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Graduate Research Team Explores Sustainability Performance in Canada, the US and Beyond

May 31, 2008

by Dorothy Paun, Professor and students Sean Cappello, Katie Fulkerson, Laura Pollan, Ravi Manghani, Carolyn Chen, Angie Gaffney, Brianna Noel Hughes, Eric Knoben, Violeta Orlovic, Elizabeth Tran, and Emil Morhardt.

Above: Dorothy Paun and CFR 519 students. Front row: Professor Dorothy Paun, Katie Fulkerson, Liz Tran, Ravi Manghani. Back row: Violeta Orlovic, Laura Pollan, Sean Cappello, Carolyn Chen, Angie Montgomery, Brianna Noel Hughes, and Eric Knoben.

Dorothy Paun’s annual spring quarter research seminar, College of Forest Resources 519: Conducting an Industry Performance Review, provides a forum for UW students to affect positive change. Students unite under a common interest to explore financial, environmental, and social responsibility business activities and performance. The team includes undergraduate, master, and PhD students majoring in business, environmental science, law and a Hubert Humphrey Fellow.

Canada and the US share more than a long-standing, substantial bi-lateral trade relationship, and both share a concern about sustainability. As noted by Pettenger (2007), the Canadian government advocates that “no one country, acting alone, can solve the problem of climate change, but by working together towards a common goal the nations of the world can successfully address the challenge.” To explore cross-cultural dimensions of US and Canadian approaches to sustainability performance reporting, a pilot study was done in 2007. Two primary findings emerged: Canadian firms scored higher social responsibility performance while US firms scored higher environmental performance. Encouraged by these cross-cultural differences, the 2008 research seminar was designed to broaden the context of inquiry to include firms from around the world.

Increasing acknowledgement of climate change, emerging economies, population growth, and consumer awareness and activism have coalesced to make even the most conventional businesses think about new approaches like sustainability. Sustainability is meeting the current needs of people, businesses, and organizations without compromising Earth’s capacity to provide for future generations. This requires balancing environmental stewardship, financial prosperity, and social responsibility, an integration called the “triple bottom line.” Sustainability, previously considered more an ethical issue, has become a “business” issue. Businesses may be hesitant about adopting sustainable initiatives without sufficient information on financial implications like profitability and shareholder value. This research uses a triple bottom line approach in hopes of providing new business insights as well as incentives for more sustainable business practices.

Over the past two years, Dr. Paun’s research has worked on building a quantitative model of triple bottom line performance in order to provide a foundation for operationalizing the constructs of financial (e.g., return on equity, gross profit margin, debt to equity) social responsibility (e.g., occupational health and safety protection, employee equal opportunity, anti-corruption practices, community development and investment), and environmental performances (e.g., renewable energy use, recycling programs, water and waste reduction). The primary goal of her model is to investigate whether sustainable business practices influence corporate financial returns, and, if so, how (i.e., positively or negatively).

The 2008 spring quarter research seminar is in collaboration with Professor Emil Morhardt, Director of the Roberts Environmental Center at Claremont College. Morhardt developed the Pacific Sustainability Index (PSI), an assessment instrument for sustainability performance. From this PSI sample, we chose a sub-sample due for data access and consistency. Our sample consists of 78 firms from 18 countries (Australia, Belgium, Canada, China, Finland, France, Germany, India, Italy, Japan, Netherlands, Norway, South Korea, Spain, Sweden, Switzerland, UK, and the US) and twelve industries (banking and insurance, chemicals, computing and office equipment, electronics, energy, food, forest products, metals and mining, pharmaceuticals, telecommunications, transportation, and utilities).

The research findings, if analyses suggest correlations among financial, environmental, and social performance, could provide incentives for corporations to deepen commitments to business practices that lower environmental impacts, enhance corporate social responsibility, and improve shareholder value.