Academic journal article Journal of Small Business Strategy

Sustainability Reporting and Its Implications for Family Firms

Academic journal article Journal of Small Business Strategy

Sustainability Reporting and Its Implications for Family Firms

Article excerpt

Introduction

The gravity of achieving sustainable organizational operations has been amplifying over the past two decades worldwide. This conceptualization of sustainability means to meet current needs while not compromising the ability to meet human needs in the future (World Commission on Environment and Development, 1987). The World Commission impetus for success is to measure today's progress in light of tomorrow's outcomes, a long-term perspective instead of a short-term perspective. An emerging and growing trend is the reporting of companies' sustainability performance, both voluntary and mandated. Nearly three fourths of the largest companies across 34 nations now participate in some form of sustainability reporting (KPMG, 2015).

The global economy is impacted by family firms that play a significant role in terms of growth and stability (Chrisman, Sharma, & Taggar, 2007). Family firms and the factors that shape their dynamics are important. If family firms continue their predominance in leading edge technology, they are likely to play a major role in sustainability efforts and reporting (Chrisman, Chua, & Sharma, 2005). Understanding the dimensions of the issue can be a first step in taking on this effort.

In this paper, we outline the current state of sustainability and sustainability reporting as a performance metric for the family business concerned with environmental sustainability. Common reporting frameworks and how these may advance sustainability goals are considered. The paper concludes with implications for family firms to integrate sustainability goals in order to better compete worldwide.

Sustainability Reporting

A now classic conceptualization of sustainability was offered by The World Commission on Environment and Development (1987) when it was defined as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs." For business organizations, sustainability is the process of meeting current stakeholders' needs, while not conceding or diminishing the capability to address their future needs (Hubbard, 2009). These definitions imply that organizations that focus only on short-term profits and current market demands need to change. They must also consider and take account of future impacts of current processes and outputs, as a system.

Referred to as the 3 Ps of People, Planet, and Profits, the triple bottom line is a sustainability concept that reframes sustainable organizational performance from a solely economic-focused entity to one that must also consider social and environmental dimensions (Elkington, 1994; Savitz, 2006). It builds on premises long embedded in organization policy and corporate social responsibility. Its focus on comprehensive results of organization activity renders triple bottom line reporting as an important mechanism to support sustainability goals (Slaper & Hall, 2011).

Reporting and frameworks for sustainability have been developing over several decades. Although fewer than 100 companies issued reports two decades ago, more than 6000 firms did so by 2013 (Ioannou & Serafeim, 2014). Global public pressure and the involvement of large companies has accelerated the scope for reporting and its importance. In some cases, reporting is voluntary and in other cases it is now mandated. In the United States, bodies such as the Securities and Exchange Commission (SEC) and the Sustainability Accounting Standards Board have developed requirements and set standards for integrated and economic sector reporting (Romero, Lin, Jeffers, & DeGaetano, 2014; Schooley & English, 2015). Research conducted by the accounting firm KPMG reveals that sustainability reporting is now practiced by roughly three out of every four of the biggest companies (73% of the N100, 34 nations). In the Fortune Global 500, 92% participate (KPMG, 2015). Companies offer rationales such as branding, cost savings, reputation, and risk management, among others, for voluntary reporting on environmental and social performance (Bonini & Bové, 2014; Chen & Kelly, 2015; Ernst & Young, 2014; KPMG, 2011; McKinsey & Company, 2010). …

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