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Understanding Sustainability Practices Through Sustainability Reports and Its Impact on Organizational Financial Performance
Beyond publishing annual reports, which document organizational activities and their financial performance, organizations are increasingly publishing sustainability reports to inform stakeholders and the public about their sustainability practices. This raises the question as to whether there is a correlation between sustainability practices and financial performance. However, sustainability reports contain huge bodies of text, and much time is required to analyze the content manually. Hence, text mining was employed in this study, by which the top-ten sustainability-related words in the sustainability reports were identified. Subsequently, these ten words were mapped to 5 UN SDGs: (1) Goal 3: Good health and well-being, (2) Goal 8: Decent work and economic growth, (3) Goal 9: Industry, innovation, and infrastructure, (4) Goal 12: Responsible consumption and production, and (5) Goal 13: Climate action, which were categorized into three themes: (1) Social (Goal 3), (2) Economic (Goal 8 and 9), and (3) Environment (Goal 12 and 13). The relationship between organizational sustainability performance and financial performance was subsequently examined with correlation analyses. The results revealed that organizations with higher FTSE Russell ESG ratings had higher GTI scores, which indicates higher transparency in their reporting. Organizations with higher FTSE Russell ESG ratings also had lower net profits, although the average net profit for these organizations was positive. Furthermore, no statistically significant relationship between FTSE Russell ESG and ROE was found. These findings suggest that ESG-rated organizations are still profitable, and that there is value in investing in ESG-rated organizations. Findings from this study provide an overview of the sustainability practices that local organizations are practicing, and could serve as a reference for other organizations to move towards a green economy.
Understanding Sustainability Practices Through Sustainability Reports and Its Impact on Organizational Financial Performance
Beyond publishing annual reports, which document organizational activities and their financial performance, organizations are increasingly publishing sustainability reports to inform stakeholders and the public about their sustainability practices. This raises the question as to whether there is a correlation between sustainability practices and financial performance. However, sustainability reports contain huge bodies of text, and much time is required to analyze the content manually. Hence, text mining was employed in this study, by which the top-ten sustainability-related words in the sustainability reports were identified. Subsequently, these ten words were mapped to 5 UN SDGs: (1) Goal 3: Good health and well-being, (2) Goal 8: Decent work and economic growth, (3) Goal 9: Industry, innovation, and infrastructure, (4) Goal 12: Responsible consumption and production, and (5) Goal 13: Climate action, which were categorized into three themes: (1) Social (Goal 3), (2) Economic (Goal 8 and 9), and (3) Environment (Goal 12 and 13). The relationship between organizational sustainability performance and financial performance was subsequently examined with correlation analyses. The results revealed that organizations with higher FTSE Russell ESG ratings had higher GTI scores, which indicates higher transparency in their reporting. Organizations with higher FTSE Russell ESG ratings also had lower net profits, although the average net profit for these organizations was positive. Furthermore, no statistically significant relationship between FTSE Russell ESG and ROE was found. These findings suggest that ESG-rated organizations are still profitable, and that there is value in investing in ESG-rated organizations. Findings from this study provide an overview of the sustainability practices that local organizations are practicing, and could serve as a reference for other organizations to move towards a green economy.
Understanding Sustainability Practices Through Sustainability Reports and Its Impact on Organizational Financial Performance
Lecture Notes in Civil Engineering
Geng, Guoqing (editor) / Qian, Xudong (editor) / Poh, Leong Hien (editor) / Pang, Sze Dai (editor) / Tay, Mavian Xin Yi (author) / Tay, Stephen En Rong (author)
2023-03-14
10 pages
Article/Chapter (Book)
Electronic Resource
English
Sustainability reporting , UN SDG , Sustainability practices , Financial performance , Return on equity Engineering , Building Construction and Design , Structural Materials , Solid Mechanics , Sustainable Architecture/Green Buildings , Light Construction, Steel Construction, Timber Construction , Offshore Engineering
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