Literature Review Lessons from others countries Regression model Recommendation Limitation Objectives: Explain why manufacturers and certain companies should issue TBL report Research questions: What is TBL reporting? What are the factors affecting the decision of issuing Triple Bottom Line report in Vietnam? What are recommendations for manufacturing companies and Vietnamese government? Triple bottom line: is an accounting framework with three parts: social, environmental (or ecological) and financial. (John Elkington, 1997). Figure 1 Three bottom line factors
Sustainability and triple bottom line reporting in manufacturing industry in Vietnam Hoang Thi Bich Ngoc Outline Literature Review Lessons from others countries Regression model Recommendation Limitation Objectives and research questions Objectives: Explain why manufacturers and certain companies should issue TBL report Research questions: - What is TBL reporting? - What are the factors affecting the decision of issuing Triple Bottom Line report in Vietnam? - What are recommendations for manufacturing companies and Vietnamese government? Literature review Triple bottom line: is an accounting framework with three parts: social, environmental (or ecological) and financial (John Elkington, 1997) Figure Three bottom line factors Planet People Profit Source: Created by author Literature review CSR: Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large - The World Business Council for Sustainable Development- Business benefits of TBL reporting • Enhancement of reputation and brand; • Securing a ‘social license to operate’; • Attraction and retention of high caliber employees; • Improved access to investors; • Reduce risk profile; • Identification of potential cost savings; • Increased scope for innovation; • Aligning stakeholders needs with management focus; and • Creation of sound basic for stakeholder dialogue Literature review • Manufacturing: The process of converting raw materials, components, or parts into finished goods that meet a customer's expectations or specifications • Sustainable manufacturing: The creation of manufactured products that use processes that minimize negative environmental impacts, conserve energy and natural resources, are safe for employees, communities, and consumers and are economically sound - the US Department of Commerce’s Sustainable Manufacturing Initiative- Theoretical framework • Legitimacy theory: Legitimacy is a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions (Suchman, 1995) • Stakeholder theory: suggests that companies will manage these relationships based on different factors such as the nature of the task environment, the salience of stakeholder groups and the values of decision makers who determine the shareholder ranking process (Donaldson & Preston, 1995) UK: Lessons from others countries • Treasury (Her Majesty's Treasury) issued guidance, minimum requirement • Award for sustainability reporting called Building Public Trust Awards • In 2013, 91% of companies published sustainability report (KPMG) Australia • 82 % of firms issuing report in 2013 • Heavy industry and resources-based sectors always has high rate of publishing report => In developed countries, TBL is popular It is highly appreciated in high profile industry Source: KPMG International, The KPMG survey of Corporare responsibility reporting,2013 Lessons from others countries Thailand • The growth in manufacturing sector caused the environmental crisis • In 1999, Thai listed companies were asked to promote and build corporate governance practices into their annual reports • In 2007, voluntary reporting was changed to a “comply or explain” approach due to the inefficiency of the previous policy However, Thailand does not have any regulation requiring corporate environmental reporting => In developing countries, TBL reporting is increasingly concerned as a tool for dealing with environmental crisis Overview of TBL reporting in Vietnam • CSR concept was first introduced by transnational companies (Nguyen, 2007) • In 2014, 28 companies in the top 50 companies in Ara Vietnam 2014 disclosed non-financial data • TBL report is still a voluntary report in Vietnam The majority of TBL disclosing companies are big corporation • With the growth in economy and manufacturing sections, Vietnam are facing with environmental crisis (Like Thailand in 1990s) • Today, TBL reporting is increasingly concerned in Vietnam, especially in the manufacturing sector Relationship between TBL reporting decision and factors • Model: Probit and logit • Reason: Probit and logit regression model is the nonlinear regression model designed for binary dependent variables • Factors: - Company age - Ranking in Ara Vietnam 2014 - Total debt - Return on assets - Total equity - Type of industry - Type of auditor Table 1: Hypothesis Variabl e Expected gap Theory Previous research author Age +/- Stakeholder Rank + Stakeholder Debt + Stakeholder and legitimacy Schipper (1981) - High debt -> need to cut cost -> Increase chance to harm people and planet -> Issue TBL to prove that they are social responsible - Gain support from public to raise performance ->Pay debt Equity + Stakeholder Bammer and Pavelin 2008 - High equity -> Many stakeholder group -> provide information in different aspect -> CSR - Large company -> Excess money for CSR activities ROA + Stakeholder King and Lenox (2001), Mathur (2000), Suttipun - Good performance ->spare money -> Do CSR Type of industry + Stakeholder Newson & Deegan(2002) - High profile industry -> more negative impacts on People and planet -> Need to prove that these impact are still acceptable -> TBL Type of auditor + Stakeholder Brammer and Pavelin (2008), Suttipun (2012) Reason - Old company -> diversify business and various stakeholders -> need to provide information in various aspects -> TBL - Good performance ->spare money -> Do CSR - Company use big auditor normally have good financial condition -> have money for CSR and issue TBL report Multiple Regression model Table 2: Coefficients in Probit and Logit model Variables Coefficient Standard error p>|z| Rank -0.0136 0.0212 0.532 Age 0.0122 0.2252 0.588 Debtm -0.0188* 0.0104 0.07 Equitym 0.2574** 0.1318 0.05 ROA 0.1007* 0.056 0.072 1.7206*** 0.6691 0.01 0.0962 0.5816 0.864 Manufacturing Big4 In which: *is the significant level at 10% ** is the significant level at 5% *** is the significant level at 1% Source: Illustrated by author Table 3: Regression model result Variabl e Expected Result sign sign Significant Meaning Age +/- + Insignificant Age of companies does not have significant impacts on TBL reporting decision Rank + - insignificant Ranking of companies does not have significant impacts on TBL reporting decision Debt + - Significant High debt amount companies tend to keep secret about their non-financial information Equity + + Significant The higher equity amount company tends to lead to sustainability reporting ROA + + Significant well-performed companies tend to be willing for sustainability reporting Type of industry + + *significant Companies operating in manufacturing industry tend to issue sustainability report Type of auditor + - Insignificant Type of auditor does not have significant impacts on TBL reporting decision Table 4: Result explanation Variabl Result e sign Significant Reason Age + Insignificant Young company has been aware about CSR and TBL reporting while in some old companies CSR is not focused activities Rank - insignificant Ranking criteria is complex (performance, activities,…) Debt - Significant High debt companies want to hide non-financial information They not want to use money for CSR and TBL reporting when in loss situation Equity + Significant High equity means they need to use TBL report to inform to stakeholders in various aspects ROA + Significant Good performance companies have nothing to hide They use TBL report to gain public trust Type of industr y + *significant Manufacturing companies disclose TBL report to ensure their impacts are still at acceptable level Type of auditor - Insignificant Vietnamese companies still use Big auditors to gain creditability of information They have not focus on sustainable report Recommendation For government - In long-term government should issue a guideline for Triple bottom line reporting in Vietnam - Regular verifying the true and fair of non-financial data by an independent organization - Manufacturing industry and other highly sensitive industries should be legally required to establish triple bottom line report Recommendation For Vietnamese companies -Vietnamese companies should use GRI guidelines and Sustainability reporting handbook issued by IFC as the framework for TBL reporting -High debt companies are suggested to be more open with non-financial data as it support them to gain the credit from creditors and avoid bankruptcy when stockholders are pessimistic about the current financial situation -Good performance companies should issue TBL report to advertise their CSR activities to public Recommendation For manufacturers In short term - Manufacturers are recommended using Big4 auditor to gain information credibility as well as use Big auditor and consultant in TBL reporting - Manufacturers are highly recommended issuing TBL report to gain trust and support from the public, then increase sales and performance Recommendation For manufacturers In long term - TBL report itself does not make company develop sustainably Only when a company operate ethically, would they gain long-term achievement - Manufacturers should set up their own codes of conducts and requirements in the working environment to avoid negative harms to environment and people, cut down the waste and increase efficiency Limitation Example 1: 1000 tons of waste were landfilled in the farm of director of Environment company at Ha Tinh province Subjective reasons Vietnam corruption perception index: Rank 112/168, Score 31/100 Institutions of the socialist-oriented market economy According to a study of William S.M (1999) culture and the political and civil system were the determinants of the amount of disclosure => The creditability of information is still questionable => Result did not show pattern in some variables Example 2: Vietcombank (rank 16th in Ara Vietnam 2014) did not issue TBL report but is ranked at 11th place in the Best 100 Vietnam working place Binh Minh plastic (Rank 11th in Ara Vietnam 2014) disclosed TBL report but the working place does not belong to the Best 100 Vietnam working place Limitation Objective reasons - Due to the limitation in time and budget, author cannot access the information source of General Statistics Office of Vietnam as well as cannot conduct interview with specialists Thank you for listening! Additional references Williams, S M (1999) Voluntary environmental and social accounting disclosure practice in the AsiaPacific region: an international empirical test of political economy theory The International Journal of Accounting, 34(2), 209-238 Muttanachai Suttipun & Patricia Stanto (2012), Determinates of Environmental Disclosures in Corporate Annual Reports of the Stock Exchange of Thailand (SET) ,Journal of Management Studies, School of Business and Management, Faculty of Business and Laws, The University of Newcastle, Callaghan Campus, Australia http://www.anphabe.com/vietnam-best-places-to-work http://vnexpress.net/tin-tuc/thoi-su/hon-100-tan-chat-thai-chon-lap-tu-lo-luyen-coc-cua-formosa3435298.html [...]... focus on sustainable report Recommendation For government - In long-term government should issue a guideline for Triple bottom line reporting in Vietnam - Regular verifying the true and fair of non-financial data by an independent organization - Manufacturing industry and other highly sensitive industries should be legally required to establish triple bottom line report Recommendation For Vietnamese... disclosing companies are big corporation • With the growth in economy and manufacturing sections, Vietnam are facing with environmental crisis (Like Thailand in 1990s) • Today, TBL reporting is increasingly concerned in Vietnam, especially in the manufacturing sector Relationship between TBL reporting decision and factors • Model: Probit and logit • Reason: Probit and logit regression model is the nonlinear... amount company tends to lead to sustainability reporting ROA + + Significant well-performed companies tend to be willing for sustainability reporting Type of industry + + *significant Companies operating in manufacturing industry tend to issue sustainability report Type of auditor + - Insignificant Type of auditor does not have significant impacts on TBL reporting decision Table 4: Result explanation Variabl... environmental reporting => In developing countries, TBL reporting is increasingly concerned as a tool for dealing with environmental crisis Overview of TBL reporting in Vietnam • CSR concept was first introduced by transnational companies (Nguyen, 2007) • In 2014, 28 companies in the top 50 companies in Ara Vietnam 2014 disclosed non-financial data • TBL report is still a voluntary report in Vietnam The majority... Thailand • The growth in manufacturing sector caused the environmental crisis • In 1999, Thai listed companies were asked to promote and build corporate governance practices into their annual reports • In 2007, voluntary reporting was changed to a “comply or explain” approach due to the inefficiency of the previous policy However, Thailand does not have any regulation requiring corporate environmental reporting. .. Recommendation For Vietnamese companies -Vietnamese companies should use GRI guidelines and Sustainability reporting handbook issued by IFC as the framework for TBL reporting -High debt companies are suggested to be more open with non-financial data as it support them to gain the credit from creditors and avoid bankruptcy when stockholders are pessimistic about the current financial situation -Good performance... manufacturers In short term - Manufacturers are recommended using Big4 auditor to gain information credibility as well as use Big 4 auditor and consultant in TBL reporting - Manufacturers are highly recommended issuing TBL report to gain trust and support from the public, then increase sales and performance Recommendation For manufacturers In long term - TBL report itself does not make company develop sustainably... ranked at 11th place in the Best 100 Vietnam working place Binh Minh plastic (Rank 11th in Ara Vietnam 2014) disclosed TBL report but the working place does not belong to the Best 100 Vietnam working place Limitation Objective reasons - Due to the limitation in time and budget, author cannot access the information source of General Statistics Office of Vietnam as well as cannot conduct interview with specialists... they gain long-term achievement - Manufacturers should set up their own codes of conducts and requirements in the working environment to avoid negative harms to environment and people, cut down the waste and increase efficiency Limitation Example 1: 1000 tons of waste were landfilled in the farm of director of Environment company at Ha Tinh province Subjective reasons Vietnam corruption perception index:... sign Significant Reason Age + Insignificant Young company has been aware about CSR and TBL reporting while in some old companies CSR is not focused activities Rank - insignificant Ranking criteria is complex (performance, activities,…) Debt - Significant High debt companies want to hide non-financial information They do not want to use money for CSR and TBL reporting when in loss situation Equity + Significant