Business Sustainability, Corporate Governance, and Organizational Ethics

CHAPTER 8Nonfinancial Dimension of Sustainability

1. Introduction

The financial economic dimension of sustainability performance, reporting, and assurance is discussed in Chapter 7. The nonfinancial dimensions of sustainability performance and reporting, including governance, social, ethical, and environmental (GSEE), are presented in this chapter. Nonfinancial dimensions of sustainability, also referred to as environmental, social, and governance (ESG) with ethics, are integrated into other dimensions. Corporate social responsibility (CSR) is one of the GSEE dimensions that is often interchangeably used as ESG. Regulators, investors, and business organizations worldwide are now interested in more information about GSEE. Consideration of nonfinancial GSEE sustainability activities can create both synergies and conflicts. These nonfinancial GSEE sustainability activities and performance can enhance the long-term value of the firm by fulfilling the firms’ social responsibilities, meeting their environmental obligations, creating an ethical workplace, and improving their reputation. However, these sustainability activities may require considerable resource allocation that may conflict with shareholder wealth maximization objectives and encourage management to solely invest in sustainability initiatives that would result in long-term financial sustainability. This chapter presents the nonfinancial governance, social, ethical, and environmental dimensions of sustainability performance, ...