Voluntary Sustainability Research Articles

Voluntary Sustainability Standards: State of the Art and Future Research

In this feature paper, we introduce voluntary sustainability standards (VSS) and canvas the research that has been conducted on VSS from different academic disciplines. We identify four main areas of research on VSS and explore them. First, we focus on research on the institutional design of VSS, which highlights the diversity among VSS. Next, we explore studies that try to assess the impact of VSS on key sustainability dimensions. Third, we zoom in on studies that analyse the uptake or adoption of VSS. Finally, we focus on the interaction between VSS and public policies. For each of the four areas, we summarise the main research findings and identify opportunities for future research.

South African Governance Legal Framework for Corporate disclosures and reporting: Part 1 – Voluntary sustainability reporting

The general dissatisfaction of shareholders and other users of financial statements with both voluntary sustainability and mandatory financial disclosure and reporting, prompt an appeal for increased government-commanded reporting requirements. State-based standardsetting and voluntary sustainability reporting within the corporate jurisprudence must therefore evolve, which includes, among others, the variety of legal and regulatory standards, their dynamism, and the manner in which standards can be imposed. Directors and auditors must act ethically to observe their various functions as regulated by the Companies Act 71 of 2008 and the Auditing Profession Act 26 of 2005. National and international companies persistently undermine good governance. Directors’ and auditors’ failure to comply with ethics can certainly not continue with impunity. The global trend in the use of voluntary sustainability reporting highlights the prominence that auditors play in good corporate governance, although compliance with voluntary sustainability reporting does not warrant good corporate governance. Independence of auditors remains contentious in the light of the funding model of the regulator, working of audit committees, the connection between directors and companies, and the corporate governance expectation gap.

Voluntary Sustainability Reporting and Financial Performance: Evidence from Global Reporting Initiative (GRI) Disclosures in Africa

Voluntary Sustainability Reporting and Financial Performance: Evidence from Global Reporting Initiative (GRI) Disclosures in Africa

Corporate Environmental Disclosures of Oil and Gas Companies in India: An Analysis of Executives’ Perceptions

Environmental and sustainability issues have assumed significance, leading to social and legal pressures on the companies across the world to take steps to reduce and prevent adverse impact of their activities on the environment and to disclose this information to the concerned stakeholders. The present study aims at investigating the perceptions of executives from 26 listed Indian oil and gas companies on Corporate Environment Disclosures (CEDs)in the annual reports using a structured questionnaire.The questionnaire was constructed on the basis of eleven environmental indicators provided in international oil and gas industry guidelines for voluntary sustainability reporting framework. An attempt was made to determine whether the extent and type of environmental disclosures have correlation with executives’ position in the organization, their knowledge about the annual reports, their stock holdings in the company and the value stream to which the companies belonged. It was found thatthe responding executives were well aware of the environmental issues associated with activities across the value chain in the oil and gas industry. They agreed that these issues are material and must be disclosed in the annual reports, but had different perceptions on the importance of four environmental issues given in the questionnaire for disclosure in the reports. A significant statistical relationship was found between perceived corporate environmental disclosure index (PCEDI) and respondents’ positions in the company and their knowledge on the annual reports. It is suggested that a greater role to knowledgeable senior executives at key positions should be assigned to deal with sustainability disclosure affairs.

IS MANDATORY SUSTAINABILITY REPORT STILL BENEFICIAL?

The latest regulations in Indonesia (SEOJK No 16/SEOJK.04/2021) have required public companies to make a sustainability report every year in order to increase sustainable in­vestment. Prior to this regulation, several public companies had made sustainability reports and received benefits of sustainability report. This makes issuers ask whether after being obligated, public companies still get the benefits that have been obtained from voluntary sustainability reports and under what conditions the mandatory sustainability reports are beneficial for public companies. This study answers the public companies' doubts by con­ducting a systematic literature review on research on mandatory and voluntary sustainability reports in Q1 and Q2 journals from 2008-2018. Before answering the issuers' doubts, this study explains the reasons why issuers make voluntary sustainability reports and the benefits derived from voluntary sustainability reports. After that, based on previous research, this study explains whether the benefits obtained from voluntary sustainability reports can still be obtained in mandatory sustainability reports. This study found that sus­tainability reports were made because of the desire to benefit from these reports initiated by company leaders coupled with institutional pressure. The benefits of voluntary sustainability reports are the positive perception of shareholders and increased concern for the company's sustainability. Mandatory sustainability reports can still provide some (though not all) of the same benefits as voluntary sustainability reports. In addition, the sustainability report must be able to cover the weaknesses of the voluntary sustainability report with the condi­tion that there is strict legal coercion, strict supervision, and the addition of an obligation to audit sustainability information which is strengthened by market demands to make a sus­tainability report. Therefore, the Indonesian government must pay attention to these condi­tions for this regulation to be implemented properly.

Environmental disclosure on mandatory and voluntary reporting of Portuguese listed firms: the role of environmental certification, lucratively and corporate governance

Purpose This study aims to construct two environmental disclosure indices (EDI), one obtained from the mandatory reporting (annual report) and the other from the voluntary reporting (sustainability report), to compare their evolution. In addition, the authors developed and evaluated a conceptual model that aims to analyse if the two EDI are affected by industry, environmental certification, lucratively and corporate governance attributes. The legitimacy, signalling and voluntary disclosure theories are used to support the theoretical relationship between the company’s characteristics, corporate governance and environmental disclosure. Design/methodology/approach Using the content analysis technique, the authors have developed two indices to assess the level of environmental disclosure in the companies’ mandatory and voluntary reporting. In addition, to analyse the determinants of EDI, the authors applied the technique of multiple linear regression using panel data. Findings Based on Portuguese listed companies (Euronext-Lisbon), the results, from 2015 to 2017, exhibited an increase of 14.6% and 25.8% for the EDI obtained from the annual reports and for EDI obtained from the sustainability reporting, respectively. In addition, the results revealed that the environmental certification, lucratively, number of members on board and number and proportion of women of the board directors tend to affect the annual reporting EDI. Regarding the sustainability reporting EDI, the results showed that the environmental certification, lucratively and proportion of independent members of the board of directors have an impact on it. Research limitations/implications The study focuses on quantitative rather than qualitative disclosures and it brings some insights to the theoretical field. Practical implications The results obtained can assist corporate decision-making processes regarding the improvement of environmental disclosure, both on the mandatory annual report and on voluntary sustainability reports. Originality/value This study brings new perspectives to this topical issue in accounting. Originally, this study is applied to Portuguese listed companies and it shows different trends and determinants of environmental disclosure when included in the annual reporting or sustainability reporting.

Company Purpose in the Context of Business Sustainability and Insolvency Proceedings

The organizational and operational company purposes of the debtor company terminate in liquidation proceedings. In addition, the nonfinancial sustainability elements vanish in a piecemeal selling. Through a selling as a going concern, the operational company purpose and sustainability elements may be transferred to a byer company. In restructuring proceedings, both the organizational and operational company purposes remain, but the shareholder primacy shifts to a creditor priority. When choosing between liquidation and restructuring proceedings, there are two tests: the viability test and the best-interests-of-creditors test. In these tests, all obligatory non-financial sustainability elements, such as environmental requirements laid down in the law, must be considered. Voluntary non-financial sustainability investments for implementing the company operational purpose are allowed also during the restructuring plan if they benefit the creditors.

The Place of Voluntary Standards in Managing Social and Environmental Risks in Global Value Chains

Under the notion of human rights due diligence (HRDD), firms are under a responsibility to account for the social and environmental impact connected to their operations across global value chains. This responsibility intersects with the sphere of operation of voluntary sustainability standards (VSS), which certify production against certain social and environmental criteria. With mandatory European rules on HRDD in the making, the question arises regarding the extent of alignment of VSS with HRDD notions and, consequently, the possibility for this form of transnational private regulation to complement European Union (EU) HRDD legislation. After presenting the regulatory effects of HRDD in global value chains and its current transposition in EU instruments, this contribution examines the relationship between private standards and HRDD. By delving into the substantive requirements and policies of several schemes certifying agricultural commodities, this paper studies the extent to which they manage social and environmental risks in global value chains and the possible support they provide to firms subject to the upcoming HRDD obligations.

ECONOMIA CIRCULAR. UMA PESQUISA SOBRE CERTIFICAÇÕES

Based on current sustainability challenges, the concept of circular economy was developed as a new approach to thinking about the linear economic cycle of material extraction, use of inputs in production and sale. The circular economy seeks to reduce costs, preserve scarce material resources or recycle materials. It is a set of strategies that underpin some public policies and make available financial resources for sustainable development projects that achieve economic, but also environmental and social impacts reaching a better quality of life for all. The current work seeks a method of certification for the circular economy, to communicate to customers voluntary sustainability actions of companies and economic organizations and monitor their voluntary advances. The research methodology is bibliographic and results in an analysis of the advantages and disadvantages of different certifications. The results allow us to say that we are still far from a solution and an adequate certification for the

Does CSR Expenditure and Sustainability Reporting Improve Firm Performance? Mandatory CSR Regimes in India

This paper aims to investigate whether firms that comply with corporate social responsibility (CSR) expenditure and undertake voluntary sustainability reporting will have lower systematic risk and higher stock returns—the proxies for measuring firm performance—in mandatory CSR regimes in India. The instrumental approach of stakeholder theory asserts that firms considering stakeholders’ interests, including societal interest, are likely to show better firm performance compared to others. Therefore, on the basis of such a theory, this study attempts to link sustainability reporting and CSR compliance with firm performance. One-way Analysis of Variance (ANOVA) and post-hoc tests were used to examine the proposed hypotheses and analyze the results for firms meeting the criteria of CSR provisions and are listed in the National Stock Exchange (NSE) of India. The period of study covers four financial years from 2015–16 to 2018–19, after India mandated CSR expenditure on April 1, 2014. Results reveal that markets value those firms that meet the mandatory CSR expenditure requirement but do not undertake voluntary sustainability reporting. The findings offer important implications for firms, investors, and policymakers of countries, including those that are planning for CSR legislation.

How to govern a sustainable supply chain: Standards, standardizers, and the political ecology of (in)advertence

There is an ambivalence within political ecology about whether the unequal power relations that emerge from many development projects are intended or unintended. This ambivalence is a result of an empirical focus on the effects of these programs on target communities, as opposed to an empirical focus on the people who are responsible for developing those programs. Drawing on qualitative fieldwork among people tasked with designing, promoting, and enforcing sustainability standards in global agricultural supply chains, I argue that the empowerment of multinational corporations and well-funded environmental NGOs that characterizes market-oriented sustainability programs is, in fact, intentional. This intention reflects the belief among sustainability professionals that the intersection of western scientific expertise with the dynamics of “the market” is the most effective way to promote sustainability in global supply chains, and to generate global sustainability in a more general sense. Concepts like “stakeholder engagement” and a commitment to flexibility and accommodation in the development and adoption of social and environmental standards are examples of what I call euphemistic sustainability, which shifts critical attention away from a balance of power that is increasingly tilted toward private interests, even as that imbalance remains an intended outcome of non-state market-driven governance systems like ostensibly voluntary sustainability standards.

The influence of non-governmental organizations (NGOs) on the development of voluntary sustainability accounting reporting rules

PurposeThe purpose of this paper is to show the impact that non-governmental organizations (NGOs) have on the evolution of Global Reporting Initiative (GRI). GRI is a sustainability report disclosed by business organizations to meet the demands and interests of various stakeholders. These stakeholders’ needs have influenced GRI and its guidelines.Design/methodology/approachThe methodology for this paper is library-based archival research. It is qualitatively and analytically descriptive of prior academic research and published literature on the subject.FindingsSustainability accounting rulemaking has evolved overtime resulting in proliferation of reporting rules. These rules have improved the extent and scope of environmental and economic performances that businesses disclose in GRI.Originality/valueGRI has provided the foundation for integrated reporting (IR). Both GRI and IR have ecological and functional dimensions. Sustainability is functionally inherent in the accounting principle of materiality, when disclosed in external reporting. The ongoing concern of business assumes an organization is systemic and operates as a living entity only when it can provide sustainable performance that benefits stakeholders and society.

Sustainable commodity governance and the global south

This is the introduction to a special issue on ‘Sustainable Commodity Governance and the Global South.’ A broad range of transnational governance initiatives have emerged to respond to social and environmental challenges caused by commodity production. These initiatives – like voluntary sustainability standards and certifications – tend to target commodity producers in the Global South, but are overwhelmingly initiated and managed by organizations from the Global North. The agency and initiative of Southern actors in addressing sustainability challenges in their own backyards remains under-examined. In this introductory paper, we outline a typology of how commodity producers, civil society groups, and governments in the Global South have responded to the challenge of sustainable commodity production. Drawing inductively on the contributions to this special issue, we argue that Southern actors either participate in transnational governance, reinterpret it in their own context, or create their own initiatives entirely. The capacity of actors in the Global South to exert meaningful influence over sustainable commodity governance is relevant to ongoing debates in ecological economics about whether environmental and social goals can be achieved by working within global value chains or whether a wholesale reconfiguration of the global economy is required.

Voluntary sustainability assurance, capital constraint and cost of debt: International evidence

We examine whether a firm's voluntary purchase of sustainability assurance is associated with reduced capital constraint and lower cost of debt. We also explore the effect of assurance provider (accountant/non‐accountant) and a country's level of investor protection/creditor rights, on this association. Using a panel dataset drawn from an international sample, we find that voluntary purchase of sustainability assurance is negatively associated with both capital constraint and cost of debt. The associations are stronger for accounting firm providers than non‐accounting assurers. Further, the effect is stronger for firms operating in low investor protection (creditor rights) settings suggesting that voluntary sustainability assurance is valued in a context generally characterized by greater information asymmetry. Findings provide evidence that firms derive a financing benefit from voluntary sustainability assurance, and the benefit is sensitive to the profile of the sustainability assurance provider and the institutional environment in which the firm operates.

Factors influencing the adoption of SDG reporting by large African and Asian companies

This article aims to investigate the adoption of the Sustainable Development Goals (SDGs) by large companies in low- and middle-income countries in Asia and Africa, and the company characteristics that influence them to undertake such new sustainability reporting practices. Logistic regression analyses were applied to combine the data extracted from the Global Reporting Initiative’s Sustainability Disclosure Database and the Orbis database from Bureau van Dijk. The empirical results indicate that characteristics like the type of company, its economic performance and its engagement in voluntary sustainability programmes and external assurance are positively related to the adoption of SDG reporting. The results also show that some corporate, organizational and performance characteristics increase companies’ likelihood to adopt SDG reporting. Drawing on agency theory and legitimacy theory perspectives, this article contributes to the academic and practical understanding of factors influencing the adoption of SDG reporting by large companies in Asia and Africa’s low- and middle-income countries.

Additionality and Implementation Gaps in Voluntary Sustainability Standards

ABSTRACT Voluntary Sustainability Standards have become a popular private governance framework for more sustainable agri-food value chains. However, recent mainstreaming efforts have increased competition between standards and driven down price premiums. This study employs a dataset of 659 Honduran coffee producers to examine whether the most widely used standards in the coffee sector (4C, Fairtrade, Fairtrade/organic, UTZ Certified and Rainforest Alliance) represent effective solutions for improving the social, environmental and economic sustainability practices of smallholder farmers under such conditions. It presents 54 farm-level indicators, compared across five standard systems, and links field results to a discussion of the strategies and governance prospects of voluntary standards. We find that no scheme has managed to grow substantially while maintaining strong additionality: commercially successful standards show little impact, while stricter schemes create high entry barriers and unresolved opportunity costs. Successful mainstreaming would require better cost coverage of sustainability improvements by value chain actors .

Representative account or greenwashing? Voluntary sustainability reports in Australia's mining/metals and financial services industries

AbstractWhy are more and more companies voluntarily issuing costly, potentially exposing standalone sustainability reports on environmentally and socially problematic issues? Using legitimacy theory, this study analyses ways companies seek to strategically enhance legitimacy by leaning towards either ‘representative’ reporting of both favourable and unfavourable information especially in an industry's highest impact domains, or ‘greenwashing’ (including whitewashing non‐environmental issues), which downplays unfavourables and high‐impact domains and highlights favourable but less relevant points. Content analysis compared Global Reporting Initiatives (GRI) reports from 2011 to 2019 by Australian financial services companies (107 reports) and mining and metals companies (122). Specifically, to critique reporting quality in fine grain, it disaggregated results into levels (from omission to full quantitative treatment) of disclosure of good/bad/neutral news indicators and violation‐related/non‐violation‐related ones and identified highest impact domains. Neither industry's reporting was very representative. Relatively though, mining and metals leant towards representation: fuller disclosure on environmental aspects (its highest impact domain), including unfavourables: bad and violation‐related indicators. Financial services companies only led in disclosing neutral social indicators, not bad or violation‐related ones, so leant towards greenwashing. Results also suggest that after the GRI clarifying materiality principle in 2016, financial services disclosure quality dropped further by de‐emphasising environmental without lifting social disclosures, while mining and metals' stayed unchanged. The results confirm and better specify widely indicated reporting weaknesses, contributing to content analysis methodology and legitimacy theory. This arms guideline setters, investors and other stakeholders to better evaluate/design reports and might encourage firms to voluntarily improve disclosures.

The place of voluntary standards in managing social and environmental risks in global value chains

Under the notion of human rights due diligence (HRDD), firms are under a responsibility to account for the social and environmental impact connected to their operations across global value chains. This responsibility intersects with the sphere of operation of voluntary sustainability standards (VSS), that certify production against certain social and environmental criteria. With mandatory European rules on HRDD in the making, the question arises about the extent of alignment of VSS with HRDD notions and, consequently, the possibility for this form of transnational private regulation to complement EU HRDD legislation. After presenting the regulatory effects of HRDD in global value chains and its current transposition in EU instruments, this contribution examines the relation between private standards and HRDD. By delving into the substantive requirements and policies of several schemes certifying agricultural commodities, it studies the extent to which they manage social and environmental risks in global value chains, and their possible support to firms subject to upcoming HRDD obligations.

Corporate governance and voluntary sustainability practices in Islamic bank: A study in the MENA region

The purpose of this paper is to investigate the effect of selected governance characteristics on the level of environmental disclosure in Islamic banks within the MENA zone. This study used a sample of 40 Islamic banks as part of a new data set, namely the data collected from the annual reports. Environmental disclosure is developed to measure the level of environmental information. We measure the environmental disclosure by both the energy disclosure items and the natural environment disclosure item provided by the annual reports. Multiple linear regression analyzes were used to verify the effect of a bank’s governance characteristics on the level of environmental disclosure. This study may contribute to the existing literature by providing insights from countries with an emerging economy and providing updated documentary and empirical evidence concerning the association between the characteristics of governance and the level of environmental disclosure of Islamic banks within the MENA zone

The role of corporate governance in mandatory sustainability reporting quality

This study analyzes the association between various corporate governance mechanisms and mandatory sustainability reporting quality (MSRQ). To this end, we construct a novel MSRQ measure based on manually collected data from 220 German firms in their first year of mandatory sustainability reporting according to the European CSR Directive (2014/95/EU). Descriptive findings show a heterogeneous reporting quality for our sample. Building on stakeholder and legitimacy theory the regression analyses underline the important role of corporate governance in ensuring high MSRQ. MSRQ increases with the number of corporate governance mechanisms employed. Regarding the individual mechanisms, we find that MSRQ is positively associated with a sustainable remuneration of the executive board, gender diversity at the supervisory board level, the existence of a CSR committee, engagement in sustainability initiatives, and external assurance. However, we do not find any association between gender diversity at the executive board level and MSRQ, contradicting research on voluntary sustainability reporting. Finally, we derive several implications for preparers, auditors, stakeholders, and regulators.