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      A computational model of the competitive effects of ESG

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      PLOS ONE
      Public Library of Science

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          Abstract

          Environmental and social initiatives within firms, commonly grouped under the ESG term, have attracted significant business interest. However, the mechanism that links ESG investment to firm performance is unclear. We develop a computational model that helps clarify the competitive effects of ESG. In our model, ESG investment attracts consumers, but it can have additional effects on companies, such as reducing production costs, increasing product value, or both. Computational experiments show that ESG intensifies competition when it has such additional effects in addition to attracting consumers. However, ESG can lead to a winner-take-all dynamic in which a firm with an initial advantage dominates the market. Moreover, firms can use strategic disclosure of information to reduce their ESG investments, softening competition. This research contributes to the ESG literature by explaining the strategic impact of firms’ ESG investments and the conditions under which firms can do well by doing good in a competitive setting.

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          Corporate Social Responsibility: Strategic Implications*

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            Strategy and society: the link between competitive advantage and corporate social responsibility.

            Governments, activists, and the media have become adept at holding companies to account for the social consequences of their actions. In response, corporate social responsibility has emerged as an inescapable priority for business leaders in every country. Frequently, though, CSR efforts are counterproductive, for two reasons. First, they pit business against society, when in reality the two are interdependent. Second, they pressure companies to think of corporate social responsibility in generic ways instead of in the way most appropriate to their individual strategies. The fact is, the prevailing approaches to CSR are so disconnected from strategy as to obscure many great opportunities for companies to benefit society. What a terrible waste. If corporations were to analyze their opportunities for social responsibility using the same frameworks that guide their core business choices, they would discover, as Whole Foods Market, Toyota, and Volvo have done, that CSR can be much more than a cost, a constraint, or a charitable deed--it can be a potent source of innovation and competitive advantage. In this article, Michael Porter and Mark Kramer propose a fundamentally new way to look at the relationship between business and society that does not treat corporate growth and social welfare as a zero-sum game. They introduce a framework that individual companies can use to identify the social consequences of their actions; to discover opportunities to benefit society and themselves by strengthening the competitive context in which they operate; to determine which CSR initiatives they should address; and to find the most effective ways of doing so. Perceiving social responsibility as an opportunity rather than as damage control or a PR campaign requires dramatically different thinking--a mind-set, the authors warn, that will become increasingly important to competitive success.
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              The Impact of Corporate Sustainability on Organizational Processes and Performance

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                Author and article information

                Contributors
                Role: ConceptualizationRole: Formal analysisRole: InvestigationRole: MethodologyRole: Project administrationRole: SupervisionRole: ValidationRole: VisualizationRole: Writing – original draftRole: Writing – review & editing
                Role: ConceptualizationRole: Formal analysisRole: InvestigationRole: MethodologyRole: Project administrationRole: SoftwareRole: SupervisionRole: ValidationRole: VisualizationRole: Writing – original draftRole: Writing – review & editing
                Role: Editor
                Journal
                PLoS One
                PLoS One
                plos
                PLOS ONE
                Public Library of Science (San Francisco, CA USA )
                1932-6203
                21 July 2023
                2023
                : 18
                : 7
                : e0284237
                Affiliations
                [1 ] Fordham University, New York, NY, United States of America
                [2 ] Universidad Complutense de Madrid, Campus de Somosaguas, Madrid, Spain
                University of Almeria: Universidad de Almeria, SPAIN
                Author notes

                Competing Interests: The authors have declared that no competing interests exist.

                Author information
                https://orcid.org/0000-0002-7968-0840
                Article
                PONE-D-22-29690
                10.1371/journal.pone.0284237
                10361511
                37478077
                8550c29a-0820-4b33-abef-0d13373bc932
                © 2023 Katsamakas, Sanchez-Cartas

                This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

                History
                : 28 October 2022
                : 27 March 2023
                Page count
                Figures: 8, Tables: 2, Pages: 18
                Funding
                The author(s) received no specific funding for this work.
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