Inderscience Publishers

A license to operate? An empirical examination of the influence of environmental and social performance on the financial performance of mining sector firms

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The notion that firms owe a duty to the wider communities in which they operate is now widely accepted among practitioners and academics. If there is a link between corporate environmental and social responsibility (CESP) and corporate financial performance (CFP), no sector is likely to be more sensitive than the mining sector. I investigate the relationship by testing whether there is a relationship between the strategic intent of mining firms to employ sustainability activities and positive financial performance as reflected in their return on fixed assets (ROFA). The results suggest that for a sample of major global mining firms there is not a statistically significant association between their CFP and their actions taken to improve their CESP. However, this paper submits that any connection may be complicated by inconsistencies in assessing and reporting the environmental and social performance of a firm in a systematic, accurate and transparent manner.

Keywords: mining industry, environmental performance, social performance, financial performance, social licence, sustainable development, sustainability, corporate environmental responsibility, corporate social responsibility, CSR, return on fixed assets, ROFA

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