What sparked your curiosity?

Companies frequently make headlines for green- and diversity- washing, promoting environmental and social commitments without taking meaningful actions. Research on these practices typically focuses on performance indicators such as emissions, workforce diversity, or promotion decisions, overlooking firms’ participation in legislative processes. Firms can influence electoral outcomes by funding and endorsing political candidates, who then vote on bills and participation in international (climate) agreements. By collecting firms’ stances from annual reports, proxy statements, and press releases, we test whether firms “put their money where their mouth is.” Specifically, we examine whether firms with environmental and diversity claims also financially support politicians who vote for pro-environmental and pro-LGBTQ+ legislation.

What did you discover?

We found that firms donate mostly to politicians who have low approval ratings by environmental and human rights advocacy groups. Firms with more claims donate relatively more to politicians with higher approval ratings, but they do not donate less to lower-rated politicians. Thus, political alignment is limited: While some alignment exists, corporate political contributions often diverge from firms’ publicly stated sociopolitical values. This is caused, amongst others, by community pressure for diversity and environmental claims and by political pressure for donations.

Why do these findings matter?

By contributing to political campaigns or endorsing political candidates, firms influence policies that affect the broader sustainability landscape. Our study provides large-scale empirical evidence on corporate political (mis)alignment and contributes to the debate on how political activities should be considered in corporate ESG assessments.

Literature:

Preuss, S., & Max, M. M. (2024). Do firms put their money where their mouth is? Sociopolitical claims and corporate political activity. Accounting, Organizations and Society, 113, 101510.