Impact of corporate sustainability reporting on firm performance: an empirical examination in Asia

Date10 December 2018
Published date10 December 2018
AuthorNajul Laskar
subjectMatterStrategy,International business
Impact of corporate sustainability
reporting on rm performance: an
empirical examination in Asia
Najul Laskar
Purpose The purposeof this paper is to analyse the impact of corporate sustainabilityreporting on firm
performancein four Asian countriesJapan, South Korea, Indonesia and India and to find out whether
there is any significant difference between developed and developingcountries of Asia with respect to
the impactof such reporting on firm performance.
Design/methodology/approach The study is based on 36 listed nonfinancial companies from Japan,
28 from India, 26 from South Korea and 21 from Indonesia respectively, from 2009 to 2014. Content analysis
(binary 0 and 1) is used to calculate the disclosure score of sustainability performance, based on Global
Reporting Initiative (GRI) format. The outcome of the content analysis is further used to examine the impact
of corporate sustainability reporting on firm performance employinga logistic regression model.
Findings The study finds that the average level of disclosure is more in the case of Japanese
companies (90 per cent), followed by India (88 per cent) and South Korea (85 per cent). On the other
hand, the averagelevel of disclosure is only 72 per cent for Indonesianfirms. Regression results depicta
significantpositive association between sustainabilityreporting and firm’sperformance. The study further
finds that the relative impact of sustainability reporting on firm performance is more in developed
countriesthan in developing countries ofAsia.
Originality/value This is the first comprehensive studyin Asian context to examine the impact of the
level of corporate sustainability disclosure on the firm performance by using the logistic regression
model. The outcomeof this study would not only help the corporatemanagers but also the policymakers
to make a valuable decision, which will eventually contribute to the objectives of sustainable
Keywords Firm performance, Content analysis, Global reporting initiative,
Corporate sustainability reporting, Logistic regression model
Paper type Research paper
1. Introduction
Sustainable development becomes a concept of strategic importance after the publication
of the report “Our Common Future” by the World Commission on Environment and
Development (WCED, 1987). In 1987, WCED first defined sustainable development (SD) as
the development that meets the needs of the current generation without compromising the
ability of future generation to meet their needs and aspirations”(
WCED, 1987, p. 16).
According to this report, the organization must play a key role in contributing to sustainable
development. The publication of the report along with increasing demand for the “voice of
Warhurst, 2000) has encouraged companies to integrate sustainability goals into
their management process. Sustainability goal is all about maintaining social solidarity,
conserving the natural environment and ensuring economic development in a balanced
manner. However, in traditional management process, the main focus was only in the
economic dimension. With the growth of social and environmental concerns, stakeholders
Najul Laskar is based at the
Department of
Management, Ajeenkya
D.Y. Patil University
(iNurture Education
Solutions Pvt. Ltd.), Pune,
Received 24 November 2016
Revised 19 June 2017
2 October 2017
22 December 2017
7 February 2018
Accepted 30 March 2018
DOI 10.1108/JABS-11-2016-0157 VOL. 12 NO. 4 2018, pp. 571-593, ©Emerald Publishing Limited, ISSN 1558-7894 jJOURNAL OF ASIA BUSINESS STUDIES jPAGE 571
are now interested in understanding firms’ approach towards managing sustainability
issues along with their potentialfor value creation (O’Dwyer and Owen, 2005;KPMG, 2008).
These interests of stakeholdersare also compelling firms to perform activities towards triple
bottom line (economy, society and environment) and communicate these performances in
the form of the sustainability report. Such reporting improves firms’ relationship with
stakeholders, which is very critical for firms’ long-term survival, growth and viability
(Clarkson, 1995;Lopez et al.,2007). Considering this uptake, a number of internationally
standardised guidelines, such as United Nations Global Compact, United Nations
Principles for Responsible Investment and the Global Reporting Initiative (GRI) framework
have been developed to facilitate corporate sustainability (CS) reporting. These frameworks
assist stakeholders to systematicallyassess and measure firms’ performance towards triple
bottom line (Gilbert et al.,2011). Evidences also reveal a significant increase in the number
of firms publishing sustainability report based on the GRI framework (Carrots and Sticks,
2013;KPMG, 2008). However, the reporting rates are found to be comparatively high in
advanced economies such as Japan, the USA,the UK and many other European countries.
In the Asian context, the concept of CS is relatively well-developed in Japan and South
Korea, while it is still in the embryonic stage in most of the Asian countries such as India,
China, Malaysia, Singapore andIndonesia (KPMG,2008, 2013).
In this global transformation era, corporate sustainability performance (CSP) is
fundamental for business growth and survival (KPMG,2008, 2013). Companies’
performances towards sustainability in a balanced and holistic manner will position them
to innovate and compete in the rapidly changing and resource-constrained global
economy. It is no longer enough for companies to perform towards society or
environment in isolation. Comprehensive sustainability strategies are expected from
companies because various survey reports (Carrots and Sticks, 2013;KPMG,2008,
2013) indicates that there exists a theoretical relationship between CS reporting and
firms’ performance. For instance, CS report facilitates healthy relation of companies with
stakeholders, reduces cost through efficient utilisation of resources, influences the long-
term business strategy, improves efficiency and attracts ethical investment, thereby
improving firms’ performance. As a result, the importance of CS reporting or CSP has
emerged as a crucial research domain in recent times. Consequently, researchers have
empirically examined the association between CSP and firm’s performance (Ho and
Taylor, 2007;Lopez et al., 2007;Reddy and Lucus, 2010;Hussain, 2015) mostly in
developed economies like USA, Australia and New Zealand. However, the findings are
inconclusive, which engenders the gap between a theoretical and empirical relationship.
Despite the contradictory findings, a consensus can be drawn that market forces are
more likely to reward than to penalise companies with better CSP (Doh et al., 2010).
Though there is a considerable number of studies on the impact of CSP on firm
performance in developed countries (Marti et al., 2015), there is a dearth of such studies
in Asian countries. Moreover, in Asia, except for few (Burhan and Rahmanti, 2012;Ho
and Taylor, 2007), most of the studies are related to the components of CSP like social
performance (Choi et al., 2010;Bhatia and Chander, 2014) and environmental (Cortez
and Cudia, 2011;Hidemichi et al., 2012) performance. This may be one of the plausible
reasons behind lack of awareness regarding the importance of CSP in Asia. This
research gap in existing literature creates enthusiasm to find answers to some of the
pertinent research questions:
RQ1. Whether CS reporting can enhance firm performance?
CS reporting according to KPMG (2013) is very advanced in developed countries as
compared to developing countries.Thus, the corresponding question arises:
RQ2. What is the relative impact of CS reportingon firm performance between developed
and developingcountries?

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