SUSTAINABLE BUSINESS DEVELOPMENT PERSPECTIVES

Current Trends in Corporate Responsibility and Sustainability Reporting

Jana Kissová ¹ & Gabriela Dubcová ²

¹ University of Economics

² University of Economics

https://doi.org/10.5817/CZ.MUNI.P280-0197-2022-10

Abstract

Basic aspects of responsible and sustainable activities. The essence of the ESG pillars. Differences between ESG, CSR and SDGs. General rules for reporting on responsible behaviour. Principles of GRI reporting. ESG reporting methods and tools. Relevant information for ESG management communications and reporting. Implementation of ESG reporting. Implementation of ESG reporting according to OECD. 3 pillars of Research Design. Fuzzy Logic and Metta Analysis. Object of research UN Global Compact member companies in the sector "Software & Computer Services" in the V4 countries. Research objective - Status Quo of ESG in IT companies. Benefits of management and ESG reporting in leading companies.

Keywords: reporting, corporate responsibility, sustainability

1 Introduction

Reporting in the context of institutionalizing of the corporate strategy has long been one of the important tools for shaping it. In the context of corporate responsibility, it provides a comprehensive assessment of the performance of ethical business, mainly through a corporate responsibility report or adequate information on a website. An important part of this is information on the fulfilment of the objectives set in the previous period, but also the setting of new objectives for the next period in the form of operational or tactical objectives (Sedlácek, Suchánek, Spalek, & Stamfestová, 2011).

The aim of the scientific paper is to present the current trends in the reporting of responsible and sustainable activities, to get acquainted with the most important approaches, methods and tools used in reporting. To clarify the issues, it also includes a practical application of ESG reporting (Lašáková, Remišová, Bohinská, 2020).

2 Key aspects of responsible and sustainable activities

Before addressing reporting itself, we consider as necessary to define the distinction between responsible and sustainable activities for the sake of clarity and proper understanding (Rybárová, Majdúchová, Štetka, Luščíková, 2021).

• CSR (corporate social responsibility) - responsible business, which includes various activities of responsible companies, primarily in three areas: economic, social, and environmental.

• ESG (environmental, social and governance) - Sustainable entrepreneurship includes business behavior that addresses the environmental, social and governance (ESG) impacts of its activities (Cho, Y. 2022).

ESG ratings are used to assess businesses for sustainability, assigning a score to each business. For example, the following factors are considered in the rating (Kudla, 2021):

• " environmental: carbon emissions, raw material sources, product carbon footprint, toxic emissions and waste, biodiversity and land use, renewable energy opportunities,

• social: labor management, health and safety, labor standards, racial diversity among employees, women in the workplace, equal career opportunities, community outreach,

• corporate: diversity of leadership, executive remuneration, shareholder relations, disclosure of truthful information ".

3 General rules for responsible behaviour reporting

The requirement to report responsible activities is based on the adopted Directive 2014/95/EU of the European Parliament and of the Council of 22.10.2014. Based on this Directive, an amendment to Act No. 431/2002 Coll. on Accounting was adopted in 2015 in the Slovak Republic. According to it, it is necessary to publish - report the first information on corporate responsibility in 2018, as it came into force on 01.01.2017.

The obligation to disclose information on responsible activities applies to companies in the public interest with more than 500 employees, such as banks, insurance companies, asset management companies, etc. For publicly listed companies over 250 employees, there is an obligation to disclose diversity policies.

Companies may submit a report for the whole group, and it is not necessary that the report is also prepared by subsidiaries if information concerning subsidiaries can also be obtained from the report. That information shall be disclosed in the annual report. The method or methodology is not precisely defined, so it is up to the company itself to choose it ( Remeňová, Kintler, - Jankelová, 2020).

Principles of reporting

In terms of reporting, it is essential to respect the basic principles of the specific reporting guideline or methodology. The most used methodologies include GRI standards, SASB standards, Down Jones Sustainability Indexes, Integrated Reporting, and we will explain them in more detail under reporting methods.

The best known and most widely used tool for preparing corporate responsibility reports is the GRI Standards, which can be provided free of charge to any company. They define 10 basic principles that allow companies to make ongoing decisions in terms of defining the content, scope and quality of reporting in the annual report.

Table 1

GRI Reporting Principles

Source : https://www.globalreporting.org/standards/

There is a simple rule for reporting according to GRI standards: The performance of all entities that the company controls or has a decisive influence over should be included in the report.

Reporting methods

Reporting methods are generally the tools that companies use to disclose important financial or non-financial information (Maciková, Smorada, Dorčák, Beug. & Markovič, 2018 and Puškárová, Vašková, 2021). Standards set out specific and detailed disclosure requirements that help organizations determine what specific metrics or indicators need to be disclosed for each topic. In terms of reporting on responsible and sustainable activities, the following standards are used.

Table 2

Relevant reporting methods for responsible and sustainable activities

Source : https://www.measurabl.com/the-top-five-sustainability-reporting-frameworks-you-should-know/

ESG reporting in the context of sustainability

In the context of the sustainability concept, ESG reporting is coming to the fore in reporting. This report is issued by organizations dealing with the environmental (Environment), social (Social) and governance (Governance) impacts of their activities, under the single title of "Corporate Social Responsibility."

It includes qualitative disclosure of key themes, but also the quantitative data needed to measure how the business is performing in managing risks, exploiting opportunities, and implementing defined strategies in these areas.

" ESG reporting is an ideal and effective means of enabling companies and organizations to bring together in a single document the answers to the various questions that may come from stakeholders " (PwC, 2021 - https://www.pwc.com/sk/sk/esg-zodpovedne-podnikanie/esg-reporting.html.)

Creating an ESG report - a sustainability report - requires compliance with the terms of the relevant methodology and must contain balanced information from each area. At the same time, companies must specify how the relevant information is to be communicated and which information or indicators from the areas to disclose, within the ESG management framework (Potkány, Gejdoš & Debnár, 2018):

Figure 1

ESG Program Development

Source : https://corpgov.law.harvard.edu/wp-content/uploads/2020/09/esg-article-pic.png

The implementation of ESG reporting will be carried out according to the following procedure:

Figure 2

Standard procedures for implementing ESG reporting

Source: Own graph based on: https://en.frankbold.org/our-work/campaign/eu-directive-non-financial-reporting-and-corporate-governance

It is important to accept the general principles of proven processes for implementing OECD recommended practices:

Figure 3

Validated processes for implementing OECD recommended practices

Source : https://www.oecdguidelines.nl/oecd-guidelines/due-diligence

4 Research Design

In our research activities, we have implemented the application of a three-dimensional perspective logic to the research process:

Figure 4

A three-dimensional perspective on the research process

HOW TO CONDUCT RESEARCH?

Research methodology

Source: Own figure

A/ Research objective

The main objective of the research is to find out the status and reasons for ESG responsible corporate behavior of UN Global Compact members in the "Software & Computer Services" sector in the V4 countries, declared primarily in ESG/CSR/SDG reporting.

B/ Subject of research

The subject of the study is corporate behavior according to ESG attributes declared in ESG/CSR/SDG reporting, corporate official websites, and financial databases. The research was conducted:

• on UN Global Compact member companies https://www.unglobalcompact.org/interactive

• in the sector "Software & Computer Services"

• in the V4 countries

Figure 5

The Structure of Enterprises

Source: Own elaboration

C/ Research methodology

Due to the complexity and integrality of the specific attributes of the topic, a combination of several relevant methods was used that is adequate to achieve the challenging objectives (for reasons of space, we only list the most relevant ones). The Fuzzy Logic method is dominant, since we have a low-numbered research object (Giuffrida, Dupuy-Chessa, Poli, & Céret, 2021) and a meta-analysis, while the data for the treatment of the topic are mainly obtained through available and relevant Internet sources, media, and background information from recent lectures by experts in the field.

Table 3

Adequate scientific research methods used in the research

Source: Own table

The Fuzzy logic method is applied with the following value scales for the 5 most relevant and predictable indicators:

Indicator	Scales of values
I. The extent to which the company implements environmental behaviour → the indicator informs about the extent to which the company successfully applies tools to mitigate negative environmental impacts in a comprehensive manner	Amn = 50 p.: a company whose strategy in operational activities not only applies but also successfully applies available tools (legislative, standards, code of ethics, ...) of high-quality environmental behavior to all stakeholders
	Amn = 37 p.: a company whose strategy successfully applies available tools (legislation and standards) for quality environmental behavior in its operational activities
	Amn = 24 p.: a company whose strategy partially applies the available tools (legislative and standards) of standard environmental behavior in its operational activities
	Amn = 11 p.: a company partially applies legislative instruments of standard environmental behavior in operational activities, problematically
	Amn = 0 b.: a company shows non-compliance with legislative requirements for standard environmental behavior
II. The extent to which the company implements social behaviour → the indicator informs about the extent to which the company successfully applies the tools of prosocial behaviour in a comprehensive way for the benefit of the company's human capital	Amn = 50 p.: a company whose strategy in operational activities not only applies but also successfully applies available tools (legislative, standards, code of ethics, ...) of high-quality social behavior to all stakeholders
	Amn = 37 p.: a company whose strategy successfully applies the available tools (legislative and standards) of quality social behavior in its operational activities
	Amn = 24 p.: a company whose strategy in its operational activities partially applies the available instruments (legislative and norms) of standard social behavior
	Amn = 11 p.: the company partially applies legislative instruments of standard social behavior in its operational activities, problematically
	Amn = 0 b.: the company does not comply with the legal requirements for standard social behavior
III. The extent to which the company implements corporate governance → the indicator informs about the extent to which the company successfully applies corporate governance synergy tools in a comprehensive manner	Amn = 50 p.: the company applies economic and management tools responsibly and successfully for the benefit of all stakeholders
	Amn = 37 p.: the enterprise applies economic and management tools responsibly, with minor problems in financing and/or corporate governance
	Amn = 24 p.: the company is responsibly applying the tools of economics and management, with problems in financing and/or management of the company, with impact on the internal environment
	Amn = 11 p.: the company applies the tools of economics and management responsibly, with problems in the financing and/or management of the company, with implications for both the internal and external environment
	Amn = 0 b.: the company is irresponsible in applying the tools of economics and management to all stakeholders
IV. The extent to which the company raises social awareness of ESG → the indicator informs about the extent to which the company successfully applies education, popularization and dissemination tools/methods in a comprehensive manner	Amn = 50 p.: the company purposefully applies education, popularization and dissemination tools/methods strategically for the benefit of all stakeholders
	Amn = 37 p.: the company purposefully applies tools/methods of education, popularization and dissemination selectively according to stakeholders
	Amn = 24 p.: the company purposefully applies tools/methods of education, popularization and dissemination selectively according to the problem/critical situation of the external environment
	Amn = 11 p.: the company applies tools/methods of education, popularization and dissemination spontaneously
	Amn = 0 p.: the company does not apply tools/methods of education, popularization and dissemination
V. Long-term sustainable behaviour rate → indicator characterising the long-term (declared) implementation of activities ESG	Amn = 50 p.: implementation over 5 years
	Amn = 37 p.: implementation in the interval of 3 to 5 years
	Amn = 24 p.: implementation at intervals of 2 to 3 years
	Amn = 11 p.: implementation between 1 and 2 years
	Amn = 0 p.: implementation within 1 year
Legend: Amn - value of the independent variable XM in the nth observation Source: Own elaboration according to https://www.mdpi.com/journal/mathematics/special_issues/fuzzy_2021

5 Research Results and Discussion

The results from the Fuzzy Logic application, which are included below, reflect several interesting facts.

Table 4

Fuzzy logic method results

Source: Own table

Companies in the sector "Software & Computer Services" show a high interest in human capital, given the values of 50 for each of the companies. This is natural, since IT services are very demanding from the personnel perspective, they also require adequate interest and appreciation. With less interest, companies approach environmental activities and implement only legislative obligations in the majority.

This standardized behaviour is generated, on the contrary, by the low intensity of environmental measures compared to other sectors of the economy. Behaviour in the aspect of corporate governance - strategic goal-oriented CSR management - appears problematic, especially for companies with shorter membership in the UN Global compact. This is also visible in the declaration of anti-corruption behaviour in company information. This fact also implies a relatively low score for indicator V. Raising social awareness of ESG - which is a moral obligation to the community and population to purposefully apply tools/methods of education, popularization, and dissemination strategically for the benefit of all stakeholders. It is extremely beneficial to ensure sustainability.

Indicator V. - Long-term sustainable behavior rate is the lowest of all 5, and these are predominantly companies with not only a short membership of the UN Global Compact but also primarily a shorter-term strategic interest in ESG for sustainability. The aggregate representation is in the form of a retransformation matrix:

Table 6

Retransformation matrix

Source: Own table

7 companies (44%) have the characteristic of the highest position in the ESG behavioural assessment and 9 (56%) have a lower position. This is an excellent state of the relationship with sustainability based on the application of ESG strategies, as there is no company with a score of 159 (64%).

Conclusion

In conclusion, we would very much like to present the benefits of ESG management reporting, both specifically, as perceived by business leaders, and aesthetically in a graphic form (Del Giudice, Rigamonti, 2020).

1/ Manulife Funds focused on the benefits of strategic management of ESG investing ( Koundouri, Pittis, Plataniotis, 2022)

Figure 6

Benefits of ESG Investing in Manulife Funds

Source: https://www. manulifefunds.com.hk/en/insights/5-benefits-of-esg-investing.html

2/ Deloitte strategies focused on the benefits of successful ESG investment management (Górka, Kuziak, 2022)

Figure 7

Benefits of ESG Investing in Deloitte

Source: https://www2.deloitte.com/xe/en/insights/topics/strategy/cfo-benefits-esg-investment.html

3/ Benefits of successful ESG management in TAUW GmbH (Jain, M. - Sharma, G. D. - Srivastava, M. 2019)

Figure 8

Benefits of ESG Management in TAUW GmbH

Source : https://www.tauw.de/news/blogs/the-benefits-of-esg-management.html

Acknowledgement

This paper is a partial output of the VEGA project of the Ministry of Education of the Slovak Republic No. 1/0836/21: "Creation of a corresponding behavioural model for ethics and integrity of institutions in the field of scientific research activities based on international comparison and setting up a system of determining attributes for its effective implementation and functioning" in the scope of 50% and the KEGA project No. 019EU-4/2022: "Strengthening the position of institutionalized sustainable development and inclusion through the support of research and education of the 2030 Agenda and inclusive diversity behaviour in the scope of 50%.

References

5 Benefits of ESG Investing. (2022, May 29). Retrieved from https://www.manulifefunds. com.hk/en/insights/5-benefits-of-esg-investing.html.

ACCESS Baza danych Bilans firmy z kilkoma oddziałami. Formularz, raporty, zestawienia. (2022, May 29). Retrieved from https://useme.com/pl/jobs/access-baza-danych-bilans-firmy-z-kilkoma-oddziaami-formularz-raporty,24371/.

Céginformációs és az Elektronikus Cégeljárásban Közreműködő Szolgálat. (2022, May 29). Retrieved from https://e-beszamolo.im.gov.hu/oldal/kezdolap.

CFOs find benefits from ESG investing. (2022, May 29). Retrieved from https://www2. deloitte.com/xe/en/insights/topics/strategy/cfo-benefits-esg-investment.html.

Databázy. (2022, May 29). https://finstat.sk/nase-sekcie/databazy.

Day, D. V. – Miscenko, D. (2015). Leader-member exchange (LMX): Construct evolution, contributors, and future prospects for advancing leadership theory. In T. N. Bauer, & B. Erdogan (Eds.), The Oxford handbook of leader-member exchange (pp. 9-28). Oxford University Press.

Del Giudice, A. – Rigamonti, S. Does Audit Improve the Quality of ESG Scores? Evidence from Corporate Misconduct. (2020). Sustainability 2020, 12(14), 5670; https://doi.org/10.3390/su12145670.

Due Diligence. (2022, May 29). Retrieved from https://www.oecdguidelines.nl/oecd-guidelines/due-diligence.

ESG – reporting. (2021) PwC, https://www.pwc.com/sk/sk/esg-zodpovedne-podnikanie/esg-reporting.html

Explore our Participants. (2022, May 29). Retrieved from https://www.unglobalcompact. org/interactive.

Flickinger, M. – Allscher, M. – Fiedler, M. (2016). The mediating role of leader-member exchange: A study of job satisfaction and turnover intentions in temporary work. Human Resource Management Journal, 20(1), 46-62. https://doi.org/10.1111/1748-8583.12091.

Giuffrida, T. – Dupuy-Chessa, S. – Poli, J.P. – Céret, É. (2021). Fuzzy4U: A fuzzy logic system for user interfaces adaptation. https://hal.archives-ouvertes.fr/hal-03283635/document.

Göbbels, M. (2022, May 29). The Benefits of ESG Management. Retrieved from https://www.tauw.de/news/blogs/the-benefits-of-esg-management.html.

Gooty, J. – Yammarino, F. J. (2016). The leader-member exchange relationship: A multisource, cross-level investigation. Journal of Management, 42(4), 915-935. https://doi.org/10.1177/0149206313503009.

Górka, J. – Kuziak, K. (2022). Volatility Modeling and Dependence Structure of ESG and Conventional Investments. Risks 2022, 10(1), 20; https://doi.org/10.3390/risks10010020.

Cho, Y. (2022). ESG and Firm Performance: Focusing on the Environmental Strategy. Sustainability 2022, 14(13), 7857; https://doi.org/10.3390/su14137857.

Jain, M. – Sharma, G. D. - Srivastava, M. (2019). Can Sustainable Investment Yield Better Financial Returns: A Comparative Study of ESG Indices and MSCI Indices. Risks 2019, 7(1), 15; https://doi.org/10.3390/risks7010015.

Jak zjistit informace o hospodaření konkurence. (2022, May 29). Retrieved from https:// mepodnikani.cz/start-podnikani/jak-zjistit-informace-o-hospodareni-konkurence/.

Koundouri, P. – Pittis, N. – Plataniotis, A. (2022). The Impact of ESG Performance on the Financial Performance of European Area Companies: An Empirical Examination. Environ. Sci. Proc. 2022, 15(1), 13; https://doi.org/10.3390/environsciproc2022015013.

Kudla, M. (2021). Sustainable investing or marketing? https://www.prosight.sk/blog/investicie/esg-investicie-udrzatelne-investovanie-alebo-marketing/.

Lašáková, A. – Remišová, A. – Bohinská, A. (2020). Best practices in ethics management: Insights from a qualitative study in Slovakia. Business Ethics. Willey 2020. ISSN: 0962-8770.

Maciková, L. – Smorada, M. – Dorčák, P. – Beug. B. – Markovič, P. (2018) Financial Aspects of Sustainability: An Evidence from Slovak Companies. Sustainability 2018, 10(7), 2274; https://doi.org/10.3390/su10072274.

Potkány, M. – Gejdoš, M. – Debnár, M. (2018). Sustainable innovation approach for wood quality evaluation in green business. Sustainability, 10 (9). ISSN 2071-1050.

Puškárová, P. – Vašková, M. (2021). Dynamics of Inequality and Growth in Europe: May Spatial Models Solve the Puzzle? Journal of Geographical Systems: Spatial Theory, Models, Methods, and Data, (2).

Remeňová, K. – Kintler, J. – Jankelová, N. (2020). The General Concept of the Revenue Model for Sustainability Growth. Sustainability 2020, 12(16), 6635; https://doi.org/10.3390/su12166635 

Rybárová, D. – Majdúchová, H. – Štetka, P. – Luščíková, (2021). D. Reliability and Accuracy of Alternative Default Prediction Models: Evidence from Slovakia In International Journal of Financial Studies: [International, Peer-Reviewed, Scholarly Open Access Journal]. - Basel: MDPI. ISSN 2227-7072, 2021, vol. 9, no. 4, pp. [1-33] online

Sedlácek, M.– Suchánek, P. – Spalek, J., – Stamfestová, P. (2011). Relationship between quality and performance: Tourism companies in the Czech Republic. Review of Economic Perspectives, 11(4), 195.

Special Issue "Fuzzy Sets, Fuzzy Logic and Their Applications 2021". (2022, May 29). Retrieved from https://www.mdpi.com/journal/mathematics/special_issues/fuzzy_ 2021.

Švikruhová, P. – Kapsdorferová, Z.– Dobošová, Ľ. –  Kataniková, R. (2021). Effective establishment of quality management systems and their impact on business performance. In International Journal for Quality Research. 15, 3 (2021), s. 831--844. ISSN 1800-6450.

The Top 5 Sustainability Reporting Frameworks You Should Know (2020). Measurabl, https://www.measurabl.com/the-top-five-sustainability-reporting-frameworks-you-should-know/

Corresponding author

Ing. Jana Kissová, PhD.

University of Economics in Bratislava, Faculty of Business Management, Department of Business Economy

Dolnozemska cesta 1, 852 35 Bratislava, Slovak Republic

jana.kissova@euba.sk

doc. Ing. Mgr. Gabriela Dubcová, PhD.

University of Economics in Bratislava, Faculty of Business Management, Department of Business Economy

Dolnozemska cesta 1, 852 35 Bratislava, Slovak Republic

gabriela.dubcova@euba.sk