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This book advances the understanding of corporate sustainability and challenges and roles of sustainability accounting in the Asia-Pacific region. The Asia-Pacific region has shown fast economic growth for several decades which is expected to continue. In this context, Asia has become the “production engine” of the global economy. At the same time scientific reports reveal that some planetary boundaries are crossed, for example relating to biodiversity and climate change. Companies in the Asia-Pacific region are therefore increasingly challenged to reduce their environmental impacts, to document their social contribution and to contribute to sustainable development. Key approaches to identify sustainability problems and challenges, to support improvement processes and to back up sustainability contributions include accounting and reporting. In contrast to the high relevance of accounting and reporting for corporate sustainability for the Asia-Pacific region, academic research has so far been dominated by Western researchers and pre-dominantly dealt with Western and Japanese cases and approaches. It is thus time to take account of Asian perspectives on accounting and reporting for sustainability in the Asia-Pacific region.



Chapter 1. Asia Pacific Perspectives on Accounting for Sustainability: An Introduction

The interplay between “accounting” and “sustainability” or “sustainable development” has spurred a long-standing debate among academics and practitioners alike for decades. During the last 25 years, networks like the Environmental and Sustainability Management Accounting Network (EMAN) and the Centre for Social and Environmental Accounting Research (CSEAR) have played a central role in building research capacity and promoting this research field. Within this topic, the number of publications and researchers has increased, and corporate and practitioner interest is growing continually, but key challenges are also increasing. On a global scale, most global environmental and social sustainability indicators show a negative trend, reflecting the ever-worsening state of our planet (e.g., IPCC 2014; WWF 2016; Sachs et al. 2017).
Ki-Hoon Lee, Stefan Schaltegger

National Culture and Sustainability Accounting in the Asia Pacific Region


Chapter 2. Cultural Relevance in Environmental and Sustainability Management Accounting (EMA) in the Asia-Pacific Region: A Link Between Cultural Values and Accounting Values Towards EMA Values

Despite the increasing popularity of environmental and sustainability management accounting (EMA) in corporate sustainability management, researchers in the sustainability accounting and sustainability management field neglect the importance and the relevance of national culture and its effect on the level of implementation of sustainability accounting and management practices. Yet, to our knowledge, there is no recent study of how national culture affects corporate environmental and sustainability management accounting practices in the different nations where they operate. In order to provide new insights into the link between national culture and EMA practice, we adopt Gray’s (1988) Abacus 24(1):1–15 theory of cultural relevance in national accounting systems. In brief, Gray proposed a framework to explain how national culture affects national accounting system using Hofstede’s (1986) The cultural context of accounting: accounting and culture. Paper presented to annual conference of the American Accounting Association, New York culture dimensions. An understanding of the national culture and its effect on the adoption and implementation of EMA can help us to improve the relevance of EMA practice and implementation in different countries. Based on Gray’s (1988) Abacus 24(1):1–15 framework, we develop the link between national cultural values and EMA values. As original contributions to sustainability accounting, we propose four EMA value dimensions (symbolic versus action, reactionary versus responsible, voluntary versus transparent, and integration versus differentiation).
Ki-Hoon Lee, David M. Herold

Chapter 3. Country Readiness in Adopting Integrated Reporting: A Diamond Theory Approach from an Asian Pacific Economy

Different countries have exhibited dissimilar levels of adoption of IR. Yet, we still do not know why some countries enjoy more competitive advantage than others in IR adoption. The chapter addresses this gap by selecting Sri Lanka, a country which exhibits a high rate of adopting IR, to explain the national competitive advantage in its readiness for IR adoption. The chapter draws on its theoretical framing of Porter’s Diamond Theory. Ample availability of professional accountants, mounting stakeholder demands, a supportive accounting profession and intense competition among organizations aided by award schemes play a key role in propelling Sri Lanka towards a high adoption level of IR. Authors also identify the national culture of the country plays a key role in this process. In addition to its theoretical contributions, this chapter also sheds light on important implications for local and international institutions, policy makers, and various professions in identifying the requisite conditions for promoting new managerial tools and techniques such as IR or sustainability reporting (SR).
A. D. Nuwan Gunarathne, Samanthi Senaratne

Chapter 4. Corporate Values and Corporate Social Responsibility Communication Strategies in a Small Economy

This paper explores the influence that companies’ values have on CSR communication. In particular, it focuses on the impact of these values on the CSR communication strategies, communication medium, and CSR information quality. This paper employs the corpus linguistics methods to explore CSR dimensions, with the analytical focus on the companies’ postures. From pragmatic perspectives, the companies may adopt a strategy that best represent their relationship with the stakeholders. Hence, the CSR communication strategy may evolve from stakeholder information strategy to stakeholder response strategy to stakeholder involvement strategy. This evolution is consistent with deliberative democracy, which has a potential to affect corporations’ actions concerning stakeholders’ interests, and encourages constant improvement and transformation of institutional accountability in which the stakeholders can be fully engaged. Our empirical findings suggest that corporate values of social-centeredness and self-centeredness have a positive influence on the strength of CSR communication strategies. Furthermore, CSR communication strategies significantly influence the issuance of stand-alone CSR reports. Our findings also suggest that New Zealand companies use explanation and justification posture, which combines bolstering, differentiation, and transcendence, to legitimize business operations that link work, society, and environment. We found that New Zealand companies’ value orientation may have been influenced by national socio-political systems. Our study establishes a link between corporate values and CSR communication strategy in communicating the impacts companies have on the society and the natural environment. The emphasis is on the language of CSR reports as a linguistic mediation of communication between corporations and stakeholders.
Rashid Ameer, Radiah Othman

Environmental and Sustainability Performance Measurement and Management


Chapter 5. Managing Eco-efficiency Development for Sustainability: An Investigation of Top Carbon Polluters in Australia

Eco-efficiency as an important measure for integration of environmental and economic performance has been studied extensively in the past. However, previous studies are either conceptual or take a macro view of the empirical relationship between economic and environmental performance in an economy or industry. Little research has explored the actual integration in corporate practice. Using carbon emissions and their integration with corporate economic performance among Australian heavy polluters during 2009 and 2013, we analysed actual integration levels, improvements, patterns at the corporate level. Based on a typological classification of carbon efficiency developed in this study, we differentiate strong and weak eco-efficiency and identify the potential value drivers for the eco-efficiency results with regard to carbon emissions. The study finds that 54% of Australian top polluters have improved carbon efficiency since the implementation of Australian National Greenhouse and Energy Reporting (NGER) Act 2007. Among this, nearly 30% of companies achieve a strong carbon efficiency outcome. Economically strong carbon efficient firms (Golden Stars) are more common than environmentally strong carbon efficient firms (Green Stars). This pattern is consistent among weak carbon efficient and inefficient firms. Dirty Cash Cows whose focus is purely on economic growth while ignoring environmental images are a minority among the companies examined. For financially stressed companies, environmental engagement appears more likely to be a reaction to regulatory requirements. Consistently, the eco-efficiency improvement changes with the government carbon policy changes over the reporting periods, indicating an influence of regulatory pressures on corporate eco-efficiency.
Wei Qian, Amanpreet Kaur, Stefan Schaltegger

Chapter 6. The Role of Business Collaboration on Sustainable Performance: Evidence from Indonesia

Competition in the hotel industry is very intense. To survive in this highly competitive market, hotels must sustain their better than average performance over time—so called ‘sustainable performance’. To achieve and maintain such performance, hotels need to measure (monitor) their financial and non-financial performance. This paper argues that one way for hotels to achieve such performance is by collaborating with other organisations. Hence, the objective of the study was to examine the relationship between business collaboration and sustainable performance following the sustainability balanced scorecard concept, which includes financial, customer, internal business process, learning and growth, and social and environment perspectives. An online survey involving 85 hotel general managers was conducted to collect data from four- and five-star hotels located in Indonesia. Data analysis was performed using partial least squares. The results revealed that the relationship between hotel engagement in business collaboration and hotel sustainable performance in terms of internal business process, learning and growth, and social and environment perspectives was found to be positive and significant. Therefore, it can be concluded that business collaboration may assist hotels to improve their internal business processes, learning and growth, and social and environmentally related performances.
Riana Sitawati, Lanita Winata

Chapter 7. Final Ecosystem Services for Corporate Metrics and Performance

Ecosystem services approaches are material to business performance. However, the lack of sufficiently detailed and commonly used ecosystem services classification systems prevents companies from benefitting fully from them. The final ecosystem services perspective, embodied by the Final Ecosystem Goods and Services Classification System (FEGS-CS) and the National Ecosystem Services Classification System (NESCS), offers a way through key bottlenecks to mainstreaming ecosystem services in corporate decision-making and accounting. Compared to other systems, these are easier to use, improve materiality analysis, and aid stakeholder engagement. In addition, their potential to improve the accuracy of valuation makes them preferable for natural capital accounting. Companies that adopt this final ecosystem services (FES) perspective are likely to gain these immediate benefits and first-mover advantage, as this FES perspective is poised to become standard practice.
Charles Rhodes, John Finisdore, Anthony Dvarskas, Joël Houdet, Joel Corona, Simone Maynard

Environmental Management Accounting: Material Flows, Cost Accounting, and Business Cases


Chapter 8. Cost Behavior of Environmental Protection and Social Contribution Activities: Korean Evidence

In this study, we focus on the corporate social responsibility (CSR) management of Korean firms and examine whether their CSR costs (particularly environmental protection and social contribution costs) are properly and effectively managed. Results of the study suggest that the disclosure of environmental capital and social contribution spending does not appear to be a function of quantitative materiality, on average and across time. It is also shown that environmental conservation costs (ECC) and social contribution costs (SCC) demonstrate symmetric behavior while R&D costs show asymmetric behavior, which implies that when sales are decreasing, ECC and SCC decrease proportionately but R&D costs decrease less than the percentage of sales decrease. SCC is stickier for firms that have a share of foreign investment, which implies that foreign investors require management to increase or maintain SCC. CSR activities measured with ECC, SCC, and R&D costs do not change as the ownership of major shareholders changes. Finally, no difference has been found between environmentally sensitive industries and non-sensitive industries in terms of the cost behavior of environmental conservation and social contribution activities.
Keun-Hyo Yook, Il-Woon Kim

Chapter 9. Application of MFCA with LEAN to Improve Pajama Production Process: A Case Study of Confederate International Co., Ltd

This research aims to present an application describing how to integrate the widely accepted productivity improvement technique of LEAN with the environmental accounting management tool of Material Flow Cost Accounting (MFCA). This research followed the steps of LEAN thinking approach by identifying the hidden, non-value added activity and wastes throughout the manufacturing process. This research identified and eliminated the typical seven wastes, by examining the details of each process and operation for greater understanding of the current status of each process. This research used Value Stream Mapping and Material Flow Model to depict the efficiency and effectiveness of the current process stream. This research then converted both physical wastes and hidden system wastes into monetary units and applied the MFCA technique to identify and rank the sources of material, energy, and system inefficiency. Discrete system simulation was used to capture and simulate the uncertainty of the process in terms of varying processing time and random quality level of each manufacturing stage. The MFCA cost was then used to determine both negative and positive costs by accounting for the variances of the process and the quality. Next, the concept of system efficiency and continuous flow was used to improve and re-engineer the interrelationships between manufacturing processes. This resulted in waste minimization programs which can be considered as environmental improvement. Quality imperfection, defectives, and all material, energy, and wastes were analyzed and resolved with a sustainable improvement program. This waste minimization implementation approach helped the team to outline and select improvement alternatives consisting of process design, work design, product, process, quality improvement, etc. The waste minimization programs and the system optimization were justified with respect to the MFCA cost scenarios. The improvement solutions were implemented and evaluated with respect to the MFCA cost structure. The case study of the pajamas production process was used to illustrate the implementation of MFCA with LEAN application. This research study demonstrates how one can integrate MFCA with LEAN. Thus, this application leads to both productivity improvement and a sustainable production system.
Wichai Chattinnawat, Warangkana Suriya, Parichat Jindapanpisan

Chapter 10. Is Japanese Material Flow Cost Accounting Useful To Vietnam? A Case Study of a Vietnamese Seafood Processing Company

Environmental Management Accounting (EMA) is a crucial method used in environmental management systems by many Japanese companies for targeting cleaner production and sustainable development. Among various EMA tools, Material Flow Cost Accounting (MFCA) is determined to be the most useful approach. Existing studies have shown numerous successful cases of MFCA applications in Japan; however, there are only a few reported cases about EMA applications in Vietnam. This paper aims to ascertain the viability of using MFCA as an EMA method for Japan in order to determine this tool’s applicability to Vietnamese companies in their pursuit of sustainable development. Using the case study method, this paper discusses the usefulness and applicability of the Japanese MFCA approach in a Vietnamese context. In this work, a case study is used to answer the research question. The company under study is a small company from the seafood processing industry, which currently causes serious environmental problems in Vietnam. Using MFCA analysis, the results of the study show that the actual and hidden losses and waste in the production process of a company can be identified.
Den Thi Thu Nguyen

Sustainability Reporting: Challenges and Approaches


Chapter 11. The Functional Differentiation Between the International Integrated Reporting Council (IIRC) and the Global Reporting Initiative (GRI) in the Sphere of Sustainability Reporting

The International Integrated Reporting Council (IIRC) and Global Reporting Initiative (GRI) have concurrently issued guidelines for an alternative to current corporate reporting. The former issued International Integrated Reporting Framework, while the latter Sustainability Reporting Guidelines ver.4. As some commentators pointed out, the IIRC shifted its emphasis from sustainability-related information, which it shared with GRI, to investor-oriented information. Did GRI and IIRC plan to bifurcate their roles? If so, how did they do that? This paper aims to answer these questions with a focus on organizational structures, based on the strategy-structure–performance paradigm of organizational theory. Thus, shedding light on the differences in organizational structure can reveal the direction in which an organization is headed, as well as the strategies they would implement. Based on the results of organizational structure analysis and network theory, while GRI formed a network open to various stakeholders for creating new sustainability reporting practices, IIRC built a network that was dominated by financial stakeholders to apply the GRI guideline to investor-oriented guideline, in accordance with IIRC’s main purpose.
Kensuke Ogata, Sadako Inoue, Atsuki Ueda, Hiroyuki Yagi

Chapter 12. Determinants of Voluntary Environmental Reporting by New Zealand Regional Councils

This chapter examines the determinants of regional councils’ voluntary environmental reporting for the 5 years before the introduction of the Environmental Reporting Bill (ERB) in 2014. This book chapter offers a public sector perspective of the extent and manner in which environmental data is being reported. The study would bring new insights on what contributes to the understanding the factors that influence public sector organisations in voluntarily reporting on the environment. The results of the study would inform debate and discussion about whether policy interventions are needed to improve environmental outcomes through environmental reporting. The study is timely because there is an absence of pressure to comply with regulation before 2014 to legitimise regional councils’ actions via environmental reporting. Our descriptive analysis shows that regional councils had reported environmental information 5 years prior to ERB. The co-relation analysis shows that size, rates income, total income, financial leverage, population size and political ideologies are statistically significant with the level of environmental reporting. These findings support the political economy theory that the managers may be in the position to decide whether to report on the environment. The consideration includes the most powerful actors, such as the ratepayers and the central government for grants and funding. It is anticipated that the new legislation would change the landscape of the accountability from voluntary to mandatory; hence the regional council managers need to reprioritise the stakeholders they want to communicate with. Due to resources constraint, they might need to strategise and refocus their service delivery.
Radiah Othman, Nirmala Nath, Fawzi Laswad


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