Journal of Robotics, Networking and Artificial Life, Vol. 5, No. 1 (June 2018) 15–18___________________________________________________________________________________________________________A Comparative Study on the Delisting Ratings of Firms from the UN Global Compact in theInternational Management Environment

Kanako Negishi

Business Administration, National Institute of Technology, Ube College,
Tokiwadai, Ube City, Yamaguchi Pref., 755-8555, Japan
E-mail: negishi @ube-k.ac.jp
www.ube-k.ac.jp/en/

Abstract
This study clarifies unique characteristics of Japanese manufacturing firms in the international business management
environment using the United Nations Global Compact delisting ratio through a comparative study on Japan, China,Spain, and the US. Analyzing the number of countries and delisting ratios of the firms by size and sector, I find atrend that Japanese firms have a low delisting ratio than firms in other countries and that SMEs have a higher delistingratio than larger companies.

Keywords: United Nations Global Compact delisting ratio, Japanese manufacturing industry, code of conduct,
voluntary initiative

now the most common way to report a firm’s
sustainability worldwide.2
Sustainability is a very important aspect of a firm’s
international management, and participation in a global
initiative such as the GC is one way to demonstrate firms’
sustainability effects to their stakeholders. Previous
research tends to focus on the positive aspects ofparticipation in voluntary initiatives, such as increased
participation and progress in the labor working
environment in the GC. However, not all firms achievesustainable management with such international actions;
indeed, some firms are expelled from the GC at fixedintervals. Therefore, there is also a need to clarify thetendency for firms to fail and the reasons why they do.
This study examines the manufacturing sector, which
receives among the greatest amount of foreign direct
investment (FDI) in Japan, through a comparative study

1. Introduction
Firms’ international business environment has changed.
In particular, this has included a transition in the area ofsustainability. After the 1990s, many guidelines andprinciples for firms were developed by public
institutions and non-governmental organizations, such as
the United Nations Global Compact (GC), Global
Reporting Initiative (GRI), and Integrated Reporting(IR) to improve international firms’ activities. For
example, over 9,000 firms participated in the GC.*
Although some guidelines and principles are notlegally binding, such as the GC, there is a recent trend
toward integration to achieve comparability in theinternational management of sustainability amongfirms.1 Such integration binds firms’ management as ade facto standard. While GRI does not have legal power
to force firms to use GRI guidelines; such guidelines are*

United Nations Global Compact homepage, https://www.unglobalcompact.org/what-is-gc/participants (25 Nov. 2016 last access)Copyright © 2018, the Authors. Published by Atlantis Press.
This is an open access article under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).
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Journal of Robotics, Networking and Artificial Life, Vol. 5, No. 1 (June 2018) 15–18___________________________________________________________________________________________________________of Japanese, Chinese, Spanish, and US firms by size,
sector, and country.

database. To show the details of the industry index, thestudy focuses on the manufacturing industry.

2. Literature Review and Research Object

3. Method and Dataset

Ref.3 notes that the past few years have seen a rapid
increase in pressure regarding accountability oncompanies. The situation has become rather complex inrecent years, especially for multinational enterprises thatface myriad requests from shareholders and otherstakeholders in various markets with often differing
regulations and governance systems.
To respond to such pressure from stakeholders, firms
can participate in a voluntary initiative and adopt
principles and/or guidelines. Not only multinationals but
also SMEs do so because, in the view of many
contractors, certification is critical for firms to secure
foreign contracts in the first place, even thoughcompliance does not necessarily lead to a greater numberof committed buyers or any additional business.4
As noted above, not all firms successfully engage inand manage such voluntary initiatives. Although there is
criticism about firms’ participation in the GC, there is alack of information explaining “why some of thecompanies that join voluntary social and environmental
initiatives ultimately fail to live up to the requirement.5
In this regard, Ref.5 examines firm delisting by country,size, sector, international economic independence,
quality of governance institutions, and share of FDI percapita.
The emerging literature nevertheless lacks suchinformation on the practices of Japanese firms. Most of
the guidelines and principles have been developed inadvanced Western countries, as the concepts ofsustainability and corporate social responsibility (CSR)
have historically been developed in such countries.
However, some of the guidelines and principles
originated in Japan and have been adopted by Japanesefirms. Yet, none of these guidelines and principles havespread globally as with GRI, whose head office is in theNetherlands.
To clarify firms’ tendency to fail in this regard andthe reasons for such failure in the GC, this article
examines the number of delisted firms by country using
the data on delisting companies from Ref.5 for April 14,
2008 and Ultimo for 2004. Therefore, this paper renews
and expands the data to include the period from March
23, 2008, to February 09, 2018, by using the delisted

The analysis used data from the GC database ofparticipants and delisted participants. Firms are expelled
if they fail to submit their reports to the GC at least once
per year. The first date of delisting from the GC is March27, 2002.
According to the GC, a company is defined as a firmwith more than 250 employees, while an SME has fewer
than 250 employees but more than ten employees.
The target countries are Japan, Spain, China, and theUS. As Spain ranks at the top of GC participants bycountry, I selected countries based on the ranking in eachregion.
This study focuses on the manufacturing sector.
According to the GC, this sector includes automobile andparts, construction and materials, electronic andelectrical equipment, healthcare equipment and services,
household goods and home construction, industrial
engineering, personal goods, and technology hardwareand equipment.
4. Results and Findings
Figure 1 shows the number of delisted firms by country,
which has changed since previous research wasconducted. Ref.5 reported that the Philippines has themost delistings (98), followed by France (71 delistings),
Spain (48), Brazil, Bulgaria, India, Turkey, the US,
Cameroon, and China. The landscape of delisted firmsby country has changed substantially, with thePhilippines, Bulgaria, Turkey, and Cameroon no longer
in the top ten countries, and Mexico, Argentina, andMyanmar now in the top ten.
According to the UN annual report, the regionaldistribution of delistings closely resembles that of newjoiners. This trend is also generally demonstrated
quantitatively: Spain has the most participants, followed
by France, Brazil, and Mexico.
Table 1 shows the delisting ratios of countries by sizeand sector.

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Journal of Robotics, Networking and Artificial Life, Vol. 5, No. 1 (June 2018) 15–18___________________________________________________________________________________________________________

4.2. Sector
In the manufacturing industry, the automobile and partsand personal goods sectors have relatively lower ratios
than the other sectors. However, there is no clear
difference between sectors.

1200
1000
8006005. Considerations and Further Research

400

From this comparative study on the manufacturingindustry, we have clarified that Japanese companies’delisting ratios are overwhelmingly the lowest among
the examined countries. The number of Japanese firms
participating in the GC is not small. Moreover, once they
participate, they do not delist, unlike firms in othercountries. However, Ref.7 notes that there are many
more withdrawals among Japanese firms from the GC
than among firms from other countries. This is a uniquecharacteristic to Japanese firms. Vogel notes thatJapanese consumers do not request greater responsibility
among firms than consumers in Europe and the US do.
Indeed, firms in Western countries sometimes must
maintain high-quality sustainable management becauseof high consumer pressure. However, given the low ratio
of delisting among Japanese firms shown in the results,
it is necessary to explore the reasons why.
Second, the results show that the ratio is higher for
SMEs than for larger companies. Ref.8 noted thatmultinationals face growing pressure to account forsocial, environmental, and ethical problems occurring in2000Fig. 1. Number of delisted firms by country.

4.1. Size
Actions undertaken by large firms are more visible, sofirm size is an important factor for analysis.6 The ratio ofChinese SMEs is relatively high. However, the overall
trend is applicable to all countries, and it has not changed
from that in previous research.
By way of exception, seven parts of the table show
higher ratios for larger companies than for SMEs.
However, except for the company delisting ratio forgeneral industrials in China and the ratio for personal

Table 1. Delisting ratio of Spanish, Chinese, Japanese, and US firms by size and sector

SectorAutomobiles and parts

Spain
Rating oflargerRating ofcompany
SME
delistingdelisting
22.22%
70.59%

China
Rating oflargerRating ofcompany
SME
delistingdelisting
25.00%
60.00%

Construction and materials
Electronic and electrical equipment
General industrials
Healthcare equipment and service
Household goods and home construction
Industrial engineering
Personal goods
Technology hardware and equipment

40.54%
50.00%
50.00%
15.79%
100.00%36.36%
64.29%
25.00%

75.00%
66.67%
87.04%
40.00%
60.00%
75.00%
66.67%
76.19%

69.64%
45.24%
61.33%
47.62%
40.00%
53.23%
77.27%
52.94%

83.33%
86.36%
75.00%
20.00%
50.00%
90.00%
16.67%
100.00%Japan
Rating oflargerRating ofcompanySMEdelistingdelisting
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%

0.00%
0.00%
0.00%
0.00%
0.00%
50.00%
0.00%
0.00%

US
Rating oflargercompany
delisting
25.00%

Rating ofSME
delisting
60.00%

55.56%
60.00%
68.18%
100.00%0.00%
75.00%
54.55%
23.08%

70.97%
75.00%
74.58%
80.00%
57.14%
90.00%
12.50%
52.94%

various locations of operation, especially if they are large,goods in the US, there are few larger companies in thesesectors.

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Journal of Robotics, Networking and Artificial Life, Vol. 5, No. 1 (June 2018) 15–18___________________________________________________________________________________________________________visible, and active in countries with different norms andstandards than their home country.
It is believed that delisting ratios are influenced by
the number of firms, regardless of whether they aresuppliers in the global supply chain. Some firms requestthat their suppliers behave virtuously.4 The results
indicate that many firms in Spain and China participate
in the GC and use the GRI guidelines, although JapaneseSMEs have better financial conditions. However,Western firms provide little to no financial assistance tosuppliers to meet their standards.4 The results regarding
their delisting ratios offer some quantitative explanation
for such results.
The topic of sustainable management with respect tosuppliers in other countries is important, not only forfirms in such countries but also for companies inadvanced countries. Nike’s global supply chain indeed
triggered a global discussion regarding child labor in the1990s.
However, more research is needed to explain the results
explicitly in order to add more information on thereasons for delisting, as well as the situation in othersectors and other countries. Additionally, furtherexplanation regarding the relationship between the GC
and internal elements, such as firm governance, isrequired.

References
1. The Global Compact and Global Reporting Initiative,
Making the Connection: Using the GRI G4 Guidelines toCommunicate Progress on the UN Global Compact
Principles,
https://www.globalreporting.org/resourcelibrary/UNGCG4-linkage-publication.pdf (Accessed: Nov. 25, 2016)
2. GlobalReporting
Initiativehomepage,https://www.globalreporting.org/information/aboutgri/alliances-and-synergies/Pages/UNGC-andGRI.aspx%20 (Accessed: Nov. 25, 2016)
3. Kolk, A. (2008). Sustainability, accountability andcorporate governance: exploring multinationals' reporting
practices, Business Strategy and the Environment, 17(1):
1–15.
4. Vogel, D. (2005). The Market for Virtue: The Potential
and Limits of Corporate Social Responsibility (TheBrookings Institution, Washington, DC).
5. Knudsen, J.S. (2011). Company delisting from the UN
Global Compact: Limited business demand or domestic
governance failure? J. Bus. Ethics, 103: 331–349.
6. Tanimoto, K. (2016). Kigyou to syakai nogabanansukouzou no henka, in Proc. 90th Annual Meetingof the Japan Academy of Business Administration.
7. Negishi, K. (2018). Consideration of Voluntary Codes ofConduct in the Japanese Firms' Corporate Social
Responsibility: Focusing on the United Nations Global
Compact, Journal of Asian Management Studies, 24.
8. Kolk, A. (2016). The social responsibility of international
business: from ethics and the environment to CSR andsustainable development, J. World Bus., 51(1): 23–34.

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