Research by: Felipe O. Calderon, Wilfred S. Manuela Jr. & Daisy T. Briones
Sustainability reporting (SR), also called ESG reporting, the disclosure of environmental, social and governance performance, is now required of listed companies in 90% of the world’s stock exchanges covering 50,000 companies with a combined capitalization of $86 trillion (Sustainable Stock Exchanges Initiative (SSE) 2019).
SR has been made mandatory in view of its utility as a behavioural transformation tool for helping firms achieve sustainable performance. Using a systematic literature review and content analysis, this study investigates the differences between Western and Asian research perspectives on the transformative effect of SR.
We used PRISMA (Preferred Reporting Items for Systematic Reviews and Meta-Analyses) to shortlist relevant peer-reviewed journal articles from an original list of 1,428 articles and derive a list of 327 eligible articles. We further used NVivo software to generate a focused search of articles discussing the impact of SR on corporate behaviour, finally yielding 71 articles. We then segregated the articles that discussed Western vis-a-vis Asian perspectives and compared the two groups.
We developed 79 codes using the triad network model of engagement in ESG issues (Wagemans, von Koppen, and Mol 2019), which purports that three distinct but interdependent networks influence the firm’s sustainability programs: economic, political, and social networks, each with its own analytical perspective, institutional arrangements and actors. Each network plays a distinct role in shaping and implementing stakeholder engagement processes.
The codification generated six major SR themes discussed and plotted them against the triad network, namely:
- SR, signaling, legitimacy and institutional theories
- SR, assurance, and improving SR quality
- SR and materiality of indicators
- SR, evasive communication tactics, and image building
- Consistency between SR and sustainable behaviour
- SR and its impact on financial and firm performance.
To reduce error and coder bias, the authors partially automated the content analysis by using NVivo software to
- count the number of Western and Asian articles mentioning the code,
- count the number of times each code was mentioned per article,
- list the articles that used the code, and
- list quotes where the code was used in the article.
The findings show that the dominant theme of Asian SR research investigates the impact of SR on financial performance, primarily addressing economic stakeholder network interests. Asian research dominantly reflects the voice of business interests dwelling on the economic benefits and the business case for CSR (Vogel 2005; Castello and Galang 2014) while Western research reflects a wider variety of political and social stakeholder interests, investigating how SR may be used as means to jumpstart a disclosure-dialogue-development action cycle (Hess 2014). Western research explores norms for good SR practice that seek to institutionalize sustainability changes permeating the corporation’s activities in planning and strategy, risk management, inclusiveness, corporate ethics, technical and operational processes, stakeholder management and accountability, value creation and supply chain ecosystem management.
This suggests that in Asia, there is a great need for more research on institutionally strengthening the linkages between SR, sustainable corporate behaviour, and stakeholder engagement in Asia. In particular, Asian research in sustainable finance could actively help in establishing and disseminating globally accepted norms and standards for quality SRs since it is an important intermediate step for SRs to withstand scrutiny and become as objective, credible, and comparable as financial reports. An ideal SR must be useful in tracking the firm’s sustainable performance over time for it to be instrumental in guiding the sustainable transformation process of the firm, which can then be used as a roadmap for a disclosure-dialogue-development action cycle.
In Asia, sustainable finance professionals need guidance not only in how to write SRs but also in deepening their appreciation for tying up sustainability metrics with sustainable management frameworks. Action-oriented SR research projects could create venues where researchers, consulting firms, assurance providers and firms could co-develop scorecards or frameworks that report as well as reinforce links between the measurement of ESG impacts of the firm and its transformative plan of action for improving its sustainable performance.
To cite this article: Calderon, F. O., Manuela Jr., W. S., & Briones, D. T. (2021). The impact of sustainability reporting on organizational behaviour from Western and Asian perspectives: A systematic review of literature. Journal of Sustainable Finance & Investment. DOI: https://doi.org/10.1080/20430795.2021.1879560
To access this article: https://doi.org/10.1080/20430795.2021.1879560
About the Journal
The Journal of Sustainable Finance & Investment is an international quarterly journal publishing peer-reviewed articles on radical and reformist initiatives for social responsiveness in global financial markets. The Journal specifically focuses on environmental, developmental, social and governance principles as formulated in the financial markets, managed investment, banking, micro-finance, project finance and philanthropy.
The use of sustainable principles has become a major movement in finance. Investment institutions in the major centres are required to disclose how environmental, developmental, social and governance factors are used in portfolio construction. Guidelines issued by the Chartered Financial Analysts Institute, and initiatives such as the Equator Principles, the United Nations Principles for Responsible Investment, and the Carbon Disclosure Project, all suggest a shift of institutional thinking. While these initiatives intersect with and reflect wider commitments including understanding environmental management, corporate governance and social equity, they also reflect unease about the ways globalised financial markets have managed attendant risks.
Such concerns have been met by research from a number of conventionally unrelated fields. By presenting the latest research from a wide range of research directions, the Journal of Sustainable Finance & Investment furthers knowledge of the institutional and policy connections needed to progress the goals of sustainability.
Journal of Sustainable Finance & Investment [ABS1]