Research motivation

Sustainable development “is development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (Brundtland’s Report of the World Commission on Environment and Development: Our Common Future, 1987). Sustainability approaches have highly important influences on these issues because firms are both major producers and consumers of goods and resources, producing severe threats to the sustainability of life. Consequently, firms can play an important role in developing sustainable societies. The EU Sustainable Development Goals in the 2030 Agenda lists “inclusive and sustainable economic growth”, “full and productive employment”, “sustainable production and consumption patterns”, as goals. Achieving them requires the active participation of the business sector.

Prior research has placed great emphasis on sustainability reporting as a driver for deep transformations in internal organisational processes. However, scholars note a failure to produce hoped for organisational change. Hence, a more comprehensive approach to examining sustainability in business organisations on many dimensions – sustainability orientation, sustainability systems, and sustainability reporting – is necessary.

Prior research has analysed those three dimensions in a disparate manner, e.g. the analysis of the extent of the alignment of a firm’s internal sustainability orientation with their external sustainability reporting and how sustainability systems serve sustainability orientation, sustainability reporting sustainability dimensions. Furthermore, prior research on the sustainability theme is typically analysed within one industry and has examined a specific aspect, like supply chains or environmental management. Research into wider relationships is lacking and the methods used have severe limitations.

In this project, to improve our understanding of sustainable development, we look at all three interrelated dimensions of business sustainability: sustainability orientation, sustainability systems and sustainability reporting. Sustainability orientation refers to the inclusion of sustainability in a firm’s overall strategy and business processes. Sustainability systems refer to sustainability data collection, categorisation and recording for internal decision-making purposes. Sustainability reporting refers to a firm’s external sustainability reporting to stakeholders.

In China, the business environment is characterised by the significant role of the government in state-owned enterprises’ (SOEs) governance, company regulation and enforcement. Political influences also affect firm engagement with sustainability, which can have positive or negative effects on sustainability if sustainability prevents government targets from being achieved. There are also studies reporting that the Chinese government encourages the adoption of sustainability in company operations.

Overall, stakeholder and legitimacy theories have not been successful in explaining sustainability reporting in China, but studies based on institutional theory and sustainability have shown promising potential. Unlike stakeholder and legitimacy theories, institutional theory does not presume the existence of certain societal arrangements, rather it allows the researcher to explore the role of institutions in context.

Fewer results are available on firm sustainability and its reporting in Finland. Finnish society is a Western democracy with strong press freedom, which creates a contrasting and therefore fruitful setting for analysing firms’ sustainability orientation and sustainability reporting. Scholars have quantified the development of environmental reporting in Finnish firms, the relationship between sustainability and market valuation and critically analysed reporting and shown its failure to meet the demands of good quality. Much remains to be examined in terms of how institutional forces affect sustainability in Finnish organisations.