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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Get familiar with business sustainability in Asia Business Sustainability in Asia offers 12 chapters that cover different aspects of business sustainability with a keen focus on its implications in Asia. Anyone who is involved with business sustainability and corporate governance, the financial reporting process, investment decisions, legal and financial advising, assurance functions, and corporate governance education will be interested in this book. It examines business sustainability performance, reporting and assurance and their integration into strategy, governance, risk assessment, performance management, and the reporting process of disclosing governance, ethics, social, environmental, and economic sustainable performance. The book also highlights how people, businesses, and resources collaborate in a business sustainability and accountability model. * Develop an awareness and understanding of the main themes, perspectives, frameworks, and issues pertaining to corporate governance and business sustainability in Asia * Covers a variety of issues relevant to business sustainability in Asia * Authored by an expert who has written extensively on the subject * Understand why organizations worldwide recognize the importance of sustainability performance If you're a business leader, executive, auditor, or student looking to familiarize yourself with this emerging subject, Business Sustainability in Asia has you covered.
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Veröffentlichungsjahr: 2019
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Table of Contents
Cover
Foreword
Preface
Acknowledgments
List of Abbreviations
CHAPTER 1: Introduction to Business Sustainability
1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. DEFINITION
4. THEMES OF THIS BOOK
5. ATTRIBUTES
6. PRINCIPLES
7. DIMENSIONS OF SUSTAINABILITY PERFORMANCE
8. VALUE RELEVANCE OF SUSTAINABILITY PERFORMANCE
9. EMERGENCE OF BUSINESS SUSTAINABILITY IN ASIA
10. SUSTAINABILITY REPORTING AND ASSURANCE
11. PROFESSIONAL ORGANIZATIONS INFLUENCING SUSTAINABILITY
12. BEST PRACTICES OF SUSTAINABILITY PERFORMANCE, REPORTING AND ASSURANCE
13. MANAGERIAL IMPLICATIONS OF SUSTAINABILITY PROGRAMS AND ACTIVITIES
14. CONCLUSIONS
15. CHAPTER TAKEAWAY
ENDNOTES
CHAPTER 2: Sustainability Principles, Theories, Research and Education
1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. INSTITUTIONAL BACKGROUND
4. SUSTAINABILITY PRINCIPLES
5. SUSTAINABILITY THEORIES
6. SUSTAINABILITY STANDARDS
7. GLOBAL IMPLICATIONS OF SUSTAINABILITY PRINCIPLES, THEORIES AND STANDARDS
8. SUSTAINABILITY RESEARCH
9. BUSINESS SUSTAINABILITY EDUCATION
10. CONCLUSIONS
11. CHAPTER TAKEAWAY
ENDNOTES
CHAPTER 3: Institutional Settings in Asia Relevant to Business Sustainability
1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. GLOBAL MOVE TOWARD SUSTAINABILITY PERFORMANCE, REPORTING AND ASSURANCE
4. INSTITUTIONAL SETTINGS IN ASIA
5. INSTITUTIONAL SETTINGS IN ASIA RELEVANT FOR BUSINESS SUSTAINABILITY
6. CONCLUSIONS
7. CHAPTER TAKEAWAY
ENDNOTES
CHAPTER 4: Drivers and Sources of Business Sustainability Initiatives in the World Including Asia
1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. GLOBAL MANDATORY BUSINESS SUSTAINABILITY INITIATIVES
4. GLOBAL VOLUNTARY BUSINESS SUSTAINABILITY INITIATIVES
5. DRIVERS AND SOURCES OF BUSINESS SUSTAINABILITY INITIATIVES IN ASIA
6. ANALYSIS OF DRIVERS AND SOURCES OF BUSINESS SUSTAINABILITY IN ASIA
7. CONCLUSIONS
8. CHAPTER TAKEAWAY
ENDNOTES
CHAPTER 5: Financial Economic Dimension of Sustainability
1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. SHARED VALUE CREATION
4. FINANCIAL ECONOMIC SUSTAINABILITY PERFORMANCE
5. FORWARD-LOOKING FINANCIAL REPORTS
6. VALUE RELEVANCE OF FINANCIAL ECONOMIC SUSTAINABILITY
7. FINANCIAL ECONOMIC SUSTAINABILITY REPORTING IN ASIA
8. CONCLUSIONS
9. CHAPTER TAKEAWAY
ENDNOTES
CHAPTER 6: Governance Dimension of Sustainability
1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. GOVERNANCE DIMENSION OF SUSTAINABILITY PERFORMANCE
4. NEW PARADIGM FOR CORPORATE GOVERNANCE
5. DRIVERS OF CORPORATE GOVERNANCE
6. CORPORATE GOVERNANCE FUNCTIONS
7. EMERGING ISSUES IN GLOBAL CORPORATE GOVERNANCE
8. GLOBAL CONVERGENCE IN CORPORATE GOVERNANCE
9. CORPORATE GOVERNANCE IN ASIA
10. CORPORATE GOVERNANCE REPORTING AND ASSURANCE
11. CONCLUSION
12. CHAPTER TAKEAWAY
ENDNOTES
CHAPTER 7: Social Dimension of Sustainability
1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. SOCIAL PERFORMANCE DIMENSION OF SUSTAINABILITY
4. CORPORATE SOCIAL RESPONSIBILITY IN ASIA
5. BEST PRACTICES OF CSR
6. CSR ISSUES
7. CSR REPORTING AND ASSURANCE
8. CONCLUSIONS
9. CHAPTER TAKEAWAY
ENDNOTES
CHAPTER 8: Ethical Dimension of Sustainability
1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. BUSINESS ETHICS
4. PROFESSIONAL CODES OF CONDUCT
5. WORKPLACE ETHICS
6. CORPORATE CULTURE
7. BUSINESS ETHICS IN ASIA
8. ETHICS REPORTING AND ASSURANCE
9. CONCLUSIONS
10. CHAPTER TAKEAWAY
ENDNOTES
CHAPTER 9: Environmental Dimension of Sustainability
1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. GLOBAL ENVIRONMENTAL INITIATIVES
4. ENVIRONMENTAL INITIATIVES IN ASIA
5. ENVIRONMENTAL KEY PERFORMANCE INDICATORS
6. ENVIRONMENTAL MANAGEMENT SYSTEMS
7. ENVIRONMENTAL REPORTING AND DISCLOSURE
8. ENVIRONMENTAL ASSURANCE AND AUDITING
9. ENVIRONMENTAL BEST PRACTICES
10. CONCLUSIONS
11. CHAPTER TAKEAWAY
ENDNOTES
CHAPTER 10: Business Sustainability Performance Reporting and Assurance
1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. FINANCIAL AND NON-FINANCIAL KEY PERFORMANCE INDICATORS
4. SUSTAINABILITY REPORTING
5. SUSTAINABILITY ASSURANCE
6. GLOBAL STATUS OF SUSTAINABILITY PERFORMANCE REPORTING AND ASSURANCE
7. SUSTAINABILITY REPORTING AND ASSURANCE IN ASIA
8. BEST PRACTICES OF SUSTAINABILITY REPORTING AND ASSURANCE
9. RELEVANCE OF SUSTAINABILITY INFORMATION
10. CONCLUSIONS
11. CHAPTER TAKEAWAY
ENDNOTES
CHAPTER 11: Emerging Issues in Sustainability Performance, Reporting and Assurance
1. EXECUTIVE SUMMARY
2. INTRODUCTION
3. SUSTAINABILITY REPORTING GUIDELINES
4. EFFECTIVE IMPLEMENTATION OF SUSTAINABILITY
5. SUSTAINABILITY RISK ASSESSMENT AND MANAGEMENT
6. FUTURE TRENDS IN SUSTAINABILITY PERFORMANCE
7. FUTURE TRENDS IN SUSTAINABILITY REPORTING
8. FUTURE TRENDS IN SUSTAINABILITY ASSURANCE
9. EMERGENCE OF BENEFIT CORPORATIONS IN THE UNITED STATES
10. EMERGENCE OF PROFIT-WITH-PURPOSE COMPANIES AND THE SHARED VALUE CONCEPT
11. CHALLENGES AND OPPORTUNITIES IN BUSINESS SUSTAINABILITY IN ASIA
12. PLANNING FOR BUSINESS SUSTAINABILITY
13. MANAGEMENT ACCOUNTANTS' ROLE IN SUSTAINABILITY
14. GLOBAL COLLABORATION AND LEADERSHIP FOR SUSTAINABILITY
15. CONCLUSIONS
16. CHAPTER TAKEAWAY
ENDNOTES
Index
End User License Agreement
List of Illustrations
Chapter 11
EXHIBIT 11.1 Sustainability risks
Guide
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Business Sustainability in Asia
Compliance, Performance, and Integrated Reporting and Assurance
ZABIHOLLAH REZAEE
JUDY TSUI
PETER CHENG
GAOGUANG ZHOU
Copyright © 2019 by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750–8400, fax (978) 646–8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748–6011, fax (201) 748–6008, or online at www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the Publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the Publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762–2974, outside the United States at (317) 572–3993, or fax (317) 572–4002.
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Library of Congress Cataloging-in-Publication Data is Available:
ISBN 978-1-119-50231-9 (Hardcover)ISBN 978-1-119-50220-3 (ePDF)ISBN 978-1-119-50225-8 (ePub)
Cover Design: WileyCover Image: © Nikada/iStock.com
To my parents Fazlollah and Fatemeh, sister Monireh, wife Soheila, and children Nick and Rose – ZR
To my husband Andrew, my son Timothy, daughter-in-law Catherine and my granddaughter Chloe, my daughter Jaclyn and son-in-law Daniel, my son Benjamin and daughter-in-law Jessica – JT
To Alex and my children Nicholas, Cecilia, and Stephanie – PC
To my parents – GZ
Foreword
BY DR KELVIN WONG
The book entitled Business Sustainability in Asia, coauthored by Professors Rezaee, Tsui, Cheng, and Zhou, is an excellent reference for the emergence of business sustainability worldwide and particularly in Asia. Business sustainability has gained significant attention from global investors, regulators, the business community, public companies, and academicians in the past decade. This book focuses on five dimensions of sustainability performance:economic, governance, social, ethical, and environmental (EGSEE). It addresses the increasing focus on business sustainability and its factors of performance, disclosure, and risk and their implications for business practice, education, and research worldwide. Proper measurement of sustainability performance, as well as accurate and reliable disclosure of sustainability performance, and effective assessment of sustainability risks remain major challenges for organizations of different types and sizes, particularly in Asia. The book focuses on business sustainability in 12 jurisdictions in Asia from the Mainland China to Hong Kong, among others,and Vietnam. The sustainability theme in Asia is important for many reasons including the significant growth in sustainability efforts and activities in Asia in the past decades. Moreover, Asia has stepped up in forging an alliance with Europe to take a leading role on environmental initiatives by tackling climate change.
Given the continuing growth in business sustainability in Asia, this is a comprehensive book that introduces the emergence of business sustainability, followed by in-depth discussions of the three important business sustainability factors of performance, disclosure, and risk. The book offers guidance to organizations worldwide to properly integrate all five EGSEE dimensions of sustainability into their business models, strategic plans, and practices. It also provides guidelines for complete and accurate measurement, recognition, and disclosure of all five EGSEE dimensions of sustainability performance in an integrated reporting model.I highly recommend this book as a valuable resource in advancing business sustainability worldwide and, particularly in Asia. I believe anyone who is involved with business sustainability from the corporate board of directors to executives, investors, policymakers, regulators, and standard-setters should buy and read this book.
Dr. Kelvin WongExecutive Director and Deputy Managing Director of COSCO SHIPPING Ports LimitedChairman of the Financial Reporting Council, Hong KongImmediate Past Chairman of the Hong Kong Institute of Directors
Preface
Business sustainability has advanced from branding and greenwashing to strategic imperative and impact investing in sustainable finance in the past decade. It is defined in this book as a process of focusing on the achievement of all five dimensions of sustainability performance namely economic, governance, social, ethical and environmental (EGSEE) in creating shared value for all stakeholders. Integrated reporting on both financial elements of economic sustainability performance (ESP) and non-financial elements encompassing governance, social, ethical, and environmental (GSEE) dimensions of sustainability performance has been demanded by investors, required and/or encouraged by regulators and performed by business organizations worldwide. Global business organizations report their integrated financial ESP and non-financial (GSEE) sustainability performance in creating shared value for all stakeholders from shareholders to customers, employees, suppliers, creditors, environmental agencies and organizations, government and society.
This book specifically focuses on business sustainability in Asia, for several reasons. First, sustainability activities in Asia have significantly grown in the past decade as business organizations in the region have faced greater pressure from regulators to engage in sustainability and corporate social responsibility (CSR) programs. Second, this trend is expected to continue as Asian countries in general and Mainland China in particular step up alliances with European countries to take a leading role in CSR and environmental initiatives through addressing product quality and safety, and tackling climate change. Third, the recent decision of the United States to exit the 2015 Paris Agreement is expected to encourage other countries (e.g., Mainland China, India, Singapore) to accelerate the pace by providing leadership in sustainability initiatives. Finally, the achievement of sustainable economic growth, prosperity and performance has been observed in Asia and is expected to continue in the foreseeable future.
A number of professional organizations, including the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC), the Sustainability Accounting Standards Board (SASB), and the Corporate Reporting Dialogue (CRD), have issued numerous sustainability reporting and assurance guidelines to assist business organizations in disclosing their economic and GSEE sustainability performance to all stakeholders. Sustainability performance information can be disclosed on a voluntary basis or on a mandatory basis. In Hong Kong, there are listing standards that require listed companies to comply with ESG requirements in annual reports commencing in the 2016 fiscal year. Large European companies (more than 6,000 employees) are now required to disclose their environmental, social and diversity activities for the 2017 financial year and onwards. The Delaware Certification of Adoption of Transparency and Sustainability Standards Act was signed into law on June 27, 2018; this represents Delaware's initiative to support sustainability practices by enabling Delaware-governed entities to disclose their commitment to CSR and sustainability.
Global business organizations have issued integrated sustainability reports on all or some of the five EGSEE dimensions of sustainability performance in the past decade. Theoretically, companies that effectively manage their business sustainability by improving EGSEE performance conduct their business more effectively and ethically, enhance their reputation, fulfill their social responsibility and environmental commitments, and thus contribute to their bottom-line financial economic sustainability performance. However, ESP and GSEE sustainability performance disclosures supplement each other and are not mutually exclusive. The relative importance of EGSEE sustainability performance with respect to each other and their integrated contribution to the overall firm value maximization is affected by whether EGSEE are viewed as complementary or conflicting factors in the context of sustainability theories. Sustainability performance dimensions (EGSEE) can be seen as complementary because firms must be financially sustainable in the long term to be able to perform well in the other areas of governance, social, ethical and environmental activities. This book offers guidance to organizations for proper measurement, recognition and reporting of all five EGSEE dimensions of sustainability performance. Sustainability integrated reporting refers to the continuous process of promoting, measuring, recognizing, reporting and auditing sustainability performance in the five areas of EGSEE. Traditionally, organizations have reported their financial performance on economic transactions. Given the growing global attention to corporate sustainability and the major economies in developing nations, this book examines the emergence of corporate sustainability in Asia, particularly in Hong Kong and Mainland China.
In this book, five primary themes will present a framework for the five dimensions (EGSEE) of business sustainability performance. First, business sustainability is driven by and built on the stakeholder theory, which is the theoretical basis for creating shared value for all stakeholders. Second, the main goal and objective for business organizations is to maximize firm value by improving financial and non-financial dimensions (EGSEE) of sustainability performance. The third theme focuses on the time horizon of balancing short-, medium-, and long-term performance, with a keen emphasis on long-term sustainable performance. The fourth theme is the multi-dimensional nature of sustainability performance in all EGSEE areas, which are interrelated. The final theme of the book is its focus on and relevance to Asia because sustainability initiatives and activities in Asia have significantly grown in the past decade and are expected to continue to grow in the future. The relative importance of the dimensions with respect to each other and their contribution to the firm's overall long-term value maximization is affected by whether these EGSEE dimensions are viewed as competing, conflicting or complementing.
We hope you will find this book a valuable resource in understanding and promoting business sustainability worldwide and particularly in Asia. This book will be of interest to anyone who is involved with business sustainability, CSR and corporate governance, the financial reporting process, investment decisions, legal and financial advising, audit functions and business sustainability education. Specifically, corporations, business executives, board members, internal and external auditors, accountants, lawmakers, regulators, standard-setters, users of financial statements (investors, creditors, and pensioners), investor activists, business academics and other professionals (attorneys, financial analysts and bankers) will benefit from this book. Business sustainability performance dimensions, principles, mechanisms and functions as well as sustainability compliance, integrated reporting and assurance presented in this book are applicable to organizations of all types and sizes. Profit-oriented enterprises, non-governmental organizations, state-owned enterprises and not-for-profit and governmental entities can benefit from our discussions. We hope you will find this book useful and valuable in achieving your personal and professional goals.
Zabihollah RezaeeJudy TsuiPeter ChengGaoguang Zhou3/06/2019
Acknowledgments
We acknowledge the quality reporting that is cited throughout the book including publications of professional organizations such as the Global Reporting Initiative, the International Integrated Reporting Council, and the Sustainability Accounting Standards Board.
The encouragement and support of our colleagues at the University of Memphis and Hong Kong Baptist University are also acknowledged. The assistance of our graduate students Charles Bell, Matthew Cantin, Chinenye Egbuna, Yueming Li, Kai Wang, and Xuemei Zheng is also appreciated. We thank the members of the John Wiley & Sons, Inc., team for their hard work and dedication, including Koushika Ramesh for managing the book through the production process, Jean-Karl Martin for their marketing efforts and Sheck Cho, Executive Editor for editorial guidance.
Our special thanks are due to our families: the Rezaee family, the Rezaee family, the Tsui family, the Cheng family, and the Zhou family Without their love, enthusiasm, and support, this book would not have come to fruition when it did.
Zabihollah RezaeeJudy TsuiPeter ChengGaoguang ZhouMarch 06, 2019
List of Abbreviations
Accounting Standards Council
ASC
Accounting Standards for Business Enterprises
ASBE
American Accounting Association
AAA
American Certified Fraud Examiners
ACFE
American Institute of Certified Public Accountants
AICPA
Asian Corporate Governance Association
ACGA
Association of Advanced Collegiate School of Business
AACSB
Association of Chartered Certified Accountants
ACCA
Board of Directors
BOD
Carbon Reduction Commitment
CRC
Certified Public Accountants
CPAs
Certified Sustainability Reporting Assurer
CSRA
Chartered Global Management Accountants
CGMA
Chartered Institute of Management Accountants
CIMA
Chief Sustainability Officer
CSO
Chinese Communist Party
CCP
Climate Disclosure Standards Board
CDSB
Coalition for Environmentally Responsible Economies
CERES
Corporate Disclosure and Governance Committee
CCDG
Corporate Governance Committee
CGC
Corporate Governance Report
CGR
Corporate Social Responsibility
CSR
Department of Environment and Natural Resources
DENR
Economic Sustainability Performance
ESP
Economic, Social and Governance
ESG
Economic, Governance, Social, Ethical and Environmental
EGSEE
Environmental Management Systems
EMS
Environmental Protection Agency
EPA
Environmental Protection Bureau
EPB
Earnings Per Share
EPS
Extensible Business Reporting Language
XBRL
Financial Reporting Standards Council
FRSC
Foreign Corrupt Practices Act
FCPA
Foreign Direct Investment
FDI
General Agreement on Trade in Services
GATS
Global Impact Investing Network
GIIN
Governance, Social, Ethical and Environmental
GSEE
Greenhouse Gas
GHG
Gross Domestic Product
GDP
Hong Kong Institute of Certified Public Accountants
HKICPA
Hong Kong Stock Exchange
HKSE
Impact Investment Exchange
IIX
Information Technology
IT
Initial Public Offerings
IPOs
Institute of Internal Auditors
IIA
Institute of Management Accountants
IMA
Internal Control Over Financial Reporting
ICFR
International Accounting Standards Committee
IASC
International Accounting Standards
IAS
International Auditing & Assurance Standards Board
IAASB
International Corporate Governance Network
ICGN
International Federation of Accountants
IFAC
International Financial Reporting Standards
IFRS
International Integrated Reporting Council
IIRC
International Monetary Fund
IMF
International Organization of Securities Commissions
IOSCO
International Standardization Organization
ISO
International Standards on Assurance Engagements
ISAE
Investor Responsibility Research Center Institute
IRRCI
Key Performance Indicators
KPIs
Lead Director Network
LDN
Management Discussion and Analysis
MD&A
Multi-national Companies
MNCs
Multiple Bottom Line
MBL
National Bureau of Statistics
NBS
National Committee on Corporate Governance
NCCG
National Greening Program
NGP
National Human Rights Institution
NHRI
National Stock Exchange
NSE
Net Present Value
NPV
Non-Governmental Organizations
NGOs
Organization for Economic Co-Operation and Development
OECD
People's Republic of China
PRC
Principles for Responsible Investment
PRI
Public Company Accounting Oversight Board
PCAOB
Return on Assets
ROA
Return on Equity
ROE
Sarbanes-Oxley
SOX
Securities and Exchange Commission
SEC
Small and Medium-Sized Enterprises
SMEs
Social Investment Forum
SIF
Socially Responsible Investment
SRI
Statement of Financial Accounting Standards
SFAS
Superfund Amendment and Reauthorization Act
SARA
Sustainability Accounting Standards Board
SASB
Sustainable Development Goals
SDGs
Sustainable Management and Investment Guideline
SMILE
Sustainable Supply Chain Management
SSCM
Tokyo Stock Exchange
TSE
Toronto Stock Exchange
TSX
Triple Bottom Line
TBL
United Nations Conference on Trade and Development
UNCTAD
United Nations Educational, Scientific and Cultural Organization
UNESCO
United Nations Environment Programme
UNEP
United Nations Global Compact
UNGC
United Nations Sustainability Development Goals
UNSDGs
United Nations
UN
World Business Council for Sustainable Development
WBCSD
World Economic Forum
WEF
World Federation of Exchanges
WFE
World Trade Organization
WTO
CHAPTER 1Introduction to Business Sustainability
1. EXECUTIVE SUMMARY
Business sustainability is gaining considerable attention from investors, regulators and businesses worldwide and particularly those in Asia. In today's business environment, global businesses face increasing scrutiny and profound pressure from lawmakers, regulators, the investment community and their various stakeholders to focus on their multiple-bottom-line (MBL) of economic, governance, social, ethical and environmental (EGSEE) performance. Global organizations recognize the importance of sustainability performance in creating shared value for all their stakeholders from shareholders to creditors, customers, suppliers, employees, government, society and the environment. A growing number of public companies worldwide and listed companies in Asia in particular are now issuing sustainability reports on some or all five EGSEE dimensions of sustainability performance. This trend is expected to continue well into the future. This chapter presents an introduction to business sustainability performance, reporting and assurance in the context of the Asian business environment.
2. INTRODUCTION
Business organizations worldwide and public companies in Asia in particular are now facing the challenges of adopting proper management strategies and practices to effectively respond to social, ethical, environmental and governance issues while creating sustainable financial performance. Traditionally, business organizations have reported their performance on economic transactions. Their sole focus on financial results has become less relevant. In recent years, stakeholders, investors, regulators, global institutions and organizations, and the public at large have increasingly demanded information on both financial and non-financial key performance indicators (KPIs) in this platform of MBL accountability and sustainability reporting.1 This chapter introduces the definition and concept of business sustainability and offers guidance to organizations for properly integrating sustainability into their business models, strategic plans and practices. It also provides guidelines for complete and accurate measurement, recognition and disclosure of all five EGSEE dimensions of sustainability performance in an integrated reporting model.
3. DEFINITION
Business sustainability has evolved from a focus on corporate social responsibility (CSR), corporate governance, and internal operational efficiencies to integration into organizations' strategies, culture and practices toward long-term and multi-dimensional sustainability performance. Sustainability can have different meanings as perceived by different stakeholders. From the academic and practical aspect, business sustainability can be defined as environmental preservation to create a better environment for future generations. It can be viewed as fulfilling the company's CSR responsibility for society above and beyond mandatory obligations. From a financial perspective, sustainability is considered as focusing on short-, medium- and long-term financial performance to generate value for shareholders. It can be also viewed as conducting business activities ethically with effective corporate governance to ensure going concern and continuity of the business.
Business sustainability is also a multi-disciplinary function of accounting, economics, ethics, finance, management, marketing, law and supply chain management, among others, with a keen focus on improving economic vitality, ethical behavior, ecological health, governance measures and social justice. It can “bring benefits in terms of risk management, cost savings, access to capital, customer relationships, human resource management and innovation capacity.”2 It also facilitates engagement with stakeholders regarding sustainable growth and risks in building trust in the company and with shareholders by enhancing effective capital allocation and achieving long-term investment goals. The 2013 Global Corporate Sustainability Report encourages companies to engage their management and suppliers in the establishment of more sustainable practices and integration of sustainability into their supply chain processes.3
Business sustainability has evolved in the past three decades, with an initial focus on sustainable development in leaving a better environment for future generations, to CSR, corporate governance, and now with the main goal of creating shared value for all stakeholders including shareholders. Business sustainability is not a single event; it is a journey to improve both financial economic sustainability performance (ESP) and non-financial governance, social, ethical and environmental (GSEE) performance to create shared value for all stakeholders. In this context, sustainability focuses on activities that generate financial (long-term earnings, growth and return on investment) and non-financial (environmental, social, ethical and governance) sustainability performance that concerns all stakeholders. The terms business sustainability, CSR and triple bottom line (focusing on environmental, social and governance (ESG)) have been used interchangeably in the literature and authoritative reports. Business sustainability can also be defined as a social objective with a keen focus on achieving the triple bottom line performance of profit, planet and people.4 However, business sustainability is regarded as much broader than CSR and even ESG and has recently gained more acceptance.5 It has advanced from a main focus on CSR to integration into corporate culture, mission, strategy, business model and management processes.6
Business sustainability for organizations refers to not only providing products and services that satisfy customers, but also operating in a socially responsible manner, protecting the environment and presenting reliable and transparent sustainability reports. The focus on business sustainability can benefit business organizations in many ways, including higher market and accounting performance, improved business reputation, enhanced product innovation and earnings growth, customer and employee satisfactions and creation of more stakeholder value. Yet, sustainability can be viewed as a box-ticking compliance and risk-mitigation exercise. It is defined in this book by encompassing all the above definitions in creating synergy for business strategies, activities and performance from ethical, environmental, social, compliance, legal, governance and economic dimensions in creating shared value for all stakeholders. A report released by the International Federation of Accountants (IFAC, 2015: 3) indicates that global business organizations are expected to “take responsibility for a broader range of sustainability issues, such as social and environmental aspects that will ultimately affect financial performance and an organization's ability to create value over time.”7 In summary, business sustainability is defined as a process of focusing on the achievement of all five: economic, governance, social, ethical and environmental (EGSEE) dimensions of sustainability performance in creating shared value for all stakeholders.
4. THEMES OF THIS BOOK
Business sustainability has advanced from the branding and greenwashing of focusing on CSR to the strategic imperative of achieving both financial economic sustainability performance (ESP) and non-financial GSEE sustainability performance in the past decade. There are five primary themes in this book, which present a framework for the five dimensions of business sustainability performance (EGSEE) and 10 sustainability principles.8 These five themes are also applicable in all 12 Asian jurisdictions and their economies. First, the business sustainability framework is driven by and built on the stakeholder theory, which is the process of protecting the interests of all stakeholders, with a keen focus on achieving long-term and enduring financial and non-financial performance for all corporate constituencies from shareholders to creditors, employees, customers, suppliers, society and the environment. The stakeholder theory implies that business organizations are responsible to many of constituencies and thus add value for all stakeholders, as listed above.9 This stakeholder view of business organizations and business sustainability is supported by researchers, regulators and the business and investment community.
Second, the main goal and the objective function for business organizations is to maximize firm value. The goal of firm value maximization under the business sustainability framework can be achieved when the interests of all stakeholders are considered. The main focus is on long-term shareholder value creation and maximization while considering tradeoffs among the other apparently competing and often conflicting interests of society, creditors, employees and the environment. Theoretically, management's engagement in non-financial GSEE sustainability activities, performance and disclosure can be viewed as value increasing or value decreasing for investors. On the one hand, companies should effectively manage and improve GSEE performance, enhance their reputation, fulfill their social responsibility, and promote a corporate culture of integrity and competency. On the other hand, companies can survive and generate sustainable performance only when they continue to be financially profitable and are able to create shareholder value. Nonetheless, financial ESP, and non-financial GSEE sustainability performance and reporting complement each other and are not mutually exclusive. Companies that are governed effectively, are socially and environmentally responsible, and conduct themselves ethically, are expected to produce sustainable performance, create shareholder value and gain investor confidence and public trust.
The third theme is the time horizon of balancing short-, medium- and long-term performance with a keen focus on long-term performance. Business sustainability focuses on the achievement of long-term and enduring performance and enables corporations to focus on maximizing long-term performance instead of meeting periodic financial targets. Businesses can no longer focus only on short-term earnings performance in beating analysts' forecasts to generate positive stock movements.
The fourth theme is the multi-dimensional nature of sustainability performance in all EGSEE areas. The multi-dimensional EGSEE sustainability performance is interrelated and integrated. The relative importance of the dimensions, with respect to each other and their contribution to the firm's overall long-term value maximization, is affected by whether these EGSEE dimensions are viewed as competing, conflicting or complementary. One view is that these EGSEE dimensions are complementary because a firm that is governed effectively adheres to ethical principles and commits to CSR and environmental obligations, enabling sustainable generation of long-term financial performance. Another view is that corporations must do well financially in the long term to be able to do well in terms of CSR and environmental activities. On the one hand, corporations that are managed ethically, governed effectively and are socially and environmentally responsible are expected to produce sustainable performance, create shareholder value and gain public trust and investor confidence. On the other hand, more economically profitable and viable corporations have more resources to create jobs and wealth and are in a better position to fulfill their social and environmental responsibilities.
The final theme of the book is its focus on and relevance to Asia, for several reasons. First, sustainability activities in Asia have grown significantly in the past decade as business organizations in Asia face greater pressure either through voluntary or mandatory requirements from regulators to engage in sustainability and CSR programs. Second, this trend is expected to continue as Asian countries in general and Mainland China in particular step up to forge alliances with European countries to take a leading role in CSR and environmental initiatives by addressing product quality and safety and tackling climate change. Third, the United States' recent decision to exit the 2015 Paris Agreement is expected to encourage other countries (e.g., Mainland China, India and Singapore) to step up by providing leadership in sustainability initiatives. Fourth, the growth in Asian economies in the recent decade, in particular Mainland China, allows companies to focus more on non-financial sustainability programs. Finally, the achievement of sustainable economic growth, prosperity, and performance has been observed in Asia and is expected to continue in the near future.
Business sustainability in general and CSR in particular as a concept has evolved over time, with different interpretation of its practices across different sectors, cultures and countries in Asia. Corporate accountability, citizenship, ethics, responsible entrepreneurship, corporate sustainability, responsible competitiveness and other terms have been used to describe CSR in Asia. But it can generally be explained as the responsibility of corporations toward the society within which they operate. This responsibility usually spans three areas, which include: economic, social and environmental responsibility. CSR started as a form of realization that corporations have responsibilities to society beyond profit maximization, which triggered the motivation behind philanthropy.10 Currently, the motivation for CSR has advanced from mere philanthropy toward awareness of the environmental implications of industrialization and of the social well-being of both internal and external stakeholders in Asia. Instead of pure and simple philanthropy, CSR has recently assumed the form of what is called ‘social investment,’ with the establishment of more social enterprises.11
5. ATTRIBUTES
Two attributes of business sustainability are sustainability performance and sustainability disclosures. Both attributes are important to all stakeholders. The sustainability performance attribute underscores that firms which focus on their non-financial performance including social and environmental performance are managed more effectively with good corporate governance and are more financially sustainable. The voluntary or mandatory disclosure attribute of sustainability performance posits that “good type” firms that focus on non-financial (governance, social, ethical and environmental (GSEE)) and sustainable financial performance have more incentive to disclose information to differentiate themselves from “bad type” firms that do not focus on GSEE and financial sustainability, in order to avoid getting a bad reputation. Disclosure of GSEE sustainability may signal management commitment to greater transparency of both financial and non-financial performance, thereby reducing information asymmetry and increasing firm value.
Companies should strive to maintain good business sustainability in their everyday practices to create shared value for stakeholders and to minimize information asymmetry to all stakeholders. If a company withholds information about its practices, whether intentionally in efforts to minimize the effect on the bottom line or unintentionally as a result of not performing due diligence on its processes, this may result in increased perceived riskiness of the venture, decreased share price, concerns regarding management's ability to lead the organization along the path toward sustainability in generating sustainable performance and growth. Thus, good sustainability is important for a company in the short run to ensure viability in the ever-changing marketplace. However, to build a strong company in the long run, business sustainability must be put into practice to prepare for the future and to mitigate unforeseen or inescapable events. One of the key features of putting business sustainability into practice is that when faced with problems from multiple stakeholders, a company with good sustainability practices can pivot its position to answer the problems in the best manner possible.
6. PRINCIPLES
Business sustainability has been promoted in response to demands from investors, necessary compliance with requirements of regulators, and voluntary initiatives by corporations considering interdependencies between global financial markets, the business community and investors in advancing sustainable performance. More than 8,000 companies in 140 countries have adopted the 10 sustainability principles established by the United Nations Global Compact and integrated these principles into their strategic planning and operations.12 These 10 sustainability principles are classified into the four general categories of human rights, labor, environment and anti-corruption. They are, in turn, related to the three dimensions (social, environmental and ethical) of sustainability performance, as explained in the previous section. The 2013 Sustainability Report of the United Nations (UN) Global Compact suggests two ways for companies to achieve business sustainability: (1) by integrating the 10 principles into their strategies and operations and (2) by taking actions that support continuous improvement in sustainability performance.13 The UN Global Compact report also provides the Global Compact Management Model as a practical tool for companies to improve their sustainability performance.14 The suggested model consists of six managerial processes of committing to, assessing, defining, implementing, measuring and communicating sustainability strategies, operations and performance in ensuring alignment with the 10 principles and compliance with applicable laws, rules and regulations.15
7. DIMENSIONS OF SUSTAINABILITY PERFORMANCE
Business sustainability performance can be beneficial to both internal and external stakeholders. Stakeholders are those who have vested interests in a firm through their investment in the form of financial capital (shareholders), human capital (employees), physical capital (customers and suppliers), social capital (society), environmental capital (environment) and regulatory capital (government). Stakeholders have reciprocal relation and interaction with a firm in the sense that they contribute to the firm's value creation and their wellbeing is affected by the firm. In essence, sustainability performance can affect and be affected by stakeholders.
Sustainability performance is typically classified into financial and non-financial performance and grouped into the five dimensions of Economic (E), Governance (G), Social (S), Ethical (E) and Environmental (E), abbreviated as EGSEE.16 Although business sustainability continues to evolve, several dimensions of sustainability performance pertaining to social and environmental initiatives have gained widespread global acceptance. These initiatives include an ethical workplace, customer satisfaction, just and safe working conditions, non-discriminatory fair wages, workplace diversity, environmental preservation, clear air and water, minimum age for child labor, safe and quality products, concern for the environment and fair and transparent business practices. Each industry has its own applicable set of sustainability financial and non-financial KPIs. Each business organization must carefully identify its own social and environmental responsibilities given the context of the business culture in which it operates. The list of financial and non-financial sustainability KPIs depends on a variety of factors: industry, legal regimes, cultural background, corporate mission and strategy, corporate culture, political infrastructure and managerial philosophy. Despite these disparate sustainability performance dimensions and their KPIs, sustainability has become an integral component of business. This section describes each of the EGSEE sustainability performance dimensions and their related KPIs.17
7.1 Economic Sustainability Performance
The most important and commonly accepted dimension of sustainability is “economic performance.” The primary goal of any business organization is to create shareholder value through generating sustainable economic performance. Business organizations should focus on activities that generate long-term corporate profitability rather than short-term performance. The economic dimension of sustainability performance can be achieved when business organizations focus on long-term sustainability performance and improved effectiveness and efficiency of production. Long-term economic sustainability performance should be communicated to shareholders through the preparation of high-quality financial reports in compliance with global accounting standards as well as the Global Reporting Initiative (GRI) Guidelines.18
The economic dimension of sustainability should reflect the financial strengths and concerns of an organization as well as the economic impacts on its stakeholders and society.19 Economic sustainability performance can be measured directly through financial activities between an organization and its stakeholders or indirectly through non-financial costs and benefits of economic relations and their effects on stakeholders. The financial economic dimension of sustainability is further presented in chapter 5.
7.2 Governance Sustainability Performance
The corporate governance landscape has changed significantly in the aftermath of the global 2007–2009 Financial Crisis. The lack of effective corporate governance has been perceived as an overriding contributing factor in the global Financial Crisis. Internal and external corporate governance measures have since been established by policymakers, regulators and corporations to improve the quality of corporate governance and thus stakeholder trust and investor confidence in corporate sustainable performance and reporting. Regulatory reforms in the United States such as the Sarbanes-Oxley Act of 200220 and the Dodd-Frank Act of 201021 are designed to improve the quality and effectiveness of corporate governance. Effective corporate governance promotes accountability of the board of directors and executives; enhances sustainable operational and financial performance; improves the reliability and quality of financial information; and strengthens the integrity and efficiency of the capital market, which results in economic growth and prosperity for the nation. Effective corporate governance sustainability requires setting an appropriate tone at the top defining roles and responsibilities of all corporate gatekeepers, from the board of directors and executives to internal and external auditors and legal counsel, and promoting accountability for them. The effectiveness of corporate governance is also affected by legal, regulatory, internal and external mechanisms and best practices to create shared value for all stakeholders, as further explored in chapter 6.
7.3 Social Sustainability Performance
The social dimension of sustainability performance reflects the transformation of social goals into practices that benefit an organization's stakeholders. Social performance measures an organization's social mission and its alignment with the interests of society. The social dimension of sustainability performance ranges from ensuring high quality of products and services, better customer satisfaction and improved employee health and wellbeing, to making a positive contribution to the sustainability of the planet and quality of life for future generations.
Socially responsible investment (SRI) is becoming nowadays an increasingly important part of business. Though the mantra of business has long been to increase shareholders' profits, the advent of benefit corporations (or B-corporations) has brought with it a chance for shareholders to affect businesses' methods of doing business to increase their own desire for social change instead of personal enrichment. The United Nations Principles of Responsible Investing (PRI) were initiated in 2005 to encourage global investors to integrate ESG into their investment decisions.22 Recently, under sustainable and socially responsible investing (SRI) principles, investors consider various sustainability issues in their investment analyses and SRI have increased by more than 22 percent to $3.74 trillion in managed assets during the 2010–2012 period.23 The social dimension of sustainability performance is typically viewed as CSR and is further explained in chapter 7.
7.4 Ethical Sustainability Performance
The ethical dimension of sustainability performance and particularly corporate ethical culture plays an important role in ensuring the achievement of corporate goals and financial sustainability. The effectiveness of ethical sustainability performance depends on a corporate culture of integrity and competency and an appropriate tone at the top. Characteristics of an ethical organization culture are codes of conduct for directors, officers and employees; a system of responsibility and accountability; and a workplace that promotes honesty, mutual respect and freedom to raise concerns. The persistence and existence of corporate scandals and financial crises have shown that companies which conduct their business ethically are more sustainable in the long term and can generate high quality and quantity of earnings, economic growth and development. The ethical dimension of sustainability performance is often integrated into business environment and corporate culture in achieving financial economic sustainability performance, as further discussed in chapter 8.
7.5 Environmental Sustainability Performance
Stakeholders are demanding clearer and more transparent information about the impacts of an organization's activities and operations on the environment beyond what is legislated for by law. The environmental dimension of sustainability performance includes creating a better work environment, reducing the carbon footprint, improving air and water quality and maximizing the positive effects of an organization on natural resources and the environment. The Coalition for Environmentally Responsible Economies (CERES) and the UN Environment Program, in collaboration with the UN Global Compact, promote environmental initiatives.24
Governments throughout the world are instituting measures to ensure that the environment is better protected, at the behest of society at large. Effective achievement of environmental sustainability performance requires businesses to create the right balance in maximizing their economic profit, protecting the environment and ensuring a better environment for the next generations. Climate change and greenhouse gas emissions affect organizations of all types and sizes worldwide and thus should be integrated into sustainability initiatives, decisions, actions and performance. The environmental dimension of sustainability performance will be discussed in detail in chapter 9.
8. VALUE RELEVANCE OF SUSTAINABILITY PERFORMANCE
Integration of the five EGSEE dimensions of sustainability performance into managerial strategies and practices enables companies to conserve scarce resources, optimize production processes, identify product innovations, achieve cost efficiency and effectiveness, increase productivity and promote corporate reputation. The 2013 Global Corporate Sustainability Report released by the United Nations Global Compact addresses the state of corporate sustainability and presents the actions taken by companies worldwide in integrating sustainability into their strategies, operations and culture.25 The report encourages companies to engage their suppliers in the establishment of more sustainable practices and the integration of sustainability into their supply chain processes. In the context of shareholder wealth maximization and stakeholder welfare maximization, sustainability activities and performance enhance the long-term value of the firm by fulfilling firms' social responsibilities, meeting their environmental obligations and improving their reputation.
The 2013 United Nations study suggests that the non-financial GSEE dimensions of sustainability performance are value relevant to investors by presenting new risks and opportunities that are fundamental in performance analyses and portfolio investment valuation.26 The study argues that GSEE performance information facilitates investors to conduct economic and industry analyses of GSEE non-financial information. This includes trends, externalities and industry competitiveness effects of GSEE that may affect shareholder value creation as well as assessment of the company's sustainability strategies and practices. These assessments may change the traditional investment valuation parameters and assumptions.27 Proper understanding of sustainability theories, standards, risk assessment, and performance has been a major challenge for companies in measuring, recognizing and disclosing the five EGSEE dimensions of sustainability performance and for corporate stakeholders (including shareholders) in evaluating their investment portfolios.
Several theories (including agency/shareholder, stakeholder, signaling/disclosure, institutional, legitimacy and stewardship), which will be discussed in subsequent chapters, can explain the interrelated dimensions of sustainability performance and their integrated links to corporate culture, business model, and managerial strategies, processes and practices and their implications for international businesses. These theories are interrelated and compatible. Hence, they can individually and collectively address the different EGSEE dimensions of sustainability performance in creating stakeholder value. The International Standardization Organization (ISO) has issued several ISO standards relevant to business sustainability.28 The ISO standards establish practical foundations that serve as the buildup based on the sustainability theoretical framework. Sustainability reports reflecting all five EGSEE dimensions of sustainability performance are deemed to be useful when they are complete and accurate, and when their reliability, objectivity and credibility are affirmed by ISO certifications. Thus, high-profile international firms can demand their trading partners to comply with ISO 9000 quality control, ISO 14000 environmental and ISO 26000 CSR standards. These ISO certifications of sustainability performance reports provide external assurance about the credibility and legitimacy of management processes and effective communication of sustainability performance to all stakeholders through integrated sustainability reporting. In recent years, risk-taking by firms and investment banks has become contagious when company executives are incentivized to take excessive risk (as evidenced by outrageous risk at Enron, WorldCom and banks issuing subprime mortgages). Global business changes constantly and becomes more volatile, unpredictable and complex. Six sustainability-related risks including strategic, operations, compliance, financial, security and reputation are relevant to sustainability performance.29 Proper consideration, assessment and management of these six risks become increasingly important and play an essential role in achieving EGSEE sustainability performance.
A 2014 survey of investors conducted by PricewaterhouseCoopers (PwC) found that about 80 percent of responding investors said they considered non-financial GSEE sustainability issues in their investment decisions, when acting as voting proxies and in creating investment portfolios in the past year. Among the top sustainability issues considered by investors are climate changes, resource scarcity, CSR and good citizenship. Investors' primary drivers for considering sustainability issues, in order of performance, are risk reduction (73 percent), avoiding firms with unethical conduct (55 percent), performance enhancement (52 percent), cost reduction (36 percent), attracting new capital (30 percent), improving capability to create value (30 percent) and being responsive to interest groups (21 percent).30
Business sustainability enables management to focus on long-term and enduring financial and non-financial performance and to disclose high-value and forward-looking information to all stakeholders. With GSEE sustainability information, management has the opportunity to gather and use relevant financial and non-financial information for planning and forecasting with the related relevant metrics that drive the business. Management can better focus on sustainable value-deriving activities and use relevant information to effectively communicate the company's sustainability performance, which creates value for stakeholders. Business sustainability promotes better business strategy, planning and decision-making, supply chain and financial and non-financial management. It is important to communicate sustainability performance information regarding business profits, processes, people and planet (the environment) to all stakeholders in an integrated sustainability report.
9. EMERGENCE OF BUSINESS SUSTAINABILITY IN ASIA
The International Monetary Fund reports the World Economic Outlook in April 2018.31 Three of the 10 largest world economies are in Asia. With Mainland China's emergence as the second largest economy, together with Japan (third) and India (seventh), they report a combined GDP (Gross Domestic Product) of US$22.1 trillion, which rivals that of their North American counterparts: US (first) and Canada (tenth) with a total of US$22.2 trillion, as well as the combined US$12.3 trillion GDP for the European countries of Germany (fourth), United Kingdom (fifth), France (sixth) and Italy (eighth). Despite demanding economic performance, Asian sustainability reporting performance lags behind Europe and North America and is ranked third among the continents.
The Asian economies together have distinct characteristics from those of Europe and North America. While the Asian countries share many similarities, each country has its own unique culture, political and economic system, which are vastly different from one another. Mainland China and India are the oldest ancient civilizations and Chinese and Indian cultures impose significant influence on countries in the region. The religious and philosophical influence of Mainland China (Confucianism) and India (Buddhism) on respected traditions cut deep in every Asian country. Central to Asian cultural heritage is the command of respect for the head or patriarch of the family, whose decisions cannot be challenged. Family hierarchy runs deep into business enterprises. This in turn greatly impacts the governance system in Asian companies. Most of the Asian countries evolved from the autocratic rule of monarchies to pluralistic socialist systems and democracies. The political process for modern democratization empowers different governments which exert influence and regulation on the operation of companies. The varying powers of governments to legislate for and implement sustainability policies further affect the development of sustainability strategies and disclosures.
One can note that there is no specific Asian model of CSR sustainability practice because of the vast, diverse histories and cultures which span the countries and jurisdictions of Asia. CSR activities in Asia are linked to the nature of the respective value systems of each country. This book presents and evaluates 12 Asian economies, including Mainland China, Hong Kong, India, Indonesia, Japan, South Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam. Various aspects of the business sustainability performance dimensions; sustainability reporting and assurance; and sustainability education, practices and research will be discussed throughout the subsequent chapters. Drivers of sustainability including political, cultural, governmental and legal drivers and regulation, globalization and civil society will be analyzed.
The emergence of sustainability in Asia is closely aligned with the economic development of the region. In their efforts to increase the GDP of their respective countries, Asian companies are adopting policies toward globalization and partnering with Western multi-national companies (MNCs). These MNCs are usually from countries with leading CSR practices and CSR-based standards such as labor rights and environmental performance. They screen and choose their Asian partners in accordance with these practices and standards. In response to the demands of MNCs, many Asian companies attempted to improve their CSR performance and tighten their CSR standards in managing their supply chains. Consequently, these MNCs provide learning opportunities for their Asian counterparts. In the process of their CSR development, Asian countries realize the economic incentives in improving their sustainability performance. Globalization and the export of products to foreign countries provide further incentives for Asian companies to promote CSR and sustainability initiatives. Across Asia, sustainability initiative and performance vary greatly. Nonetheless, the region has made substantial improvement and achieved milestones in sustainability performance in all five EGSEE dimensions.
10. SUSTAINABILITY REPORTING AND ASSURANCE
The role of corporations in our society has evolved from profit maximization to creation of shareholder value and in recent years protection of the interests of all stakeholders. In today's business environment, global businesses are under scrutiny and profound pressure from lawmakers, regulators, the investment community and stakeholders on their sustainability performance. Corporate disclosure, both mandatory and voluntary, is the backbone of financial markets worldwide. Public companies are required to disclose a set of financial information as long as their securities are held by the public. The primary purpose of corporate disclosure is to provide economic agents (e.g., shareholders, creditors) with adequate information to make appropriate decisions. Mandatory corporate reporting, including financial reports disseminated to investors and filed with regulators, is designed to provide investors with relevant, useful and reliable information in making sound investment and lending decisions. Voluntary sustainability reports are usually considered as any disclosures outside of financial statements that are not required by regulators and standard-setters.
Until the late 1990s, sustainability reports had been largely voluntary as part of a firm's supplementary disclosures. In recent years, many jurisdictions including Australia, Austria, Canada, Denmark, France, Germany, Malaysia, Netherlands, Sweden, Hong Kong and the United Kingdom have adopted sustainability reporting. Regulators in other countries are expected to follow suit. Many global regulators, standard-setters and other organizations, including the Sustainability Accounting Standards Board (SASB), the GRI and the International Integrated Reporting Council (IIRC) are now promoting and suggesting guidelines for integrated/sustainability reporting and assurance. Business sustainability requires organizations to focus on achieving all five EGSEE dimensions of sustainability performance by taking initiatives to advance some social good beyond their own interests, compliance with applicable regulations and enhancement of shareholder wealth. Simply stated, business sustainability means enhancing corporations' positive impacts and minimizing their negative effects on society and the environment while creating value for stakeholders.
Over recent years, companies have begun to stray from the mindset of “profit only” to the recognition that building and maintaining sustainable business practices is a good strategy for their companies. In April 2013, the IIRC released a draft of its consultation on a framework of integrated reporting intended to provide guidelines on communication with stakeholders.32 The IIRC's proposed framework addresses the fundamental concepts of integrated reporting and its guiding principles in relation to an organization's strategy, governance, performance and prospects. The 2013 Global Corporate Sustainability Report released by the United Nations Global Compact reviews the actions taken by companies worldwide in advancing their business sustainability.33 The report uses the 10 principles of sustainability and proposes a model to be adopted as a benchmark in assessing corporate sustainability actions and performance. The report presents the responses of 2,000 companies in 113 countries regarding their sustainability progress and challenges. The key findings of the 2013 Sustainability Report are (1) companies are taking proper actions to achieve sustainability performance as evidenced by 65 percent of signatories committing to sustainability at CEO level, and about 35 percent having trained their managers to integrate sustainability into their strategies and operations (2) large companies are leading the way toward sustainability performance and integrated reporting while small and medium-sized enterprises (SMEs) still face challenges to achieve sustainability (3) supply chains are a roadblock to the achievement of improved sustainability performance (4) companies are moving forward with a focus on the achievement of all dimensions of sustainability performance from education to poverty eradication, employment growth and climate change.34
An accountability assurance principle means conducting business in an ethical and socially responsible manner. A proper assurance process requires timely and deliberate planning, aggressive actions, effective implementation, enforceable accountability, continuous monitoring and independent third-party assurance on the sustainability reports. Assurance on sustainability reports lends incremental credibility and objectivity to sustainability performance information provided by business organizations. Sustainability assurance can be provided by third-party assurance providers, public accounting firms and internal auditors, as discussed in chapter 5.
In addition to a few mandatory sustainability guidance established in Asia and Europe, there are several voluntary guidelines for sustainability reporting, including the reporting frameworks released by the GRI, the Connected Reporting Framework and the reporting publications of AccountAbility. Currently, sustainability reports are voluntary and (generally) not audited by external auditors. Existing sustainability reports bear different names (green reporting, CSR reporting); serve different stakeholders in achieving a variety of purposes; and vary in terms of content, structure, format, accuracy and assurance. A more standardized, integrated and audited process is required to make sustainability reports on EGSEE performance comparable, commonly acceptable and relevant to all corporate stakeholders. Recently, the provided a comprehensive Sustainability Reporting Framework to enable greater organizational transparency.35
