In the world of business, there's a race towards becoming more environmentally friendly. Some companies are leading the charge, while others find themselves lagging behind. Researchers Drew Peabody, assistant professor of finance, and his co-researcher, Hirofumi Nishi studied how these "lagging firms" decided to catch up, influenced by the eyes of their spectators — the stakeholders.
In the vast landscape of corporate practices, some companies that operate in environmentally sensitive industries found themselves falling short in sustainability initiatives compared to their peers. The lagging firms are the main character in research by Drew Peabody, assistant professor of finance at the Martha and Spencer Love School of Business, and his co-researcher, Hirofumi Nishi associate professor at the University of Texas at Dallas. These were the lagging firms, facing the challenge of catching up.
Enter the stakeholders — the audience of this sustainability journey. Researchers used tools like Internet search volumes and institutional ownership percentages to gauge how much these spectators cared about the lagging firms.
The researchers uncovered a twist. Lagging firms, especially those in the spotlight of consumers, suddenly intensified their efforts. It was as if the attention from the crowd spurred them to act, making strides in reducing emissions and embracing eco-friendly materials.
Companies lagging behind but drawing more interest from consumers stepped up their sustainability initiatives compared to those with lower consumer interest. Firms that grabbed the attention of retail investors exhibited a significant increase in sustainability efforts, particularly in reducing emissions. Meanwhile, businesses trailing behind with a higher percentage of institutional ownership felt the pressure to reduce emissions, but this heightened demand didn’t necessarily result in a focus on innovative environmental practices.
It wasn’t just about catching up; it was about responding to the expectations of those who cared about sustainability.
The research titled, “Under the spotlight: The peer standard in CSR and the role of public attention”, was published in the Financial Review.
Peabody previously taught at the University of Texas Dallas before joining Elon University in 2021. He currently teaches Advanced Managerial Finance, Venture Capital Financing, and Finance Foundations. Research interests include corporate financing, valuation, financial technology, and venture capitalism.
Peabody was recently awarded the Love School of Business Dean’s Award for Excellence in Scholarship 2023. He also is a co-advisor to Elon’s student team for the Venture Capital Investment Competition.