Corporate social responsibility and financial performance : an Australian example

The increasing attention on corporate social responsibility (CSR) is based on the belief that it can influence a firms' performance. An understanding of the effect that corporate social performance has on corporate financial performance is valuable for policy makers. This knowledge aids in answering the question as to whether managers systematically miss profit opportunities if they decide not to give emphasis to corporate social performance. Also, it assists in understanding the relative emphasis that should be placed on an adoption of information based instruments that improve the flow of information such as voluntary green measures. Furthermore, through a focus on CSR activities companies can develop good relationships with stakeholders and indirectly create value for shareholders. It is widely accepted that firms with an attitude geared toward disclosure of socially responsibility related activities appear to be able to develop and maintain a better relationship with stakeholders in general. The primary aim of this paper is to determine the relationship between corporate social performance and corporate financial performance of selected Australian companies using the Corporate Responsibility Index developed by the St. James Ethics Centre and the Australian SAM Sustainability Index.