The Surprising Link Between Language and Corporate Responsibility

We've heard that Eskimos have 100 words for snow—a common way of expressing how language affects the way we see the world. Whether or not that particular example is true, cultural linguists have long theorized that the words a particular group of people have at their disposal influences how they categorize the world, emphasizing some values or activities over others.

In other words, languages shape the way people think.

After hearing about one such theory from visiting doctoral student Hao Liang from Tilburg University, Harvard Business School Associate Professor Christopher Marquis teamed with Liang and Luc Renneboog of Tilburg University, and Sunny Li Sun of the University of Missouri—Kansas City to study whether the same held true in business. Would a company's use of language, particularly by the CEO and other top executives, guide its business philosophies and decisions?

"It seemed to me to be an amazing finding if it were true," Marquis says. "We asked, what are some other tests that could be done in a business context?"

The research team had the perfect testing ground: corporate social responsibility. Researchers have long shown that there are differences in how socially responsible companies depend on the culture of their country of origin. Companies located in countries including Germany, Japan, and most Nordic nations are more likely to practice CSR and sustainability initiatives than are companies in France, India, or Russia, for example.

Because culture is subjective, however, it is notoriously difficult to test in a research setting. "Everyone knows culture is important, but no one can tell you exactly how it matters," says Marquis. Language, on the other hand, is a more objective difference that can be easily measured.

Better yet, no one had studied this question.

In recent years, researchers have taken increasing interest in measuring CSR (or as it's sometimes termed, environmental, social, and governance—or ESG—factors), both because of its importance to socially conscious investors and as an indicator of long-term corporate health. Firms such as Morgan Stanley Capital International crunch hundreds of factors from carbon emissions to the percent of women on corporate boards in order to produce indices of CSR for individual companies.

The research team set out to examine whether these measures of CSR correlate to the languages spoken in each company's home country.

LANGUAGE MATTERS
Their findings, contained in a new working paper titled "Speaking of Corporate Social Responsibility ," suggest that they do. Key among their results is that idea that it is not the words used in a particular language that matters, but the way that language is constructed. They looked at the constructions used to describe future actions, and found that the more separation placed between present and future events, the less socially responsible a company was.

Marquis and his fellow researchers based their inquiry on a similar study regarding individual decision-making done by UCLA economist Keith Chen. In a paper published in the American Economic Review in 2013, Chen noted that some languages, such as English, Spanish, Arabic, and Korean, require speakers to use a completely different structure to speak of the future—for example, changing "It is raining today" to "It will be raining tomorrow." In other languages, such as German, Swedish, Chinese, and Indonesian, speakers use essentially the same structure. Saying "It is raining today" is grammatically equivalent to saying "It is raining tomorrow."

In his research, Chen found that speakers of the former languages with strong future-time reference (FTR) tended to focus and act less on the future—presumably because there was more linguistic distance between future and the present. They save less, become more obese, and even practice less-safe sex than in weak FTR languages, which use less separation between what is and what is to come.

Like saving money or dieting, corporate social responsibility is an inherently future-oriented activity, Marquis notes—and thus subject to the same phenomenon of language.

"While we might hope that companies do good for the community because it's the right thing to do, in general they think of it as making a short-term trade-off for a long-term return. It doesn't have to have immediate payback. As one corporate executive said to me, 'I'm willing to accept a long time horizon, but if it's not going to have a positive influence eventually, I'm not going to do it."

BUILDING A STUDY
To determine a company's CSR performance, the researchers relied on rankings of 1,500 companies from 1999 to 2011 in MSCI's Intangible Value Assessment, and sustainability data from the Vigeo Sustainable Country Ratings. These were matched with the company's official language and strong/weak orientation toward the future, and several moderating variables.

Marquis and his fellow researchers were able to determine that corporations in countries with a strong FTR language scored 26 percent lower on CSR values than those with a weak FTR language.

Of course, that finding could be confounded by other cultural factors—especially since many of the weak FTR language countries are in Scandinavia, which is well known for being socially liberal. To double check, the researchers ran the numbers excluding Scandinavia and found they still held up.

Furthermore, they performed a unique check involving Belgium and Switzerland, two countries with multiple official languages, at least one of which is strong or weak FTR. Painstakingly going through and coding each company according to the dominant language in its headquarters city, they were able to show CSR scores differed by language even within the same country.

OVERCOMING THE LANGUAGE BARRIER
Lest one conclude that the US, France, and other strong FTR countries are doomed when it comes to social responsibility, Marquis and his colleagues also found that language isn't necessarily destiny. Looking at a variety of factors, including the degree to which a company had branches in different countries or even held foreign assets, they found that the more globalized a firm is, the less the type of language influenced its CSR scores.

"The idea is the more exposed you are internationally, the more you encounter different languages and situations where people have a different way of approaching things," speculates Marquis. "Our assumption is that this will then have an influence on the local company. Having all of those influences somehow breaks down the effect."

As companies put more of a focus on CSR, understanding these underlying distinctions may help global managers figure out where tendencies towards future thinking may be strong or weak, and tailor their programs effectively. Beyond those findings, however, the implications of future-focused language may have other effects on corporate behavior.

"The idea that language affects a business strategy is pretty fundamental to our results—and may affect dividend reinvestment, expansion, acquisition, and international growth," says Marquis. "CSR is just one way to test the effect of language on long-term activities—but there are many other long-term activities that could correspond to this, too."

About the author
Michael Blanding is senior writer at Harvard Business School Working Knowledge.

[This article was provided with permission from Harvard Business School Working Knowledge.]