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Why investors can view the same company as a leader and a laggard

Socially responsible investment (SRI) techniques use screens to include—or exclude—companies in portfolios based on social or environmental performance. SRI is gaining traction—eleven percent of professionally managed U.S. assets were invested using these principles in 2007.

Researchers Magali Delmas (University of California, Los Angeles) and Vered Doctori Blass (University of California, Santa Barbara) examined the criteria for comparing companies and the pros and cons of current SRI screens. In their Business Strategy and the Environment article, they developed a case study of 15 publicly traded chemical companies including giants such as Avon Products, Inc., DuPont Company, Johnson & Johnson, and Proctor & Gamble.

The authors found firms can be ‘good’ and ‘bad’ at the same time. Those scoring poorly on environmental performance (like toxic releases) and compliance with regulation also provided better reporting and took on more pollution-preventing activities. For example, Dow and DuPont ranked best on environmental reporting but worst on toxic releases, while Avon and Clorox two firms that were amongst the best for toxic releases were the worst reporters.

To read the full article on the Network for Business Sustainability website click here.