The effects of corporate governance on environmental sustainability reporting: empirical evidence from South Asian countries

Md Abdul Kaium Masud,Mohammad Nurunnabi,Seong Mi Bae

doi:10.1186/s41180-018-0019-x

Abstract

Comparatively less research has examined the effect of corporate governance (CG) elements on environmental sustainability reporting performance (ESRP) in South Asian (SA) countries. Further, no study in literature documents a cross-country examination of CG and ESRP in this region. The study takes three SA countries (Bangladesh, India, and Pakistan) and 88 listed organizations’ sustainability reports during the years 2009–2016 from the Global Reporting Initiative (GRI) database. The study considers a variety of mixed theoretical frameworks—i.e., agency, resource dependency, stakeholder, legitimacy and political cost theories—to indicate which ownership (foreign, institutional, director and family) and board characteristics (independence, size, diversity and committee) affect ESRP practices in the world’s most environmentally vulnerable region. Our empirical results indicate ESRP has a positive association with foreign and institutional ownership, board independence, and board size. Moreover, we find director share ownership significantly relates with ESRP. In contrast, our results also reveal no association between ESRP and family ownership, female directorship, and CSR and environmental committees. We conclude that more family control, a lack of female participation, and the unavailability of resourceful management personnel primarily impedes ESRP practices in the SA countries’ organizations. These findings have both theoretical and practical implications for academia, policy-makers, and corporate managers in this region.

Highlights

Broad research has been conducted in the environmental sustainability reporting field due to the continuing magnitude of environmental problems and an emphasis on the triple bottom line approach to business management (Elkington 1998; Baral and Pokharel 2017; Albertini 2013; Perrault and Clark 2016; Delgado-Márquez et al 2016; Cheng et al 2014)
Our findings suggest that most corporate governance elements can help management monitor, control, and promote environmental sustainability reporting by 1) strategic decisions on social and environmental investments, technological innovation for pollution control, and compliance with international environmental regulations; and 2) supporting long-term environmental initiatives by providing suggestions and directions based on expertise and experience
The political cost theory was used in the explanation of corporate environmental sustainability reporting performance (ESRP)

Summary

Introduction

Broad research has been conducted in the environmental sustainability reporting field due to the continuing magnitude of environmental problems and an emphasis on the triple bottom line approach to business management (Elkington 1998; Baral and Pokharel 2017; Albertini 2013; Perrault and Clark 2016; Delgado-Márquez et al 2016; Cheng et al 2014). The associations between environmental sustainability and corporate governance have been empirically analyzed as to developed countries such as Australia, the United Kingdom, Canada, the United States, and other European countries (de Villiers et al 2011; Ortiz-de-Mandojana et al 2016; Perrault and Clark 2016; Delgado-Márquez et al 2016). South Asia (SA) consists of eight countries—Afghanistan, Bangladesh, India, the Maldives, Nepal, Pakistan, Bhutan, and Sri Lanka—with a population of 1.75 billion, equivalent to 24.89% of the world’s population (World Bank 2017). A 2017 pollution index portrayed the deepest concerns of SA countries’ environmental situation, as six major cities in six different countries are ranked in the top ten (NUMBEO 2017)

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Conclusion