The Kellogg School of Management at Northwestern University took a close look at the growing practice of CSR contracting last week, and describes the research of professors Dylan Minor, Bryan Hong and Caroline Flammer in its Kellogg Insight publication under the self-explanatory headline, “Rewarding CEOs for Corporate Social Responsibility Pays Off for Society—and for Firms: CSR contracting encourages executives to sacrifice short-term payoffs for long-term gains.”

Minor was initially skeptical that the data would reveal any substantial bottom-line benefit from CSR contracting:  Minor suspected that when push came to shove, executives would prioritize the company’s bottom line over what was socially responsible. To Minor’s surprise, the research revealed that CSR contracting actually hit its mark, leading companies to reduce emissions, increase eco-friendly or “green” patents, and improve social responsibility ratings across the board. Those actions, in turn, increased companies’ value over the long run.

One surprise was the rapid growth in CSR contracting, from 12 percent in 2004 to 40 percent in 2013. Another interesting takeaway is the involvement of high-carbon industries. The study found that mining, energy and transportation companies engaged in CSR contracting at double the average rate.

In an earlier study Minor conducted in 2015, he set out to understand why companies and investors were tuning into CSR, even without hard evidence of the bottom line evidence. The problem that Minor nailed down is that this kind of “CSR contribution” actually doesn’t work, and may even expose a company to greater risks.  In contrast, Minor and his research team found that managers who foresee potential trouble spots and strategically target CSR investments to address them are more likely to protect their firms from the effects of adverse events.

Read the full article about corporate social responsibility by Tina Casey at TriplePundit.