What we saw was that certain CSR dimensions became non-optional, or downright required, following the incident. In all, BP agreed on a $20 billion claims fund for the spill. Communities in the Gulf Coast states of the USA were hard-hit through the shutting of fisheries and lost employment opportunities.

A total of 11 workers died and four million barrels of oil flowed into the ocean. The disaster resulted from an explosion on a drilling rig in the Gulf of Mexico in April 2010 and led to one of the worst offshore oil spills in history. More specifically, we used the BP Deepwater Horizon disaster as an empirical context. Putting our theory to the test, we examined how an exogenous event that increased the financial materiality of certain CSR dimensions affected firms’ differentiation choices. How materiality constrains differentiation choices: the BP Deepwater Horizon case We illustrated this mechanism in a real-life scenario by studying the case of the Deepwater Horizon disaster. This is because materiality constrains the set of valuable differentiation opportunities, since all firms in the industry are expected to perform well in high-materiality dimensions. But we also showed that the positive market returns to CSR uniqueness decrease as the number of material CSR dimensions increases: the association was not as strong in industries where the firms had many dimensions of high materiality. Our study pinpointed a positive association between CSR uniqueness and market value. Our research shows a positive association between CSR uniqueness and market value. As we saw it, choices were not just about what firms invested in, but also what they did not invest in. We also investigated how the financial materiality of the various CSR dimensions –– that is, each dimension’s capacity to directly benefit the firm’s financials –– influenced these strategic choices. We set out to understand if the uniqueness of CSR dimension choices made a difference. Our first goal was to explore if firms are incentivized to strategically choose certain CSR dimensions. As a result, organizations will increasingly need to report more consistently on what they are doing on the different dimensions. With the International Sustainability Standards Board (ISSB) currently establishing a global baseline of financial disclosures on sustainability that are set to be finalized in 2023, this is timely. We wanted to investigate the impact of CSR dimension choices to help in the decision-making process. So, which should companies choose to invest in, and how should they decide? CSR decisions and benefits No company has the resources to invest equally in all CSR dimensions, and most are limited in how many dimensions they can invest.

There are many choices of CSR dimensions including the whole set of environmental, social, and governance (ESG) areas: everything from carbon footprint to human rights to workplace diversity. The financial gains of CSR can be high – a recent study estimated that $1 invested in 1993 in high sustainability companies would have grown to $22.6 by the end of 2010, while $1 invested in low sustainability companies would have only reached $15.4.

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