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The Impact of Sustainability Accounting on Sales Performance in Fast Fashion Industry
Introduction
Context
The rising environmental awareness trends to affect consumers’ buying decisions. They may consider more about a company’s sustainability accounting when they make decisions. In the UK, the environmental awareness has been continuously growing. To be specific, an internet survey that collected data from 2,264 UK internet users between 16 and 24 years-old finds that they are rising their environmental awareness. The survey also reveals that UK consumers’ environmental awareness has impacts on their purchase decisions on brands. This means that they are more willing to buy from eco-friendly brands. More importantly, the survey finds that 80% of net citizens care the future of the environment, followed by 64% of net citizens who concern plastic issues, 57% of net citizens who worry about extreme weather, and 49% of net citizens who care about air pollution. Other researches also indicate that UK buyers consider environmental influences when they make purchase decisions. 41% of UK consumers consider environmental impact in the purchase process.
Aim
This research aims to study the impact of sustainability accounting on sales performance in fast fashion industry. It has the purpose to explore whether or sustainability accounting can improve sales performance.
Objectives
To develop a literature review about the impact of sustainability accounting on company’s sales performance
To analyse the impact by quantitative data from questionnaires and secondary data
To discuss the findings from data analysis with the literature review to generate conclusions and recommendations
Literature Review
Sustainability Accounting
With the rise of environmental awareness worldwide, many non-financial reporting initiatives are developed to make contribution to businesses reaching true sustainability. True sustainability is a term for a circumstance aligning with the viability on basis of viable systems model (VSM), and the rate of advancement to achieve viability in time prior to non-reversible destructions have been made is true sustainability (Isaksson and Johansson, 2010). According to Brundtland (2007), ‘sustainable development refers to development that fulfils the current needs while no damaging the capability of generations in future to fulfil their own needs’. The definition of Brundtland is consistent with Isaksson and Johansson (2010)’s. The non-reversible destructions and no damaging the capability of future generation are homogeneous. According the UN, Sustainability Development Goals (SDG) consist of 17 worldwide goals aiming to outline and plan to reach a greater and more sustainable future for all parties. SDGs focus on future, which aligns with the future generation in Brundtland ‘s definition. Based on these defines, non-financial reporting initiatives are developed, such as GRI, ISO, and comprehensive reporting. The purpose this essay is to discuss how these non-financial initiatives help CSR practitioners to achieve true sustainability. The essay highlights that these initiatives provide basic concepts, guidance and ideas to the practitioners to reach true sustainability.
Triple Bottom Line (TBL), GRI and ISO 26000 make contributions to CSR practitioners achieving true sustainability by helping them to address systemic issues. For example, planetary boundaries consider systemic issues and cover nine boundaries including climate change, biodiversity loss, biogeochemical, ocean acidification, land use, and so on. The nine boundaries are the major environmental issues that compromise sustainability. Meanwhile, TBL consists of three pillars including plant, people and profit and considers value created, value per environmental harm and value per social harm (Isaksson, 2007). TBL highlights that development must consider the interests of economy, society and environment. The pillar of planet, as environmental bottom line, stresses that a TBL organisation make efforts to bring benefits to the environment or at least do not damage and minimise its ecological footprints. Such organisations minimise their environmental impacts by controlling their energy consumption and non-renewables consumption as well as diminishing wastes. Therefore, planetary boundaries align with the pillar of environment in TBL. The boundaries only focus on environmental issues, whereas TBL guides CSR practitioners to find a balance among profits, people and plant. It is more realistic for them. Furthermore, ISO 26000: 2010 offers CSR practitioners guidance that helps them to realise what social responsibility is. Before the standards, there is not consistent understanding of CSR and sustainability. ISO 26000 however covers the gap and allows organisations to have a general standard. It provides the guidance including sustainable resource use, climate change migration and adaption, environmental protection, biodiversity protection, pollution prevention and so on, which are related with planetary boundaries. Furthermore, the guidance of ISO 26000 is very specific that techs CSR practitioners what responsibilities they should take. Additionally, GRI sustainability reporting empowers all organisations to report their performance in term of economy, environment, society and government. According to ISO (2014), ISO aligns with GRI in most of aspects. Thus, GRI also can help the practitioners to address the issues of planetary boundaries. In general, these non-financial reporting initiatives provide specific guidance to the practitioners to help address systemic issues such as planetary boundaries.
Non-financial reporting initiatives also help CSR practitioners to achieve true sustainability by assisting them to develop strategic management processes. Hahn (2013) illustrates that ISO 26000 helps the practitioners to develop a formal strategic planning in order to rise operational efficiency. He examines the contribution of ISO 26000 in each process of strategic planning. In environmental scanning, the standard is useful that helps the practitioners to be aware of external and internal expectations on CSSR and to have an overall analysis covering all important elements. In the process of strategy formulation, ISO 26000 provides an overview of stakeholder expectations. Therefore, it plays the role of helping organisations to find a detailed mission and vision and to define their major influences on society. In strategy implementation process, the standard provides new insights and ideas about the ways to reach sustainability. In strategy evaluation, the standard offers a general statement: ongoing activities should be regarded as necessary, so CSR practitioners are certainly taking their responsibility and can decide whether extra issues should be considered. This statement helps the practitioners to examine their strategy. Hahn (2013) concludes that the standard enables companies to evaluate their internal and external expectations toward CSR and measure their CSR practices even though it does not cover all processes of strategic management. In general, the standard provides guidance, ideas and insights as starting points that help organisations to integrate sustainability into their strategy.
Stakeholder Systems Model (SSM) proves that these initiatives help organisations to improve their CSR practices by linking CSR practices and corporate evaluations. It highlights the importance of CSR reporting in facilitating organisations to accomplish true sustainability. Whereas, non-financial initiatives such as GRI and ISO 26000 provides standards to organisations to report their CSR practices. Mason and Simmons (2014) develop stakeholder systems model of CSR, which is complicated and covers five major components. CSR outcome and reporting is one of important components of the model and links CSR process and operations and CSR cumulative corporate evaluations. In order words, companies need to report their CSR outcomes and then they can evaluate their CSR practices. These companies can use GRI and ISO 26000 as guidance to report their CSR practices. In SSM, CSR outcomes and reporting cover investor evaluation, customer and supplier assessment, employee assessment, and community & environment assessment. These assessments actually are aligned with TBL. To be specific, the investor assessment covers cost-benefit evaluation, revenue, customer loyalty, reputation advantages, and so on, which are the interests of investor. These can be attributed to the pillar of economy in TBL. The community & environment assessment in SSM accords with the pillar of society and environment in TBL. Therefore, companies also can adopt TBL as framework to report their CSR practices. In SSM, CSR reporting is the premise of cumulative company evaluation. The evaluation considers efficiency, effectiveness, equality, environmental impact, and external reputation and helps companies to improve their CSR practices. Given that CSR reporting in SSM and non-financial reporting initiatives such GRI and ISO 26000 are homogeneous, it is safe to deduce that these initiatives also can help CSR practitioners to evaluate their efficiency, effectiveness, equality, environmental impact, and external reputation and improve their practices thus reaching true sustainability.
In the perspective of CSR practitioners, non-financial initiatives are helpful for them to reach true sustainability. Many organisations adopt GRI or ISO 26000 to report their CSR practices, which helps them to improve transparency. With the benefits of these non-financial initiatives, these organisations can facilitate their credibility and reputations, which in return contribute to their economic returns or reputational benefits. This actually is helpful for them to accomplish true sustainability because economy also is an important part of sustainability. With the help of these non-financial initiatives, organisations can demonstrate their CSR practices to their stakeholders, transfer these practices to reputations and other advantages which bring benefits such as economic returns. Thus, these organisations are more motivated to reach true sustainability. Hubbard (2009) highlights that organisations must use concept such as TBL as based but they need more practical tools when they measure their sustainable performance. TBL and other non-financial initiatives provide a concept, ideas or directions for organisations to measure their sustainability. They also can be bases for more practical tools.
Sustainability Accounting and Corporate Performance
Bhatia and Tuli (2014) tried to study and assess the extent and level of sustainability reporting in India. They concluded saying that Indian companies are recognising the importance of sustainability reporting. Their results showed an optimistic picture regarding sustainability. Burhan and Rahmanti (2012) in their research attempted to examine the relationship between sustainability reporting as a whole and each of the elements of sustainability reporting with company performance. They measured the Sustainability variables by means of disclosure index, using Global Reporting Initiative (GRI) as the basis of calculating the index score. They used Return on Asset (ROA) as a measure of economic performance. Their result shows that sustainability reporting influences company performance. However, partially, only social performance disclosure influences the company performance. Eccles R. et. al. (2013) has investigated the effect of corporate sustainability on organizational processes and performance. They provided evidence that High Sustainability companies significantly outperform over the long-term, both in terms of stock market as well as accounting performance. Godha and Jain (2015) reviewed sustainability reporting and its benefits for the corporates. They examined the development in the Indian regulatory environment for sustainability reporting. Their findings reveal that the development of sustainability reporting is maturing in India. Indian companies are increasingly realizing that they have much to lose by not following sustainability reporting. Goyal Neeraj (2014) has attempted to find out level of disclosures among Indian companies, by selecting companies on BSE 500 index from different five sectors. He concluded saying that sustainability reporting is gaining more importance; therefore a framework is required to give space to the items ignored. Priyanka Aggarwal (2013) has conducted a research to find whether sustainable companies are more profitable. She analysed the impact of overall sustainability as well as separately analyzed the impact of four key components of sustainability (i.e. Community, Employees, Environment and Governance) on financial performance. Her research found no significant association between overall sustainability rating and financial performance. Weber et. al. (2005) on the basis ofa sample of 100 companies and using binary logistic regression has studied the relation between sustainability measures and financial performance of the firms. They used the GRI framework for their study. His results demonstrated that companies performing well on GRI indicators also perform well financially.
Research Methodology
Research philosophy
This research uses positivism philosophy for quantitative analysis. Positivism uses objectivity in scientific approach to study a phenomenon, which is suitable in laboratory and physics experience. The essence of positivism-based studies is to remove all human influence to create an absolute non-biased environment (Robson, 2012). Positivism philosophy uses a very strict structure to eliminate the impact of inquirers on the research topic. Thus, positivism-based studies are able to generate law-like findings and universals (Saunders and Lewis, 2012). The findings of positivism-based studies are reliable, convincing and less controversial because the quantitative analysis is robust and confident without the feelings of inquirers. In positivism -based studies, researchers adopt quantifiable observations and analyse data by statistical techniques via computer. Even though positivism-based studies need time to construct research framework, the data can be analysed by statistical software in an effective way (Gill and Johnson, 2002).
The use of interpretivism philosophy in this dissertation is to collect qualitative data. In contrast of positivism, interpretivism uses a loose research framework to collect and explain a phenomenon (Patton, 2002). So, researchers can have wide horizon to seek variables related with research phenomenon in the loose framework. More importantly, interpretivism is suitable for social research. The use of interpretivism covers the shortage of positivism which is ineffective to address social research. Interpretivism philosophy allows researchers to use their feelings and experience to perceive the phenomenon thus generating an in-depth of findings. Moreover, it enables inquirers to incorporate in research context and phenomenon to use feelings to perceive a social phenomenon (Saunders and Lewis, 2012).
Deductive Approach
The use of deductive approach is suitable for this dissertation to achieve its objectives. Deductive approach is to use existing knowledge to explain a phenomenon (Neuman, 2005). Researchers normally evaluate a larger scope of knowledge and gradually narrow down to the specific topic of research phenomenon (Hewson et al., 2003).
Research Strategy
This study will adopt case study as research strategy to have an in-depth analysis in a certain context. Case study is used to address in-depth analysis in a certain context. Case study helps researchers to incorporate in research context (Collis and Hussey, 2003). Based empirical investigation, case study enables inquirers to use different types of data and evidences (Collis and Hussey, 2003). Both quantitative data and qualitative data are allowed in a case study. Creswell (2007) highlight that case study focuses on the connection between phenomenon and context. By case study, researchers accomplish those research objectives which relate with context and process.
This research analyses one business case: H&M, which is rewarded as one of the most sustainable fashion brands around the world.
Data collection
This research collects secondary data from H&M’s official websites, especially annual report.
It also adopts questionnaires to collect data from consumers of H&M. The sample size is 180
Self-selection sampling technique is applied.
Reference
Brundtland (2007) Framing Sustainable Development The Brundtland Report – 20 Years On, [online] Available at: < https://www.un.org/esa/sustdev/csd/csd15/media/backgrounder_brundtland.pdf> . [Accessed on 20 April 2020]
Hahn, R. (2013), ISO 26000 and the Standardisation of Strategic Management Processes for Sustainability and Corporate Social Responsibility, Journal of Business Strategy and the Environment 22,442-455.
Hubbard, G., (2009). Measuring organizational performance: beyond the triple bottom line. Business strategy and the environment, 18(3), pp.177-191.
Isaksson, R.: 2007, Product Quality and Sustainability in the Cement Industry. Proceedings of the 7th International Conference on Cement Chemistry, Montreal, Canada, 8–13 July.
Isaksson, R. and Johansson, P. (2010) Detecting Supply Chain Innovation Potential for Sustainable Development, Journal of Business Ethics, 97:425–442
ISO (2014) GRI G4 Guidelines and ISO 26000:2010 How to use the GRI G4 Guidelines and ISO 26000 in conjunction, [online] Available from:
Mason, C. and Simmons, J. (2014) Embedding Corporate Social Responsibility in Corporate Governance: A Stakeholder Systems Approach, Journal of Business Ethics, 119(1)
