Sustainability Disclosure and the Financialization of Social Sustainability

Abstract

This empirical study explores the financialization of social sustainability driven by sustainability accounting and reporting initiatives (SARIs). Since no globally accepted definition of what social sustainability encompasses exists, the paper asks how social sustainability is translated into the financial market language by SARIs as they provide standards for disclosing corporate non-financial performance and promote their concepts of social sustainability. The paper uses a two-step qualitative content analysis. First, it operationalizes social sustainability based on the empirical data of six sustainability rating agencies. Second, this operationalization is compared with the concepts created by three SARIs. The paper shows significant differences between the concepts of the SARIs and the rating agencies. While the rating agencies altogether interpret social sustainability with 83 distinct aspects, the SARIs, although differently created, use significant reduced concepts where 20% of these aspects are absent. The result of this financialization process could be a simplified and financially determined concept of social sustainability within die socially discourse. The research is limited to social sustainability and its financialization by SARIs. Individual indicators and their way or intensity to capture aspects of social sustainability were not part of the research interest. Further research should investigate the economic and the ecological pillars of sustainability as well as the usage of such financialized concepts within the society and especially by corporations. The paper unfolds the arbitrariness of operationalizing a qualitative phenomenon like social sustainability through the financial system. It discloses the need for looking at the mechanisms behind such processes and at the interests of the actors behind the frameworks. The paper reveals the financialization process driven by SARIs and demonstrates its simplifying effects on the concept of social sustainability. Furthermore, the paper shows that SARIs as metrics for non-financial aspects are troubled with a lack of transparency and a lack of convergence.

Prison break from financialization: the case of the PRI reporting and assessment framework

“…The valuation process of sustainability accounting standards has consequently been shaped toward quantification and financialization (Chiapello, 2015; Hall et al. , 2015; Woschnack et al. , 2021).…”

“…An essential concern for actors willing to put sustainability on the agenda of financial actors has therefore been to be able to demonstrate that the risks associated with sustainability could be of value for societywhether by measuring it or constructing itthat they need to be managed, and that doing so adds financial valueor what is commonly known as finding the "business case" for sustainability (Adams et al, 2020;Kaplan, 2020;Porter and Kramer, 2011;Young-Ferris and Roberts, 2021). The valuation process of sustainability accounting standards has consequently been shaped toward quantification and financialization (Chiapello, 2015;Hall et al, 2015;Woschnack et al, 2021).…”

“…Research abounds on the role of (financial) calculability in sustainability (Crane et al. , 2015; Cuckston, 2013, 2018; Gray, 2010; Woschnack et al. , 2021).…”

“…The literature on sustainability and accounting thus follows in the same vein. Research abounds on the role of (financial) calculability in sustainability (Crane et al, 2015;Cuckston, 2013Cuckston, , 2018Gray, 2010;Woschnack et al, 2021). To be deemed important (of value), sustainability issues have been primarily transformed into numbers that could later be given a financial value (Barman, 2015;Chiapello, 2015;Cuckston, 2013Cuckston, , 2018.…”

“…Though "financialization" provides economic actors with a simplification of the complex nature of sustainability issues it also poses a big problem: only sustainability issues that are calculable and financially material matter in the end (Lowe et al, 2020;Woschnack et al, 2021). However, many sustainability topics, such as biodiversity loss or urban development, remain hard to price.…”