there is no specific standard or limitations; however, there are the various indicators and assurance standards that they can voluntarily incorporate. Also, as pointed out by
Bouraoui et al. (
2019), the methods of measuring CSR are controversial and this maintains the absence of a complete understanding of it. Meanwhile both the planning and implementation of CSR actions differ significantly by country and due to the legislative framework for companies and the financial issues they face, as well as a number of other factors that affect it. Therefore, a different approach and evaluation is required for each country (
Van Marrewijk 2003;
Campbell 2007;
Tsourvakas and Yfantidou 2018). Moreover, a common admission of several CSR scholars is the difficulty in evaluating corporate social responsibility and sustainability reports that remain undefined and makes them non-comparable, while also requiring complex and non-homogenized tools for the determination and measurement of CSR level. As an example, we mention the relevant studies by
Ellen et al. (
2006),
Calabrese et al. (
2016) and
Rim et al. (
2018).
However, the common framework that applies to all is that those researchers who choose to deal with the measurement of the CSR character of companies first face the problem of qualitative measurement of this due to the absence of a uniform regulatory framework and then face the problem of quantitative measurement where there are numerous limitations. This is the main reason why in some publications researchers such as
Gjølberg (
2009) refer to Corporate Social Responsibility (CSR) as “measuring the immeasurable”.
In recent years, corporate governance and ESG actions of companies have been added to the assessment of corporate social responsibility. The reason that this happens is because it has been proven that the ultimate goal of both—improving corporate governance and fulfilling corporate social responsibility—is to enhance corporate governance legitimacy, and indeed, corporate governance not only has the same basic content as corporate social responsibility, but also affects the quality of its disclosure. Studies, such as
Leitoniene and Sapkauskiene (
2015),
Vartiak (
2016) and
Domingues et al. (
2017), on the relationships between corporate governance, corporate social responsibility information disclosure and firm value, confirmed what was mentioned above and demonstrated the fact that CSR information is fragmented, diverse and multidimensional and needs special analysis to be transformed into valuable disclosure mechanisms, providing full information and new value for the public.
Also, we know that most of the academic research on CSR, CG and sustainable development issues focuses on large companies because it is easier to identify their actions, because large companies are more visible in society and it is easier to identify the stage of corporate responsibility they have reached, simply by looking at their sustainability reports, code of conduct and other policy documents or their participation in initiatives of various bodies (
Wickert 2014). Measuring CSR performance often involves a combination of frameworks and metrics, depending on the industry and company’s specific focus areas.
A multitude of studies link CSR to the financial performance of companies.
James and Wooten (
2005) have already highlighted the financial benefits of corporate responsibility for companies themselves, as a result of improving their overall image, customer confidence and the confidence of all stakeholders.
Hohnen (
2007) also emphasized the importance of CSR in the intangible assets of firms,
Bakker et al. (
2014) positively correlate it with profitability, and
Lu et al. (
2009) and
Yuen and Lim (
2016) report a positive correlation of corporate performance with the CSR level of firms, while
Husted and Salazar (
2006) proved the connection of social performance with profitability, confirming other empirical studies that had preceded them. Also,
Tarczyński et al. (
2020) confirmed the existence of a relationship between fundamental strength and company value that can be applied to many areas in the operation of any company, including CSR, allowing for sectoral comparisons and the determination of the company’s market position over time. And
Wang (
2010) investigated the relationship between CSR and brand equity in a sample of international companies over a three-year period, concluding that good performance in corporate responsibility is correlated with the financial value of companies. The recent study by
Nareswari et al. (
2022) that examined the impact of ESG on corporate performance for non-financial companies listed on the Indonesian stock exchange demonstrated that in each case the implementation of ESG is reflected in their financial performance with positive impact in non-crisis periods and negative impact in crisis periods. The European CSR network argues that CSR investments can lead to higher financial returns and improved corporate profitability, and a number of studies agree. On the other hand, studies such as
McWilliams and Siegel (
2000),
Brown et al. (
2006),
Harjoto (
2007) and
Nelling and Webb (
2009) deny any link between CSR and financial performance.
However, in an attempt to link CSR with financial performance and to identify the correlation between them, most studies turn to listed companies and their respective stock market indices. The study by
Mittal et al. (
2008) on the listed companies of the Indian stock exchange and the S&P CNX Nifty index showed the positive correlation with the added market value; however, a negative correlation with the weighted average cost of capital index does not lead to firm conclusions. In the same direction are studies by
López et al. (
2007) for listed companies in the Dow Jones Sustainability Index and Dow Jones Global Index,
Li et al. (
2009) for listed companies in the Shanghai Stock Exchange in the services sector,
Zhu (
2011) for the Korean Stock Exchange, etc. The studies that support a negative correlation between CSR and a firm’s financial performance are those that basically study the short-term financial benefits of firms. On the other hand, the literature study by
Van Beurden and Gössling (
2008), who conducted a comprehensive review on the topic, concluded that the majority of studies show a positive relationship between CSR and financial performance. In particular, as far as Greece is concerned, the empirical study by
Karagiorgos (
2010) that tested the impact of CSR performance on stock returns using voluntary disclosures, based on a sample of Greek listed companies, demonstrated their positive correlation, contributing to this direction. This was preceded by
Panayiotou et al. (
2009) who examined 28 listed companies through the CSR reports they had issued, but without reaching firm conclusions.
Yet this approach of assessing the relationship between CSR and the financial performance of companies has objective limitations for Greek data, due to the limited number of listed companies.
In relation to the Greek reality, the study by
Sahinidis and Kavoura (
2014), which examined the performance of companies operating in Greece in the field of CSR through an international tool based on Responsibility Indicators, demonstrated a two-way relationship between companies and the society in which they operate, although the content analysis revealed the lack of real communication of CSR activities. Along the same lines,
Kim and Ferguson (
2014) showed that companies promote CSR activities and communicate their projects to the public in a similar way to the sponsorships they give, but without taking into account consumers and target groups. Of increased interest is the research by
Grougiou et al. (
2016) which examined corporate social responsibility reporting strategies focusing on stigmatised firms belonging to the alcohol, tobacco, gambling, nuclear energy and firearms sectors and found that these firms are more inclined to issue independent CSR reports. This obviously helps us to draw the conclusion that as the risk of third-party litigation looms, the interest and likelihood of a company instigating CSR reports increases. In fact, through this study, it was shown that CSR disclosures are an integral part of the strategic objective of ‘sinful’ companies in order to distract attention from their controversial activities, reduce the negative effects of stigma and neutralize the impact of dispute resolution processes, which supports the dynamics of the visibility and positive impact of CSR actions by society as a whole. Important in this direction is the study by
Panagopoulos et al. (
2016), who investigated the perceptions of employees of companies on their corporate social performance, but also incorporated the perceptions of customers on our topic, as interpreted by employees, where it was shown that employees’ evaluations of CSR are much more complex than those of customer–consumers. To determine the quality of this social information, it is important to identify the appropriate content of the CSR report.
However, although there is extensive literature on individual business activities and the need for financial reporting of the actions they implement in the context of their CSR in order to qualitatively capture the benefits gained by their stakeholders, there are no studies that quantify these benefits in numerical terms and compare them with the costs of CSR actions of companies for all activities and categories of companies and groups. Important in this direction is the study by
Thalassinos and Liapis (
2011) where, explaining the factors that play a key role in a financial, credit or debt crisis, they present a holistic regulatory framework for the banking sector based on European banks that are part of the EMU, stating that the regulatory framework for the banking sector should be characterised by transparency, accountability and performance in several important areas, including corporate financial reporting. Also, in another study by the same authors, in the same year, to assess the financial situation of the Greek banking system, they included, among other indicators in the model they constructed, corporate financial reporting, their corporate governance and the corporate social responsibility they have to demonstrate, thus affecting the economy, society and the environment. In particular, for the indicator they constructed for the CSR variable they relied on the annual mandatory corporate disclosures, taking values between 1 (for high involvement of CSR and sustainable development actions) and 15, for low values of the above. However, the findings of these surveys do not concern the whole economic activity, but are focused on the banking sector. Important is the study by
Astara et al. (
2017) that investigated the association between corporate social responsibility and financial performance studying 124 listed companies in the Athens Stock Exchange during the period 2006–2012 and showed that there is significant evidence. In the same direction, the more recent study by
Ziogas and Metaxas (
2021) that studied the association between CSR and financial performance during the crisis period through the CSR index confirms the majority of the literature that the adoption of CSR’s good practices is not only a moral rule, but contributes at least partly to the development of their effectiveness.
We find that the link between CSR and the performance of companies in the Greek reality focuses mainly on listed companies and the link with stock market indicators, rather than on the general profile of companies and their financial performance, focusing on the weaknesses of the quantitative determination of their corporate responsibility. Despite the few studies that focus on it, closer to the Greek reality seems to be the assessment of the performance of companies also in the CSR sector, in proportion to their financial performance, through the sustainability reports that they issue. This methodological approach requires the use of appropriate methodological tools in order to bend the difficulties in evaluating CSR performance that a number of scholars, such as
Carroll (
2000) and
Skouloudis et al. (
2015), have mentioned.
The study by
Hawn and Ioannou (
2016) adds another parameter that should be taken into account in the assessment of CSR through criteria, that of the separation of corporate responsibility actions available to companies in external and internal actions. In fact, they recorded that the companies themselves focus mainly on the implementation of internal CSR actions, which seem to be associated with the best market value. The need to separately focus our study on each subcategory of CSR has been pointed out in the past by other researchers as well (indicatively, we cite
Schaltegger and Wagner 2006).
In the systematization of CSR report data and the quantification of qualitative information, the contribution of the scoring method with specific criteria was initially mentioned by
Weber (
1990). Skouloudis and Nikolaou in 2020 moved in the same direction based on the GRI G2, while the recent study of
Vouros et al. (
2020) can be considered as an evolution of these with the GRI—G4 guidelines. In the study of Vouros et al. which collaborated with the EHRC of the University of the Aegean, a specific methodology has been developed and applied, based on specific evaluation criteria with a scale per criterion, depending on the degree of disclosure of information in CSR reports. In addition, they also defined specific weighting coefficients per criterion. Also, in the study by
Diez-Cañamero et al. (
2020) in the same period, a systematic recording of the indexes, rankings and ratings that are often used in matters of corporate responsibility and sustainable development is made. In fact, in their study, they also made an interesting consultation of the report “Rate the Raters 2019: Expert Views on ESG Ratings” of the consulting firm SustAinability. In a parallel manner, the recent study by
Chen et al. (
2021) which is focused on the US industrial stock market differs significantly from studies that use weighted evaluation scores of ESG policies to correlate them with their portfolio and financial data and other financial indicators. Specifically, they constructed a data envelopment analysis (DEA) model with quadratic and cubic terms to enhance the evidence of two or more aspects, as well as the interaction between the environmental, social, and governance attributes. Additionally, the study by
Drempetic et al. (
2019), who studied the influence of company size on the ESG score, is also important because of its methodology that used the Thomson Reuters ASSET4 ESG ratings to analyse the influence of firm size, as well as due to their findings that found a significant positive correlation between the mentioned variables. Following this,
Cohen et al. (
2000) noted that confidence in research conclusions increases with the number of methodological approaches contrasted.
Summarizing the study of the existing literature, as presented in this section, the link between CSR and CG, both between each other and each separately with the financial performance of companies, emerges. Also, there seems to be a variation in the association depending on whether we consider corporate responsibility actions directed to the internal activity of companies or when we refer to actions towards external parties, ESG actions. Finally, there are several studies that link CSR to stock market indicators.
The question, therefore, arises, which specific variables we should choose for our sample of firms, both in terms of their non-financial data (CSR, CG) and purely financial data, and what exactly we will examine with them. It seems logical to consult the empirical literature to determine an answer to this question.
On the other hand, a number of studies, as well as institutions involved in implementation, training, evaluation and awarding in the fields of responsible business (European Business Network for Social Cohesion-EBNSC, CSR Europe, CSE, Quality Net Foundation, etc.), have come up with a number of subcategories that form the two main variables we will examine: CSR and CG. Building on these variables in our own study, we have tried to make as complete a record and mapping as possible, as documented in detail in
Section 3.2.3.
Therefore, in our study we choose to consider these variables, to which we have already referred, adding one more which will outline whether a company is listed in the Athens Stock Exchange in general, without referring to individual stock market indices (LOA variable). Our objective is to investigate whether it is relevant to examine CSR and CG through its stock market performance.
Overall, this study extends the literature both in the assessment of corporate responsibility and corporate governance actions of companies with a holistic approach, and in their correlation with other non-financial elements.
Thus, we make the following assumptions:
Hypothesis 1. The variables of corporate social responsibility and corporate governance are correlated with some main exogenous financial variables.
Hypothesis 2. There is a difference between internal CSR actions and ESG actions of large companies in how they relate to their financial and other non-financial data.
Hypothesis 3. The CSR and CG actions of large companies depend on and are influenced by other non-financial factors (for example, awards listed on Athex).
5. Discussion
This research focuses on studying the relationship between the level of corporate social responsibility, sustainable development and corporate governance of the 100 largest companies operating in Greece and their financial data. Our sample period runs from January 2019 until December 2021. The data were drawn from the financial and non-financial reports published by the companies and organisations themselves.
The existing literature is significantly limited and focuses on individual issues regarding this topic, while we chose to take a holistic approach and to use quantitative measurement methods. Initially, the sample companies were selected based on their financial figures as published in their financial statements. Then, and for the same companies, we studied the content and the way in which they present information regarding the corporate responsibility actions they implement both internally in the companies and organisations and in their external environment. Next, we statistically processed the data and investigated the degree of correlation between the above-mentioned variables. The correlation between variables for their economic data and CSR performance was examined through correlation and regression analysis.
Overall, our findings confirm our first hypothesis and complement the previous empirical evidence of other researchers, who often focus on the financial performance of companies and find that their level of corporate social responsibility and corporate governance appears to be correlated with financial factors (
Bakker et al. 2014;
Yuen and Lim 2016;
Nareswari et al. 2022). We further distinguished between CSR actions within companies and ESG actions towards their external environment, individually and overall, and found that small differences emerge, partially confirming our second research hypothesis. Specifically, it was found that all CSR categories depend on total assets and whether they are listed on Athex or not, while only the external CSR of companies is also affected by total sales, but with a low correlation. This finding is in line with the studies of
Schaltegger and Wagner (
2006) and
Hawn and Ioannou (
2016), among others, which suggest that companies’ CSR actions should be examined separately and by category to investigate the external factors influencing them. Meanwhile, our third hypothesis was also confirmed, since there was a correlation of companies’ awards with the overall corporate responsibility actions they implement, as well as their level of corporate governance with the type of non-financial data report they choose.
Additionally, by proving that the criterion of being a company listed on the Athens Stock Exchange was the key factor for a better CSR index, this has confirmed once more our third hypothesis and at the same time it acts as a booster regarding the orientation of research that studies the correlation of stock market indices with CSR, such as
Panayiotou et al. (
2009);
Astara et al. (
2017); and
Ziogas and Metaxas (
2021). Apart from these, secondary findings emerged during our study, mainly when recording and documenting the corporate responsibility actions of the companies in the sample.
In particular, and with regard to the reports they publish, there was a shift from CSR to sustainable development and an increasing trend of companies publishing reports voluntarily, above and beyond the legislation. However, a first key conclusion that emerged is that non-financial information is not presented in a specific uniform way for all companies, nor are they required to report comprehensive information. This is because there is no legislative provision for this and no uniform strategy and commitment by companies. In most of the cases, qualitative information was sufficient, as opposed to quantitative measurement of the nature of the CSR actions implemented, and there was no measurement of the dissemination of the impact they had on their beneficiaries. Another important observation that emerged is that companies in the same sector invested in the same areas, which were directly related to their areas of activity or to any aggravating action through their activities in specific fields. This observation also confirms the theory that CSR contributes to the creation of value for the company and helps to improve its corporate reputation. It should be noted, however, that there is also increased information around areas such as public health protection, but we cannot be sure that they are related to fixed company policies because the study years included the COVID pandemic and many company actions were oriented around this.
6. Conclusions
This study is a systematic evaluation of the corporate responsibility actions of the largest companies in Greece and a comparative study of these actions with a quantitative measurement of their character and a comparison of these actions with their financial data.
In comparing non-financial data with financial data, it was found that Corporate Social Responsibility (CSR) overall and by subcategories (internal, external) is influenced by the size, the EBITDA and financial data of a company, as well as by whether it is listed on the stock market or not. This is a very important finding for the ability of larger companies to implement CSR, but also for how listed companies have a higher level of transparency and control, and therefore a better and more complete level of information. Also, Corporate Governance (CG) is related to CSR reports and EBITDA. Another finding was that awards seemed to be influenced only by CSR actions that are internally oriented, while they were negatively correlated with all other categories. This can be a policy tool for the companies themselves, showing them the way where they should focus their actions if they want to directly improve their results in this area, which has been proven to improve their corporate reputation and turn everyone’s eyes towards them.
In particular, we implemented two different econometric methods. Firstly, we made use of the stepwise method to decide which variables have more influence on the CSR indicator and we found that LOA, EBI and ASS have a significant influence on the CSR estimation. Using the same method (stepwise) and examining corporate governance we found that TS have a considerable influence on the CG estimation. Secondly, we used the Panel least-squares method, and we found that the awards for each company do not mainly arise from the CSR indicator but are predefined from other factors. We implemented similarity analysis among companies according to CSR indicators. From our results, the rank of our classification is from 1 to 6, starting from the best level of similarity defined as 1 and moving upwards. And we identified the main factors that a company needs to improve in order to move up the CSR index: a. For internal CSR (employees, training, health and worker safety, consultation and participation in decisions); b. For external CSR and in relation to society (charities, offers and volunteering); c. For external CSR and in relation to the environment (development and implementation of RES and other alternative environmental technologies, mitigation or avoidance of emissions, effective use or resources in manufacturing products and providing services, reduction in the use of materials, energy, water or steam, reduction in environmental costs, recycling); d. For external CSR and in relation to corporate governance (relationship with stakeholders).
This study contributes to the literature and assists those who have to make investment decisions by demonstrating the relationship between the level of corporate responsibility and sustainable development of a company and its financial results, and because our research base is constantly updated, it also allows the control of other cases and the longitudinal analysis of changes in corporate responsibility and governance.
Recommendations for Future Research
Ιn the future the research methodology could be applied in other countries, mainly in Europe, in order to test its effectiveness and whether similar results will be obtained. For further research, it would be interesting to examine the sample companies by economic activity sector in order to study their behaviour and the orientation of their decisions in the areas of corporate social responsibility and corporate governance. Furthermore, there are several directions for future research and the biggest challenge of all, we believe, is to quantify these parameters and the correlation between them. In future research, we propose the implementation of alternative approaches such as discriminant analysis to evaluate the results and an artificial neural network to include in the model and the effect of categorical variables, which was the biggest challenge we faced.