Correlation is Not Causation, and Correlations Can be Negative

A new study sponsored by NTT claims that firms practicing social sustainability policies are more profitable than firms which do not do so. The problem, as always, is that correlation is not causation. We cannot conclusively prove that social sustainability policies produce better financial outcomes. We can only correlate financial outcomes with the degree of spending on such programs. 

In other words, the relationship between ESG and firm profits is unclear.

Study	Findings
Whelan et al. (2021)	Meta-analysis of 1000 studies found a positive relationship between ESG performance and financial performance.
Eccles et al. (2014)	Study of over 20,000 firms found that ESG performance was positively correlated with firm profits, but only in the long term.
Khanna et al. (2016)	Study of US firms found that ESG performance was negatively correlated with firm profits.
Ma et al. (2019)	Study of Chinese firms found that ESG performance was positively correlated with firm profits.

That tends to be the case for other correlations between firm profits and employee happiness, for example. 

It often is claimed that such policies promoting diversity and inclusion may improve employee morale and productivity. The link between employee happiness and productivity is itself unclear. 

Study	Findings
Warwick (2010)	Found a positive relationship between happiness and productivity.
Oxford (2019)	Found no relationship between happiness and productivity.
Harvard (2020)	Found a bidirectional relationship between happiness and productivity.
Stanford (2021)	Found that a third factor, such as employee engagement, could be causing both happiness and productivity.
Harter et al. (2010)	Found a positive relationship between employee engagement and productivity.
Achor (2010)	Found that happy employees are 12% more productive than unhappy employees.
Bai et al. (2016)	Found no relationship between employee happiness and productivity.
Cohn et al. (2016)	Found that employee happiness can have a negative impact on productivity if it leads to employees being less willing to take risks.
Oswald et al. (2015)	Found a positive relationship between happiness and productivity.
Spector et al. (2017)	Found no relationship between happiness and productivity.
Van Doorn et al. (2018)	Found a negative relationship between happiness and productivity.

We find the same pattern in studies examining the relationship between economic growth and broadband deployment. Such studies have found a positive, negative or no relationship between broadband and economic growth. 

Study	Findings
Czernich et al. (2011)	Found a positive relationship between broadband access and economic growth.
Dewan and Min (2013)	Found no relationship between broadband access and economic growth.
Gagliardi et al. (2015)	Found a negative relationship between broadband access and economic growth.
Becker et al. (2017)	Found inconclusive evidence of a causal relationship between broadband access and economic growth.
De Vries and Moll (2016)	Found that broadband internet access has a negative impact on economic growth.
Falck et al. (2018)	Found that the causal impact of broadband internet access on economic growth is unclear.
Gillett et al. (2012)	Found no relationship between broadband penetration and economic growth.
Waqas et al. (2022)	Found a negative relationship between broadband penetration and economic growth.
OCDE (2023)	Found that the causal impact of broadband on economic growth is inconclusive.

The point is that complex outcomes are hard to definitively pin to any single input. Where there is correlation, there might not be causation. And where there is correlation, such correlation can be positive, neutral or negative.