The impact of the United Nations global compact on firm performance: A longitudinal analysis

Abstract

The United Nations Global Compact (UNGC) is one of the most important corporate social responsibility (CSR) initiatives aimed at aligning companies' strategies and operations with principles that involve human rights, labor, environment, and anti-corruption. The purpose of this paper is to shed light on the relationship between UNGC adoption and firm performance. Starting from a literature analysis, we develop eight research hypotheses, three of them related to the effects of UNGC on performance (labor productivity, sales growth, and profitability), and five related to contextual factors that might affect them. We empirically test these hypotheses through a structured longitudinal event study analysis and an ordinary least square multiple regression, using balance sheet data of a cross-country and cross-industry sample of 810 companies gathered from the Standard and Poor Capital IQ's Compustat Global and North America datasets. The results demonstrate a significant positive impact of UNGC adoption on sales growth and profitability, whereas no significant impact emerged on labor productivity. In terms of affecting factors, country development and cultural features affect the impact on sales performance, whereas UN vendorship affects the impact on profitability. The study contributes to the scientific debate by developing and empirically testing a comprehensive theory-grounded framework on the impact of UNGC on firm performance. It also provides significant insights of relevance for managers, firms, regulatory bodies and policy makers.