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.
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 ābring benefits in terms of risk management, cost savings, access to capital, customer relationships, human resource management and innovation capacity.ā2 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 ātake 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.ā7 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 su...