Business Sustainability, Corporate Governance, and Organizational Ethics

CHAPTER 7Financial Economic Dimension of Sustainability

1. Introduction

A synopsis of the five economic, governance, social, ethical, and environmental (EGSEE) dimensions of sustainability performance is presented in previous chapters. The emerging move toward business sustainability worldwide has created unprecedented challenges, risks, and opportunities for business organizations to present reliable, relevant, transparent, and useful financial and nonfinancial information on their key performance indicators (KPIs) pertaining to all five EGSEE dimensions of sustainability performance. However, according to the shareholder primacy concept, the primary function of business entities is to maximize shareholder wealth through continuous sustainable economic performance. This chapter discusses the importance of financial economic performance, its KPIs, measurement, recognition, and reporting in the format of financial statements and its assurance in the framework of audit reports on financial statements and internal control over financial reporting (ICFR). This chapter also describes in detail the financial economic sustainability performance (ESP) dimension, its importance and relevance in ensuring a sustainable organization, and its value-relevant disclosures, reporting, and assurance in generating shareholder value. Nonfinancial governance, social, ethical, and environmental (GSEE) dimensions of sustainability performance and reporting are discussed in detail in Chapter 8.