IS ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORTING FINANCIALLY USEFUL? EVIDENCE FROM TURKEY

Year 2022, Volume: 7 Issue: 1, 261 - 280, 27.06.2022

Eylül Özdarak Çağatay Akarçay

https://doi.org/10.54452/jrb.1094498

Cited By: 1

Abstract

İnsanlığın küresel ısınma ve kısıtlı kaynakların aşırı tüketimi gibi risklerle karşılaşması günümüzde sürdürülebilirlik raporlamasına olan ilgiyi giderek yaygınlaştırmaktadır. Bu doğrultuda birçok otorite, sermaye piyasalarında şeffaflığın ve hesap verilebilirliğin arttırılarak paydaş güveninin sağlanması amacıyla işletmeleri sürdürülebilirlik bilgilerini açıklamaya teşvik etmektedir. Halbuki sürdürülebilirlik raporlamasındaki kural eksikliği ve finansal olmayan bilginin yapısı, Çevresel, Sosyal ve Kurumsal Yönetim (ÇSKY) bilgilerinin faydalılığı konusunda şüphe yaratmaktadır. Bu çalışmanın amacı sürdürülebilirlik raporlamasının finansal performans üzerindeki etkisini incelemektir. Çalışma kapsamında 2009-2018 yılları arasında Borsa İstanbul Metal Eşya Endeksi’nde işlem gören işletmelere panel regresyon testleri uygulanmıştır. Araştırma sonucunda sürdürülebilirlik raporlaması ve finansal performans arasında istatistiki olarak anlamlı bir ilişki bulunamamıştır.

Keywords

sürdürülebilirlik raporlaması, finansal performans, ÇSKY açıklaması, finansal olmayan bilgi

IS ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) REPORTING FINANCIALLY USEFUL? EVIDENCE FROM TURKEY

Abstract

Sustainability reporting is attracting widespread interest as humanity is exposed to risks related to climate change and overexploitation of limited resources. Accordingly, many authorities have been and still are encouraging companies to disclose sustainability information for the purpose of increasing transparency and accountability in capital markets thereby ensuring stakeholder trust. However, the irregularity of sustainability reporting and the nature of non-financial information cast doubt on the usefulness of Environmental, Social and Governance (ESG) disclosure. The objective of this study is to investigate the impact of sustainability reporting on financial performance. Panel regression tests were applied to companies listed on Borsa Istanbul Metal Products Machinery Index throughout 2009-2018 in this paper. As a result, no statistically significant relationship was found between sustainability disclosure and financial performance.

Keywords

sustainability reporting, financial performance, ESG disclosure, non-financial information

References

• Acquier, A., Gond, J. P., & Pasquero, J. (2011). Rediscovering Howard R. Bowen’s legacy: The unachieved agenda and continuing relevance of social responsibilities of the businessman. Business and Society, 50(4), 607–646. https://doi.org/10.1177/0007650311419251
• Aksu, M., & Kosedag, A. (2006). Transparency and Disclosure Scores Stock Exchange. Corporate Governance, 14(4), 277–296.
• Albertini, E. (2013). Does Environmental Management Improve Financial Performance? A Meta-Analytical Review. Organization and Environment, 26(4), 431–457. https://doi.org/10.1177/1086026613510301
• Alsayegh, M. F., Rahman, R. A., & Homayoun, S. (2020). Corporate economic, environmental, and social sustainability performance transformation through ESG disclosure. Sustainability (Switzerland), 12(9). https://doi.org/10.3390/su12093910
• Artiach, T., Lee, D., Nelson, D., & Walker, J. (2010). The determinants of corporate sustainability performance. Accounting and Finance, 50(1), 31–51. https://doi.org/10.1111/j.1467-629X.2009.00315.x
• Ashrafi, M., Adams, M., Walker, T. R., & Magnan, G. (2018). ‘How corporate social responsibility can be integrated into corporate sustainability: a theoretical review of their relationships.’ International Journal of Sustainable Development and World Ecology, 25(8), 671–681. https://doi.org/10.1080/13504509.2018.1471628
• Aupperle, K. E., Carroll, A. B., & Hatfield, J. D. (1985). An Empirical Examination of the Relationship between Corporate Social Responsibility and Profitability. The Academy of Management Journal, 28(2), 446–463. https://doi.org/10.5465/256210
• Barauskaite, G., & Streimikiene, D. (2021). Corporate social responsibility and financial performance of companies: The puzzle of concepts, definitions and assessment methods. Corporate Social Responsibility and Environmental Management, 28(1), 278–287. https://doi.org/10.1002/csr.2048
• Barker, R., & Eccles, R. G. (2018). Should FASB and IASB Be Responsible for Setting Standards for Nonfinancial Information? https://doi.org/10.2139/ssrn.3272250
• Barnett, M., & Salomon, R. (2012). Does It Pay To Be Really Good? Addressing The Shape Of The Relationship Between Social And Financial Performance. Strategic Management Journal, 33, 1304–1320. https://doi.org/10.1002/Smj
• Baumgartner, R. J. (2014). Managing corporate sustainability and CSR: A conceptual framework combining values, strategies and instruments contributing to sustainable development. Corporate Social Responsibility and Environmental Management, 21(5), 258–271. https://doi.org/10.1002/csr.1336
• Beckmann, M., Hielscher, S., & Pies, I. (2014). Commitment Strategies for Sustainability: How Business Firms Can Transform Trade-Offs Into Win-Win Outcomes. Business Strategy and the Environment, 23(1), 18–37. https://doi.org/10.1002/bse.1758
• Buallay, A. (2019a). Between cost and value: Investigating the effects of sustainability reporting on a firm’s performance. Journal of Applied Accounting Research, 20(4), 481–496. https://doi.org/10.1108/JAAR-12-2017-0137
• Buallay, A. (2019b). Sustainability reporting and firm’s performance: Comparative study between manufacturing and banking sectors. International Journal of Productivity and Performance Management, 69(3), 431–445. https://doi.org/10.1108/IJPPM-10-2018-0371
• Busco, C., Consolandi, C., Eccles, R. G., & Sofra, E. (2020). A Preliminary Analysis of SASB Reporting: Disclosure Topics, Financial Relevance, and the Financial Intensity of ESG Materiality. Journal of Applied Corporate Finance, 32(2), 117–125. https://doi.org/10.1111/jacf.12411
• Cardoni, A., Kiseleva, E., & Terzani, S. (2019). Evaluating the intra-industry comparability of sustainability reports: The case of the oil and gas industry. Sustainability (Switzerland), 11(4), 1–23. https://doi.org/10.3390/su11041093
• CDP, CDSB, GRI, IR, S. (2020). Statement of Intent to Work Together Towards Comprehensive Corporate Reporting.
• CFA Institute. (2017). Environmental , Social and Governance Survey.
• Chang, R. D., Zuo, J., Zhao, Z. Y., Zillante, G., Gan, X. L., & Soebarto, V. (2017). Evolving theories of sustainability and firms: History, future directions and implications for renewable energy research. Renewable and Sustainable Energy Reviews, 72(July 2016), 48–56. https://doi.org/10.1016/j.rser.2017.01.029
• Colombo, U. (2001). The club of Rome and sustainable development. Futures, 33(1), 7–11. https://doi.org/10.1016/S0016-3287(00)00048-3
• Davis, K. (1960). Can business afford to ignore corporate social responsibilities? California Management Review., 2(Spring), 70–76.
• Dyllick, T., & Hockerts, K. (2002). Beyond the business case for corporate sustainability. Business Strategy and the Environment, 11, 130–141. https://doi.org/10.4324/9781315259277-7
• Eccles et. al. (2012). The Need for Sector- Specific Materiality and Sustainability Reporting Standards. Journal of Applied Corporate Finance, 24(2), 65–71.
• Eilbirt, H., & Parket, I. R. (1975). Social Responsibility: The Underlying Factors. Business Horizons, Vol. 18, pp. 5–10. Retrieved from http://www.sciencedirect.com/science/article/pii/0007681373900438
• Erkens, M. (2015). Non-financial information : State of the art and research perspectives based L ’ information non financière :
• Flöstrand, P., & Ström, N. (2006). The valuation relevance of non-financial information. Management Research News, 29(9), 580–597. https://doi.org/10.1108/01409170610709014
• Frederick, W. C. (1960). The Growing Concern over Business Responsibility. California Management Review, 2(4), 54–61. https://doi.org/10.2307/41165405
• Han, J.-J., Kim, H. J., & Yu, J. (2016). Empirical study on relationship between corporate social responsibility and financial performance in Korea. Asian Journal of Sustainability and Social Responsibility, 1(1), 61–76. https://doi.org/10.1186/s41180-016-0002-3
• Hirigoyen, G., & Poulain-Rehm, T. (2015). Relationships between Corporate Social Responsibility and Financial Performance: What is the Causality? Journal of Business and Management, 4(1), 18–43. https://doi.org/10.12735/jbm.v4i1p18
• Hongming, X., Ahmed, B., Hussain, A., Rehman, A., Ullah, I., & Khan, F. U. (2020). Sustainability Reporting and Firm Performance: The Demonstration of Pakistani Firms. SAGE Open, 10(3), 1–12. https://doi.org/10.1177/2158244020953180
• Hubbard, G. (2009). Measuring organizational performance: Beyond the triple bottom line. Business Strategy and the Environment, 18(3), 177–191. https://doi.org/10.1002/bse.564
• Husted, B. W., & De Jesus Salazar, J. (2006). Taking friedman seriously: Maximizing profits and social performance. Journal of Management Studies, 43(1), 75–91. https://doi.org/10.1111/j.1467-6486.2006.00583.x
• IFRS. (2022) IFRS - ISSB: Frequently Asked Questions. Available at: https://www.ifrs.org/groups/international-sustainability-standards-board/issb-frequently-asked-questions/#:~:text=The%20intention%20is%20for%20the,information%20on%20climate%2Drelated%20matters. Accessed: February, 2022
• IFRS Foundation. (2020). Consultation Paper on Sustainability Reporting. Retrieved from https://cdn.ifrs.org/-/media/project/sustainability-reporting/consultation-paper-on-sustainability-reporting.pdf
• Ioannou, I., & Serafeim, G. (2017). The Consequences of Mandatory Corporate Sustainability Reporting. In Harvard Business School Research Working Paper. https://doi.org/10.2139/ssrn.1799589
• Johnston, P., Everard, M., Santillo, D., & Robèrt, K. (2007). Discussion Articles Reclaiming the Definition of Sustainability. Environmental Science and Pollution Research, 14(1), 60–66.
• Jones, T. M. (1980). Corporate Social Responsibility Revisited, Redefined. California Management Review, 22(2), 59–67. https://doi.org/10.2307/41164877
• Kamalirezaei, H., Anvary Rostamy, A. A., Saeedi, A., & Khodaei Valeh Zaghard, M. (2020). Corporate social responsibility and bankruptcy probability: Exploring the role of market competition, intellectual capital, and equity cost. Journal of Corporate Accounting and Finance, 31(1), 53–63. https://doi.org/10.1002/jcaf.22417
• Karaman, A. S., Kilic, M., & Uyar, A. (2018). Sustainability reporting in the aviation industry: worldwide evidence. Sustainability Accounting, Management and Policy Journal, 9(4), 362–391. https://doi.org/10.1108/SAMPJ-12-2017-0150
• Kiliç, M., Kuzey, C., & Uyar, A. (2015). The impact of ownership and board structure on corporate social responsibility (CSR) reporting in the Turkish banking industry. Corporate Governance (Bingley), 15(3), 357–374. https://doi.org/10.1108/CG-02-2014-0022
• Kılıç, M., & Kuzey, C. (2019). Determinants of climate change disclosures in the Turkish banking industry. International Journal of Bank Marketing, 37(3), 901–926. https://doi.org/10.1108/IJBM-08-2018-0206
• Kolk, A., & Perego, P. (2010). Determinants of the adoption of sustainability assurance statements: An international investigation. Business Strategy and the Environment, 19(3), 182–198. https://doi.org/10.1002/bse.643
• Kuzey, C., & Uyar, A. (2017). Determinants of sustainability reporting and its impact on firm value: Evidence from the emerging market of Turkey. Journal of Cleaner Production, 143, 27–39. https://doi.org/10.1016/j.jclepro.2016.12.153
• Laskar, N. (2018). Impact of corporate sustainability reporting on firm performance: an empirical examination in Asia. Journal of Asia Business Studies, 12(4), 571–593. https://doi.org/10.1108/JABS-11-2016-0157
• López, M. V., Garcia, A., & Rodriguez, L. (2007). Sustainable development and corporate performance: A study based on the Dow Jones sustainability index. Journal of Business Ethics, 75(3), 285–300. https://doi.org/10.1007/s10551-006-9253-8
• Lourenço, I. C., & Branco, M. C. (2013). Determinants of corporate sustainability performance in emerging markets: The Brazilian case. Journal of Cleaner Production, 57, 134–141. https://doi.org/10.1016/j.jclepro.2013.06.013
• Lozano, R., Carpenter, A., & Huisingh, D. (2015). A review of “theories of the firm” and their contributions to Corporate Sustainability. Journal of Cleaner Production, 106, 430–442. https://doi.org/10.1016/j.jclepro.2014.05.007
• Manne & Wallich, H. C., H. G. (1972). The modern corporation and social responsibility (Vol. 3). American Enterprise Institute for Public Policy Researchers.
• Maqbool, S., & Bakr, A. (2019). The curvilinear relationship between corporate social performance and financial performance. Journal of Global Responsibility, 10(1), 87–100. https://doi.org/10.1108/jgr-11-2018-0060
• Marimon, F., Alonso-Almeida, M. D. M., Rodríguez, M. D. P., & Cortez Alejandro, K. A. (2012). The worldwide diffusion of the global reporting initiative: What is the point? Journal of Cleaner Production, 33, 132–144. https://doi.org/10.1016/j.jclepro.2012.04.017
• Mcguire, J. B., Sundgren, A., & Schneeweis, T. (1988). Corporate Social Responsibility and Firm Financial Performance. Academy of Management Journal, 31(4), 854–872.
• Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and financial performance: A meta-analysis. Organization Studies, 24(3), 403–441. https://doi.org/10.1177/0170840603024003910
• Palley, T. I. (2006). Milton Friedman: The Great Laissez-Faire Partisan. Economic and Political Weekly, 41(49), 5041–5043.
• Sheldon, O. (1924). The Philosophy of Management. Retrieved from http://library1.nida.ac.th/termpaper6/sd/2554/19755.pdf
• Sierra, L., Zorio, A., & García-Benau, M. A. (2013). Sustainable Development and Assurance of Corporate Social Responsibility Reports Published by Ibex-35 Companies. Corporate Social Responsibility and Environmental Management, 20(6), 359–370. https://doi.org/10.1002/csr.1303
• Siminica, M. et al. (2019). Well-governed sustainability and financial performance: A new integrative approach. Sustainability, 11(17), 1–21. https://doi.org/10.3390/su11174562
• Steurer, R., Langer, M. E., Konrad, A., & Martinuzzi, A. (2005). Corporations, stakeholders and sustainable development I: A theoretical exploration of business-society relations. Journal of Business Ethics, 61(3), 263–281. https://doi.org/10.1007/s10551-005-7054-0
• Transparency, C. (2020). Climate Transparency Report 2020- Turkey.
• Van Beurden, P., & Gössling, T. (2008). The worth of values - A literature review on the relation between corporate social and financial performance. Journal of Business Ethics, 82(2), 407–424. https://doi.org/10.1007/s10551-008-9894-x
• Vance, S. (1975). Are Socially Responsible Corporations Good Investment Risks? Managerial Review, 64, 18-24.
• Velte, P. (2017). Does ESG performance have an impact on financial performance? Evidence from Germany. Journal of Global Responsibility, 8(2), 169–178. https://doi.org/10.1108/jgr-11-2016-0029
• Wang, H., Lu, W., Ye, M., Chau, K. W., & Zhang, X. (2016). The curvilinear relationship between corporate social performance and corporate financial performance: Evidence from the international construction industry. Journal of Cleaner Production, 137, 1313–1322. https://doi.org/10.1016/j.jclepro.2016.07.184
• World Commission on Environmental Development. (1987). Our Common Future. Oxford: Oxford University Press.
• Zhang, F., & Jung, J. Y. (2020). Changes in the influence of social responsibility activities on corporate value over 10 years in China. Sustainability (Switzerland), 12(22), 1–17. https://doi.org/10.3390/su12229506
• https://www.unenvironment.org/ozonaction/who-we-are/about-montreal-protocol Accessed: February, 2021
• https://www.climate-transparency.org/g20-climate-performance/g20report2021#1531904804037-423d5c88-a7a7 Accessed: February, 2022
• https://climateactiontracker.org/countries/ Accessed: April, 2021
• http://hdr.undp.org/sites/default/files/hdr2020.pdf. Accessed: April, 2021
• http://hdr.undp.org/sites/default/files/hdr2020.pdf Accessed: May, 2021
• https://www.ifac.org/what-we-do/speak-out-global-voice/points-view/enhancing-corporate-reporting#toptab-3-role-of-accountancy-profession-in-enhancing-corporate-reporting Accessed: May, 2021