2016-13
Introductory analysis of sustainable production in Southeast
Asia and Japan: Corporate disclosure, green purchasing,and macro situation
Michiyuki Yagi Katsuhiko Kokubu

Introductory analysis of sustainable production in Southeast Asia and Japan:
Corporate disclosure, green purchasing, and macro situation

Michiyuki Yagi and Katsuhiko Kokubu

Abstract
As an introductory analysis, this paper examines how to shift to the sustainable production inSoutheast Asia (especially in Thailand). The current situation of environment and supply chain
management in Southeast Asia is measly understood. This paper aims to understand the current
situation and future issues with discussion of related policy issues in Southeast Asia. Research
design of this study is divided into two parts; micro and macro viewpoints. From the micro
viewpoint, we examine corporate disclosure and green purchasing/procurement by adopting
neo-institutional theory and stakeholder theory. Regarding corporate disclosure, we use CDP data,
whereas, regarding green purchasing/procurement, we use Toyokeizai corporate social responsibility
data (focusing on Japanese firms). On the other hand, from the macro viewpoint, we examine thecurrent situation following Porter hypothesis and the framework of green product development ofSoutheast Asian countries. Based on some macro statistics such as OECD statistics and World Bank
data, we review the current situation and what should be discussed from these frameworks asremaining issues.

1Preface

Against the backdrop of 17 Sustainable Development Goals (SDGs) adopted by UN
member states in 2015, this paper focuses on goal 12: sustainable consumption and production(SCP). SCP is a consumption and production pattern that increases net welfare (from economic
activity) by reducing degrees of resource use and environmental burden, and improving quality oflife. Specifically, SCP considers the following things: improvement of recourse and energy use
efficiency, sustainable infrastructure, enhancement of access to basic service, afforestation, increase
in appropriate jobs, improvement of quality of live, and so on. Realization of these issues will help
to achieve the overall SDGs and related issues such as decrease in economic, environmental, andsocial costs, and poverty. To achieve goal 12, structured approach and cooperation will be needed
through supply chain (from production to final consumption). For example, approaches for
consumers includes consumer dialogue (e.g. environmental education), communication (e.g.
international standard and environmental labeling), and so on.
As an introductory analysis, focusing on the production side, this paper examines how toshift to the sustainable production in Southeast Asia (SA) (especially in Thailand). The current
situation of environment and supply chain management in SA is less understood, which is a
motivation of this study. This paper aims to understand the current situation and future issues withdiscussion of related policy issues in SA.
Specifically, research design of this study is divided into two parts; micro and macro
viewpoints. From the micro viewpoint, we examine corporate disclosure and green
purchasing/procurement by adopting neo-institutional theory and stakeholder theory. Corporate
disclosure and green purchasing/procurement are related to goal 12.6 and 12.7, respectively. Whileregarding corporate disclosure, we examine carbon and water disclosure, using CDP data, green
purchasing/procurement, we analyze Japanese firms in 2015, using Toyokeizai corporate social
responsibility (CSR) data. On the other hand, from the macro viewpoint, we examine current
situation following Porter hypothesis and a framework of green product development of SA

2

countries. Based on some macro statistics such as OECD statistics and World Bank data, we review
the current situation and what should be discussed from these frameworks as remaining issues.
This paper is structured into five chapters. From the micro viewpoint, Chapters 1 and 2
examine current situation of corporate carbon and water disclosure, respectively, in the world.
Chapter 3 analyzes current situation of green purchasing/procurement in Japan in 2015. On the other
hand, from the macro viewpoint, Chapters 4 and 5 analyze the current situation of SCP, comparing
SA countries with Japan. Chapter 4 tests Porter hypothesis whereas Chapter 5 adopts the frameworkof green product development, focusing on Thailand and Japan.

3

Acknowledgments

This study was carried out as part of the SESAMI project in Kobe University and was
supported by research grant from the Research Institute of Advanced Management. We thank Prof.
Chieko Minami, Dr. Jittima Tongurai, Dr. Gustavo Tanaka, and Dr. Shinya Horie for cooperation forthis year’s project and for constructive comments and suggestions. We also thank Mohammad Tazul
Islam and Qi Wu for supporting our research and proofreading this paper.

4

Table of contents

Preface .................................................................................................................................................. 2
Acknowledgments ................................................................................................................................ 4
Table of contents ................................................................................................................................... 5
Chapter 1. Carbon Disclosure in response to institutional pressure in Japan and Southeast Asia
(Naima Khatun, Michiyuki Yagi, and Katsuhiko Kokubu)................................................... 6
Chapter 2. Water Performance Disclosure and Stakeholders: Trend and Relevance (Yaokun Liu,
Michiyuki Yagi, and Katsuhiko Kokubu) ........................................................................... 23
Chapter 3. Corporate governance and green purchasing and procurement in Japan: Empirical insightsfrom a neo-institutional framework (Hayato Fujii, Michiyuki Yagi, and Katsuhiko
Kokubu) .............................................................................................................................. 40
Chapter 4. Sustainable Consumption and Production: The Porter Hypothesis testing in ASEAN andJapan (Wencheng Guo, Michiyuki Yagi, and Katsuhiko Kokubu) ..................................... 56
Chapter 5. Green product development in Japan and Thailand: Academic, business and consumer
perspectives (Minhwa Kang, Michiyuki Yagi, and Katsuhiko Kokubu) ............................ 68

5

Chapter 1. Carbon Disclosure in response to institutional pressure
in Japan and Southeast Asia
Naima Khatun, Michiyuki Yagi, and Katsuhiko Kokubu

Abstract
This study investigates the relationship between carbon disclosure level and institutional pressure to
examine whether companies’ participation in Emission Trading Scheme positively influences carbon
disclosure level. Additionally, this study examines the relationship between climate change risk andcarbon disclosure level. Using a sample of 66 companies of Southeast Asia and 1118 companies ofJapan from CDP 2009 to 2015, we find that, both in Japanese and Southeast Asian companies, there
is no relationship between companies’ carbon disclosure level and participation in the Emission
Trading Scheme. We also find that carbon disclosure level is not influenced by regulatory andphysical risk; however, other climate change risk affects carbon disclosure level to some extent bothin Japan and Southeast Asia. By adding new findings on the perspective of neo-institutionalframework to the literature, we find the disclosure level of companies in Japan and in Southeast Asia
is not affected by Emission Trading Scheme participation as well as by institutional pressure.

Key words: corporate disclosure; climate change; neo-institutional theory
JEL classification: M14, M41 Q56

61. Introduction
This is a well-proved statement that carbon emission is one of the major threats to thequality of sustainable consumption and production (SCP). Moreover, from a widely and commonly
accepted definition of SCP, it can be derived that “the production and use of services and related
products, which respond to basic needs and bring a better quality of life while minimizing the use ofnatural resources and toxic materials as well as the emissions of waste and pollutants over the life
cycle of the service or product so as not to jeopardize the needs of future generations” (UNEP,
2015). In addition, sustainable development goal (SDG) 12.6 stimulates companies, particularly
large and multi-national companies, to adopt sustainable practices and to incorporate sustainability
information into their disclosure (UNEP, 2015).
In spite of these, there is no mandatory carbon disclosure regulation in most of thecountries around the world. But some companies disclose carbon emission and reduction
information voluntarily. Previous studies such as Rankin et al. (2011) stated that completeness ofcarbon disclosure is scarce and corporations infrequently disclose quantitative greenhouse gas(GHG) emissions. Similarly, Smith et al. (2008) added that climate change disclosure is still in an
unsophisticated stage of development but increasing number of companies is responding voluntary
to climate disclosure.
Previous studies confined to test companies’ propensity to voluntarily environmental
disclosures, the motivation of this study is to analyze how corporations concentrate on carbon
disclosure and to what extent companies react to intuitional pressure concerning climate change
disclosure.
The purpose of this study is to test the level of carbon disclosure and companies’ response
to some institutional pressures following neo-institutional framework. This is because
neo-institutional theory places importance on societal institutions. Our study aims to examine theassociation between companies’ carbon disclosure level and participation in Emission Trading
Scheme (ETS). Moreover, the expansion of climate change regulation and disclosure is being shaped7

by the prompt and exclusive growth of the role of institutional pressure as stated by neo-institutional
theory.
Consequently, we focus on the carbon disclosure level between Southeast Asian (asdeveloping and most emerging economy’s countries) and Japan. With this purpose, we scrutinize thelevel and scoring of carbon disclosure in Southeast Asia and Japan using CDP dataset from2009-2015. Additionally, the relationship between carbon disclosure level and companies’
participation in ETS, and climate change risk level has been analyzed in our study.
In short, the level of carbon disclosure in Japanese companies is increasing consistently
and the disclosure scores have started to increase in Southeast Asian companies since 2013 which
remained positive till 2015. On the other hand, both in Japanese and Southeast Asian companies,
there seem no relationship between companies’ disclosure level and participation in ETS. Therefore,
companies don’t respond to institutional pressure. Regarding climate change risk, both in Japan andSoutheast Asia, carbon disclosure level is not affected by regulatory or physical risk but otherclimate change risks influence carbon disclosure level to some extent.
There are five sections of this study. Section 2 reviews background of neo-institutionalframework and studies of carbon disclosure. Section 3 explains research methodology. While section
4 shows the results and section 5 concludes with limitation and direction for future research.

2. Backgrounds
2.1 Neo-institutional framework
This study follows neo-institutional framework to examine the determinants of carbon
disclosure. Recently, Ntim and Soobaroyen (2013) examined the relationship between corporatesocial responsibility (CSR) activities and corporate governance (CG) empirically. The authors
analyzed large listed corporations from 2002 to 2009 in South Africa, following neo-institutionalframework. Their results indicated that corporations with high government ownership, larger boards
and diverse boards practice more CSR activities than corporations with high block ownership and8institutional ownership. Authors likewise provided new signal that suggests better-governed
corporations are more prompted to pursue a more socially responsible program than theirpoorly-governed counterparts. Accordingly, authors also found positive relationship between
internal CG quality and CSR practices and independent directors and CSR practices. Their findings
finally concluded that a combination of CSR and CG practices has a strong positive effect on CFP as
their study proved that CG positively controls the CSR-CFP connection.
Another study by Ntim and Soobaroyen (2013) stated that, the neo-institutional framework
is a perspective which implies that the players in the market not only compete for capitals or
efficiency but also seek for ultimate legitimacy and social acceptance. The authors also addressed 3
types

of

institutionalpressure:

coercive/regulative,

normative,

andcognitive/mimetic.

Coercive/regulative factors comprise political pressures and the power of the government, normative
factors arise from strong influence of the professions, and mimetic force is a result from reacting to
uncertainty where in uncertainty is also an influential force that motivates organizations to become
more similar to one another.

2.2 CDP and related studies of carbon disclosure
Some studies recently analyzed carbon disclosure, using CDP dataset (e.g. Luo et al.,2012; Matisoff, 2013). CDP is a UK registered independent not-for-profit organization. It has thelargest collection globally of self-reported climate change, water and forest-risk data on behalf ofinvestors since 2002. Its goal is to collect and distribute high quality information that motivates
investors, corporations and governments to take action to prevent dangerous climate change andprotect natural resources. The CDP secretariat works with the Global Reporting Initiative (GRI) to
ensure this request and the GRI indicators are closely aligned and complementary.
Recently, Luo et al. (2012) and Matisoff (2013) used CDP dataset to investigate the levelof carbon disclosure and convergence in carbon reporting empirically. Luo et al. (2012) examine 291
companies published in CDP 2009 and shown that larger firms prefer to disclose carbon information
voluntarily even in the absence of required accounting and reporting standards because they are9aware of social responsibility. On the other hand, Matisoff (2013) conducted content analysis on
CDP responses from 2003 to 2010 focusing on the convergence in carbon reporting and trends
relating to carbon disclosure based on transparency over time across a wide range ofemissions-related activities. Their results presented a mixed perspective regarding the transparencyof firms relating to carbon management and accounting. As a result, firms have been increasingly
likely to employ a standardized accounting methodology and report numerical data in response to
Scope 1, 2, and 3 emissions queries. These suggest that firms are paying closer attention to carbon
management and reporting.
Other studies investigate internal and external institutional pressures in carbon disclosuresuch as participating in ETS. Such as, Rankin et al. (2011) investigated 187 firms of ASX300 index
in 2007, of which 80 companies (42.8 per cent) report GHG emissions and their analysis stated that
better corporate governance is positively related with the extent of GHG disclosure. They also
hypothesized the relationship between the firms participating in the ETS and the level of GHG
disclosure but did not find any association. In addition, Luo et al (2012) found that the firms
participating in the ETS disclose more about their carbon emission examining 291 firms reported by
CDP 2009.
Hence previous studies show both positive and no association between ETS participationand carbon disclosure level in firms reported by CDP. Our study examines carbon disclosure level in
response to external pressure of Southeast Asian and Japanese firms from CDP 2009-2015, which
add new findings to the literature.

3. Research Methodology
The purpose of this study is to examine the degree of carbon disclosure across countries
focusing on CDP carbon disclosure scores, and its trend both in Japan and Southeast Asiancompanies. We next investigate how institutional pressure affects carbon disclosure, focusing on
participating in the ETS and awareness degree of climate change risks.

10This study follows neo-institutional framework of Ntim and Soobaroyen (2013). In thisframework, Ntim and Soobaroyen (2013) mentioned that, the neo-institutional framework is a
viewpoint which suggests that the businesses focus on ultimate social acceptance along with striving
for resources or efficiency. There are three types of institutional pressures: coercive/regulative,
normative, and cognitive/mimetic. Among them, mimetic pressures arise from imitating anotherorganization's configuration because of the belief that the structure of the latter organization isbeneficial. Our study is conducted to examine the Southeast Asian companies’ and Japanesecompanies’ response to mimetic pressure.
This study conducts four types of analyses. First, we focus on the number of companies ofSoutheast Asia and Japan in CDP questionnaire 2009-2015. Second, the average disclosure scores ofeach country in Southeast Asia, and Japan have been shown. Third, number and percentage ofparticipation in ETS along with disclosure scores have been displayed. Finally, we concentrate on
the comparison between Japanese companies and Southeast Asian companies regarding climatechange risks (regulatory, physical and other risk) and their average disclosure scores.
Regarding the dataset, we use CDP disclosure score for comparing the degree of corporate
disclosure. The sample of our study consists all of the companies of Southeast Asian countries andJapan that could be retrieved from the index of climate change score and response of CDP from2009 to 2015. We found 25 companies of Thailand, 20 companies of Singapore, 7 companies of
Malaysia, 3 companies of Indonesia, 10 companies of Philippines, 1 company of Vietnam, and 1118
companies of Japan disclosing their carbon information as reported by CDP. Thus, in total, 66
companies of Southeast Asia and 1118 companies of Japan are the sample size of this research.
Regarding the ETS analysis, we use question number Q13.1 in 2013, 2014, and 2015,
Q14.1 in 2012 and 2011, and Q21.1 in 2010 from CDP questionnaire. It is noted that in 2009 and2010, there is no information regarding ETS participation in Southeast Asian and Japanesecompanies.
Regarding risk analysis, the risk identification has been divided into three categories:
regulatory, physical and other. These data have been retrieved from CDP database in response to the11question of climate change Q5.1 in 2015, 2014, 2013 and 2011. In case of 2010 and 2009 the ‘CC’question numbers are Q3.1, Q4.1, and Q5.1 (2009) and Q1.1, Q2.1, and Q3.1 (2010) respectively. It
is noted that only publicly available information has been incorporated in this study.

4. Results
Table 1 represents the number of Southeast Asian and Japanese companies disclosing theirinformation publicly in CDP from 2009 to 2015. It shows that in South East Asia, the observation
numbers were fluctuating but tend to be increasing over years (from 5 in 2009 to 23 in 2015). On theother hand, in Japan, the observation numbers were consistently increasing (from 127 in 2010 to 178
in 2015) although the maximum was in 2009 (215).
Table 2 represents the observations, average scores and standard deviation of all thecountries of Southeast Asia (individually and entirely), and Japan from the year 2009 to 2015. In
Southeast Asia, the average scores were decreasing from 2009 to 2012 by 59.0, 56.0, and 43.5
respectively. The average scores were then increasing rapidly from 2013 to 2015 (53.9, 66.4 and73.3 respectively). In addition, the standard deviations were increasing in Southeast Asiancompanies (from 9.9 in 2009 to 28.0 in 2015) except one falling in 2014 (23.0).However, inJapanese companies, it is noticed that the average scores increased every year consistently from 53.9
in 2009 to 91.1 in 2015. In contrast, the standard deviation in Japan also increased from 2009 to2012 but fluctuations remained from 2013 to 2015.
Table 3 shows the comparison between Japanese companies and Southeast Asiancompanies in participation of ETS along with average disclosure score. In Southeast Asia, from 2011
to 2013, all companies had no participation in ETS, and the average scores were moderately flat in2011 and 2013 (approximately 62) except for 2012 (46.6). In 2014 and 2015, only 11.76% and17.64% firms participated in ETS, respectively. Noticeable differences were that there was a large
difference between participation and no participation in ETS. The average scores in case of ETS

12

participation in 2014 and 2015 (88.5 and 73, respectively) are larger than in no ETS participation(63.46 and 68, respectively.
On the other hand, in Japan, there seems little difference in case of average scores between
participating and non-participating firms in ETS. However, the numbers of firms in participation andnon-participation in ETS vary apparent. For example, the number of ETS participation was 60 in2010 and 65 in 2015, whereas the number of non-participation was 66 in 2010 and 112 in 2015.
Table 4 represents the comparison between Japanese and Southeast Asian companies inclimate change risk and their average disclosure scores. The risks driven by changes in regulations,
physical climate parameters, and other climate-related developments have different number ofcompanies and score in different years. In Southeast Asia, 2 (33.33%) companies in 2009, 2(33.33%) companies in 2011, 7 (63.63%) companies in 2012, 15 (88.23%) companies in 2013, 11(64.70%) companies in 2014 and 17 (73.91%) companies in 2015 identified that they haveregulatory risk which may affect their business operation. If we look at the average disclosure scoresof the companies facing regulatory risks, the average disclosure scores were 69, 70, 51.14, 60.18,
69.9 and 49 in 2009, 2011, 2012, 2013, 2014 and 2015, respectively. Inversely, average disclosure
scores for the companies not facing regulatory risk were 44.5 in 2009, 57.66 in 2011, 50 in 2012,69.5 in 2013, 63.6 in 2014 and 56 in 2015. Therefore, there are mixed results. It seems no relation
between regulatory risk and disclosure level in Southeast Asian companies.
Nevertheless, 4 (66.67%) in 2009, 4 (66.67%) in 2011, 10 (90.90%) in 2012, 17 (100%) in
2013, 13 (76.47%) in 2014, and 19 (82.60%) in 2015 companies identified their physical risk.
Correspondingly, the average disclosure scores for the companies identifying physical risk were
59.25, 58, 51, 61.61, 67 and 49 in 2009, 2011, 2012, 2013, 2014, and in 2105 which were fluctuatedrather than consistency like the number of companies. Conversely, average disclosure scores for thecompanies not facing physical risk are 39.5 in 2009, 40.5 in 2010, 0 in 2012 and 2013, 71.66 in 2014
and 59 in 2015. Companies that were facing physical risk disclose more from 2009 to 2013 but lessin 2014 and 2015 than the companies not facing physical risk. Hence, it seems also mixed result
which represents no relation between physical risk and disclosure level in Southeast Asia.

13

Regarding other climate change risk, the numbers of companies which that identified therisk are 4 (66.67%) in 2009, 4 (66.67%) in 2011, 7 (63.63%) in 2012, 13 (76.47%) in 2013, 11(64.70%) in 2014 and 17 (73.91%) in 2015. Disclosure scores were 59.25 in 2009, 58 in 2011, 51.28
in 2012, 59.09 in 2013, 64 in 2014, and 52 in 2015. On the other hand, average disclosure scores forthe companies that were not facing other climate change risks are 39.5 in 2009, 40.5 in 2011, 49.67
in 2012, 51.33 in 2013, 76.6 in 2014 and 47 in 2015. This indicated that except in 2014, companies
having other climate change risk disclose more. In Japan, regarding regulatory risk, the numbers ofcompanies which identified the risk were 116 (92.8%) in 2009, 105 (83.33%) in 2010, 137 (98.56%)
in 2011, 140 (97.90%) in 2012, 149 (98.67%) in 2013, 161 (98.17%) in 2014, and 169 (95.48%) in
2015. Disclosure scores of the companies facing regulatory risk were 8.34 in 2009, 47.23 in 2010,
64.37 in 2011, 61 in 2012, 76.87 in 2013, 83.21 in 2014, and 92.42 in 2015. Inversely, average
disclosure scores for the companies not facing regulatory risk were 12.55 in 2009, 54.95 in 2010, 58
in 2011, 61.33 in 2012, 82 in 2013, 70 in 2014, and 56 in 2015. There seem diversified results as insome years companies having regulatory risk disclose more and in some years companies not having
regulatory risk disclose less. Thus, there seems no relation between regulatory risk and disclosurelevel in Japanese companies.
Regarding physical risk, the numbers of companies which identified physical risk were108 (86.4%) in 2009, 89 (70.63%) in 2010, 116 (83.45%) in 2011, 123 (86.01%) in 2012, 136(90.06%) in 2013, 150 (85.36%) in 2014, and 159 (89.83%) in 2015. Correspondingly, average
disclosure scores of the companies having physical risks were 8.78, 42.80, 64.42, 61.17, 77.55,
82.77, and 93.96 from 2009 to 2015, respectively. These scores also show the same result as inregulatory risk where the disclosure level were increasing with the increase of companies facing
physical risk except in 2012 where the score falls to 61.42 from 64.42 in 2011. If the attention is
focused on the disclosure scores of the companies not having physical risk, it were 6.65 in 2009,43.92 in 2010, 63.65 in 2011, 60 in 2012, 71.53 in 2013, 89.12 in 2014 and 69.43 in 2015.
Therefore, no consistent outcome is noticeable in case of physical risk too, and there seems no
relation between physical risk and disclosure level in Japanese companies.

14

Regarding other climate change risk, the numbers of companies which identified other risk
were 109 (87.2%) in 2009, 85 (67.46%) in 2010, 99 (71.22%) in 2011, 117 (81.81%) in 2012, 135(89.40%) in 2013, 140 (85.36%) in 2014, and 149 (84.18%) in 2015. Accordingly, average
disclosure scores related to other climate change risks were 8.09, 46.90, 64.37, 60.83, 77.04, 83.51,
and 93.96 in 2009, 2010, 2011, 2012, 2013, 2014, and 2015, respectively. This trend is similar toother two types of risk as the numbers of companies facing other climate change risks wereincreasing except in 2010 and disclosure level was also increasing except in 2012. On the other
hand, the disclosure scores of the companies not facing other climate change risk were 7.06 in 2009,42.61 in 2010, 64.07 in 2011, 61.81 in 2012, 76.06 in 2013, 78.61 in 2014 and 74.81 in 2015. It isobserved that except in 2012, in all other years’ companies having other climate change risk disclose
more than the companies not facing other climate change although in some years the differenceswere negligible. There appears some relation between disclosure level and other climate change risk
in Japanese companies.
In summary, it can be commented that the level of carbon disclosure scores is increasing
every year in Japanese companies and fluctuating in Southeast Asian companies. On the other hand,regarding the companies’ participation in ETS and climate change risks, it found that companies do
not respond much in case of institutional pressure. Regarding climate change risk and average
disclosure scores, it is summarized that both in Japanese and Southeast Asian companies, there
seems no influence of regulatory and physical risk on companies’ carbon disclosure level but otherclimate change risks affect the level of carbon disclosure to some extent and that is proved both inJapanese and in Southeast Asian companies.

5. Conclusions
The purpose of this study is to find out to what extent corporations concentrate on carbon
disclosure and to check companies’ response to some institutional pressures. This study also aims tofind the relationship between carbon disclosure level and some climate change risk determinants.

15

This study conducts 4 analyses: 1) the number of companies in Japan and Southeast Asia which
disclose their information in response to CDP questionnaire; 2) average disclosure scores andstandard deviation of the Japanese and Southeast Asian companies; 3) comparison between Japaneseand Southeast Asian companies in case of participation in ETS along with average disclosure scores;
and 4) comparison between Japanese and Southeast Asian companies regarding climate change risk
and their average disclosure scores.
The findings of this study are as follows. First, carbon disclosure level was increasing
every year in Japanese companies but it is noticed that from 2012 the disclosure scores wereincreasing very rapidly. On the other hand, in Southeast Asian companies, the average disclosure
scores were fluctuated from 2009 to 2012 and increasing promptly from 2013 to 2015. Second,
companies both in Japan and Southeast Asia didn’t respond to institutional pressure as there seems
no significant relationship between companies participate in ETS corresponding to their average
disclosure scores. Third, regarding climate change risk, there seems no effect of regulatory andphysical risk on the disclosure level of Japanese and Southeast Asian companies but in case of otherclimate change risk it is noticed that there is little relationship between companies’ carbon disclosurelevel and other climate change risk.
This study contributes to neo-institutional theory by adding new findings considering
comparative analysis of companies in Southeast Asia and Japan participating in ETS which reveals
that companies in Southeast Asia and Japan do not respond to institutional pressure. Particularly
mimetic pressure has been examined in this study. Our study contributes to Nitm et al. (2013) study
assessing the relationship between external pressure (participation in ETS) and carbon disclosurelevel and finds no relationship between external pressure and carbon disclosure level.
Additionally, this study has some implications to investors, regulators, and policy makers
in various ways. Investors can have some ideas from this study that Japanese and Southeast Asiancompanies do not response to mimetic pressure which may help them to take better investment
decision. Regulators and policy makers will get some idea about the relationship of companies’
carbon disclosure level and external institutional pressure which they can utilize in case of imposing

16

new rules and regulations. Because, policy makers can check that companies in Japan and Southeast
Asia do not response to external institutional pressure and based on this finding they can enforce
new standard whether participation in ETS should be imposed as mandatory or voluntary rules.
Remaining issues are as follows. Our study contributes to neo-institutional framework by
examining only mimetic pressure while other two parts of institutional pressure such as coercivepressure and normative pressure are not examined in this study. Future research may focus on theother features of neo-institutional framework such as coercive pressure (engagement with policy
makers) or normative pressure (funding research organizations, engagement with trade association).
Also, relationship between some other variables of scope 3 carbon emission such as business travel,
employee commuting, processing of sold products and carbon disclosure level could also be
examined in future research.

17

References
Luo, L., Y.C. Lan, and Q. Tang, 2012, “Corporate Incentives to Disclose Carbon Information:
Evidence from the CDP Global 500 Report,” Journal of International Financial
Management&

Accounting,

Vol.

23

(2),

pp.

93-120.

doi:10.1111/j.1467-646x.2012.01055.x
Matisoff, D.C., 2012, “Privatizing Climate Change Policy: Is there a Public Benefit?” Environ
Resource Econ, Vol. 53 (3), pp. 409-433. doi:10.1007/s10640-012-9568-0
Ntim, C.G. and T. Soobaroyen, 2013, “Corporate governance and performance in socially
responsible corporations: New empirical insights from a neo-institutional Framework”,
Corporate Governance: An International Review, Vol. 21 (5), pp. 468-494.
doi:10.1111/corg.12026
Rankin, M., C. Windsor, and D. Wahyuni, 2011, “An investigation of voluntary corporate
greenhouse gas emissions reporting in a market governance system: Australian evidence,”
Accounting, Auditing & Accountability Journal, Vol. 24 (8), pp. 1037-1070.
doi:10.1108/09513571111184751
Smith, J.A., M. Morreale, and M.E. Mariani, 2008, “Climate change disclosure: moving towards abrave new world,” Capital Markets Law Journal, Vol. 3 (4), pp. 469-485. doi:
10.1093/cmlj/kmn021
United Nations Development Programme (UNEP), 2015, “Sustainable Consumption and
Production:

A

Handbook

for

PolicyMakers(GlobalEdition).”<https://sustainabledevelopment.un.org/content/documents/1951Sustainable
Consumption.pdf> (accessed May 12, 2016).

18

Table1. Number of Southeast Asian and Japanese companies disclosing their information publicly in CDP from 2009 to 2015
Year
2009
2010
2011
2012
2013
2014
2015
Total

Indonesia
Ind. Com.

‒
‒

‒
‒

1

1

‒
‒

‒
‒

1
1

1
1
19

‒

ThailandInd. Com.
1
2

‒

‒

SingaporeInd. Com.
2
2

‒

‒

MalaysiaInd. Com.
1
1

‒

‒

2
3
2
7
6

2
3
3
7
8
47

1
3

1
3

1
2

1
2

‒

‒

‒

5
6

6
8
46

‒

VietnamInd. Com.

‒
‒

‒
‒

‒
‒
‒
‒
‒
‒

2

3
25

‒

‒

Note: ‘Ind’ and ‘Com’ stand for industry and company, respectively.

19

‒
‒
‒
‒
‒
‒

1

1
2

Philippines
Ind.
Com.

‒

‒

1
2
3

1
2
3

‒

‒

2
2

2
2
21

‒

Total
5
1
7
11
3
16
23
66

Ind.
21
21
42
23
22
22
31

‒

Japan
Com
215
127
139
144
151
164
178
1118

Table 2. Carbon disclosure scores and standard deviation
Country
Indonesia
Malaysia
Philippines
Singapore
Thailand
Vietnam
SA
Japan

2009

2010

2011

2012

2013

2014

2015

obs

avg

s.d.

obs

avg

s.d.

obs

avg

s.d.

obs

avg

s.d.

obs

avg

s.d.

obs

avg

s.d.

obs

avg

s.d.

1
1
2
2
5
0
11
59

41.0
54.0
56.5
64.0
62.6
‒
59.0
53.9

‒
‒
2.1
1.4
11.3
‒
9.9
15.9

0
0
0
0
0
0
0
102

‒
‒
‒
‒
‒
‒
‒
60.5

‒
‒
‒
‒
‒
‒
‒
16.0

1
2
1
4
2
0
10
203

63.0
59.0
28.0
53.0
69.5
‒
56.0
61.6

‒
31.1
‒
14.8
0.7
‒
17.9
19.0

1
3
3
4
2
0
13
218

11.0
55.3
30.7
43.0
62.5
‒
43.5
66.1

‒
3.8
19.9
26.5
0.7
‒
21.6
19.4

1
4
2
6
5
0
18
209

32.0
68.0
34.5
52.0
57.0
‒
53.9
73.6

‒
14.1
29.0
25.7
34.8
‒
26.2
17.9

2
1
2
7
5
0
17
214

43.5
59.0
60.5
65.9
80.2
‒
66.4
78.3

2.1
‒
9.2
28.6
18.1
‒
23.0
20.2

1
3
2
8
8
0
22
173

45.0
54.3
53.5
80.5
81.8
‒
73.3
91.1

‒
36.9
23.3
31.2
19.7
‒
28.0
14.4

Note: ‘Obs’ denotes the number of observations, whereas ‘avg’ and ‘s.d.’ denote average and standard deviations of carbon disclosure scores,
respectively.

20

Table 3. Comparison between Japanese and Southeast Asian companies in case of participation in
ETS along with average disclosure scores

Year
2009
2010
2011
2012
2013
2014
2015

Average score
obs
Average score
obs
Average score
obs
Average score
obs
Average score
obs
Average score
obs
Average score
obs

South-East Asian Companies
Yes (ETS)
No
‒
‒
‒
‒
‒
‒
‒
‒
62.6
‒
6
‒
46.63
‒
11
‒
61.61
‒
17
‒
88.5
63.46
2
15
73
68
3
14

21

Japanese Companies
Yes (ETS)
No
‒
‒
‒
‒
47.43
49.62
60
66
63.72
64.84
63
76
67.44
69.73
58
85
78.01
75.22
67
84
79.50
79.38
69
95
96.51
87.82
65
112

Table 4. Comparison between Japanese and Southeast Asian companies regarding climate change risk and their average disclosure scores.

Year
2009
2010
2011
2012
2013
2014
2015

Average score
obs
Average score
obs
Average score
obs
Average score
obs
Average score
obs
Average score
obs
Average score
obs

Southeast Asian companies
Regulatory
Physical
Yes
No
Yes
No
69
44.5
59.25
39.5
2
4
4
2
‒
‒
‒
‒
‒
‒
‒
‒
70
57.66
58
40.5
2
4
4
2
51.14
50
51
‒
7
4
10
1
60.18
69.5
61.61
‒
15
2
17
‒
69.9
63.6
67.07
71.66
11
6
13
4
49
56
49
59
17
6
19
4

Others
Yes
No
59.25
39.5
4
2
‒
‒
‒
‒
58
40.5
4
2
51.28 49.67
7
4
59.09 51.33
13
4
64
76.6
11
6
52
47
17
6

22

Regulatory
Yes
No
8.34
12.55
116
9
47.23
54.95
105
21
64.37
58
137
2
61
61.33
140
3
76.87
82
149
2
83.21
70
161
3
92.42
56
169
8

Japanese companies
Physical
Yes
No
8.78
6.65
108
17
42.80
43.92
89
37
64.42
63.65
116
23
61.17
60
123
20
77.55
71.53
136
15
82.77
89.12
150
14
93.29
69.43
159
18

Others
Yes
No
8.09
7.06
109
16
46.90
42.61
85
41
64.37
64.07
99
40
60.83
61.81
117
26
77.04
76.06
135
16
83.51
78.61
140
24
93.96
74.81
149
28

Chapter 2. Water Performance Disclosure and Stakeholders: Trend and Relevance

Yaokun Liu, Michiyuki Yagi, and Katsuhiko Kokubu

Abstract
Goal 12 of Sustainable Development Goals and its target 12.6, how firms and what can be thematters for firms to adopt sustainable practice and to integrate sustainability information to theirreporting cycle is interested to be investigated. This study expands former study of carbon disclosure,by focusing on water performance disclosure and examining whether their results can transferrable
to water-related issues. This study analyzes 1) the awareness on water disclosure about companies,
2) the trends of water disclosure, and 3) the relevance of non-financial stakeholders and water
disclosure. Using data of CDP’s water projects from 2010 to 2015, this study confirms that regarding
water disclosure, the trend of water withdrawals and discharges is decreasing, whereas water recycle
and consumption tend to increase. The awareness of firms about water disclosure, such as requiring
their key to do water disclosure increases year by year but still low in general. This study finds thatall stakeholders are associated with water disclosure, and that regulator, local communities andemployees act as important factors. Furthermore, stakeholder customers in developed countries andwater utilities/suppliers in developing countries are also important for water disclosure.

Key words: corporate disclosure, water, stakeholder theory
JEL classification: M14, M41 Q56

23

1. Introduction“On 1 January 2016, the 17 Sustainable Development Goals (SDGs) of the 2030 Agenda
for Sustainable Development officially came into force” United Nations (2015a, 2015b). Over the
next fifteen years, with these new goals that universally apply to all, countries will mobilize efforts
to end all forms of poverty, fight inequalities, and tackle climate change. SDGs with 169 targets arebroader in scope and go further than the Millennium Development Goals (MDGs) (the goals whichwere set in 2000, and successfully ended in 2015), by addressing the root causes of poverty, and theuniversal need for development that works for all people (United Nations Development Programme,2015). The goals cover the three dimensions of sustainable development: economic growth, social
inclusion, and environmental protection.
Regarding SDGs, this study examines sustainable consumption and production (SCP) of
Goal 12 (ensure sustainable consumption and production patterns) in both developed and developing
countries. Specifically, this study focuses on Target 12.6: encourage companies, especially large andtrans-national companies, to adopt sustainable practices and to integrate sustainability information
into their reporting cycle. The motivation of this study is what can be the matters for companies toadopt sustainable practices and to integrate sustainability information into their reporting cycle.
Focusing on firms’ environmental disclosure, environmental performance seems a practicable way.
A number of previous literatures were focused on environmental (carbon) disclosure, whereas water
disclosure appears to have lack of research in recent years and is valuable to be investigated. This
study investigates the trends of environmental (water) performance disclosure from 2010 to 2015
and the relevance of non-financial stakeholders based on the former environmental (carbon)
disclosure study; Guenther et al. (2016).
In short, this study finds that the number of companies who would like to take part inwater disclosure tends to increase year by year. Although in specific categories of water disclosure it
is not increasing all the time, the awareness of water disclosure of firms keeps rising over the years.
Furthermore, no matter it is in developed or developing countries, non-financial stakeholder such as
regulator, employee, and local communities act as important factor to water performance disclosure.

24While in developing countries, water utilities/suppliers seem also very significant in developed
countries.
This paper is constructed in five sections. The next section contains a literature review ofGunther et al. (2016) and the introduction of CDP data. Section 3 explains our research methodology
and provides some information and descriptive statistics about our sample. Section 4 discusses our
results and section 5 draws conclusions.

2. Background
2.1 Stakeholder theory and corporate disclosure
In the environmental accounting field, the relationship between carbon performance andcarbon disclosure is an important issue. This study follows the research framework of Guenther et al.
(2016). Guenther et al. (2016) examined carbon disclosure from the viewpoint of stakeholder theory.
Results of their study are about carbon performance disclosure and only transferable toclimate-change issues. This study aims to expand their study to the wider field of environmental(water) performance or sustainability in general. Specifically, this study focuses on the awarenessabout water performance disclosure of companies, and the relationship between stakeholders andwater performance disclosure, to see whether the conclusions of Gunther et al (2016) can
transferable beyond climate-change issues and effect on water issues.
Stakeholder theory, as a very flexible socio-political concept, emerged with different
interpretations distinguishing between managerial, legal, and ethical approaches. Building on the
managerial view: business can be understood as a set of relationships among groups that have a stakein the activities that make up the business. Prior literature before Guenther et al. (2016) examined therelationship between environmental disclosure and environmental performance, often focusing on
only financial market-oriented control variables and financial stakeholders. Instead, Guenther et al.
(2016) analyzed the relevance of different non-financial stakeholder groups with environmental
disclosure.

25

Applying Tobit regressions, Guenther et al. (2016) analyzed the relationship between
carbon disclosure and the relevance of stakeholder groups: government, general public, media,
employees, and customers, by building on a worldwide sample from the three major CDP reports
from 2008 to 2011, resulting in a total sample of 3,631 observations. The five stakeholders’ pressure
can potentially affect corporate disclosure in the following reasons. Governments may be evaluatorsof corporate disclosure, seeking input on prospective legislation. General public may be interested in
the carbon performance of businesses and can pressure the government to change environmental
regulations. Further, as a consequence of increased public awareness about climate change, media
may influence the degree of corporate disclosure through increasing audience attention. Again,
employees may have also started to pay attention to a firm’s disclosed carbon performance. Finally,
many customers’ conscience regarding climate change may have obliged companies to adopt
pertinent policies and to report their carbon performance.
Guenther et al. (2016) found that 1) All stakeholders’ (government, general public, media,
employees, and customers) pressures affect carbon disclosure; 2) Only one stakeholder group(government) acts as a moderator for the relationship between carbon performance and carbon
disclosure; and 3) corporate carbon performance acts as a moderator effect between stakeholder
relevance and carbon disclosure.

2.2 CDPCDP is a global not-for-profit organization, founded in 2000 and headquartered in London.
It pioneers and provides the world’s only global natural capital disclosure system of over 4,500
companies, representing over 50% of the market capitalization of the world’s largest 30 stock
exchanges, and 110 cities from 80 countries’ report, share and take action on vital environmental
information. CDP operates its global disclosure system on behalf of 767 institutional investors
representing over a third of the world’s invested capital. The insight it brings enables investors,
companies, cities and governments to understand and act on the business case for reducing impacts

26

on the environment and natural resources. CDP works to transform the way the world does businessto prevent dangerous climate change and protect natural resources.
CDP’s water program works to catalyze action to improve water security globally. A 40%
global shortfall in supply is expected by 2030. Businesses as usual water management will put at risk
$63 trillion or 1.5 times today’s global economy. This water program motivates companies todisclose and reduce their environmental impacts, and accelerate the use of this data in multiple ways.
It has been six years since CDP water project came into force in 2010. From CDP water project’s
data, information about different categories of water disclosure from a large amount of companies
can be gathered. Thus, focusing on typical questions from each year’s questionnaires and analyzing
them can investigate the trends of change of water disclosure over years.

3. Methodology
While Guenther et al. (2016) examined about carbon performance disclosure andstakeholder issues; this study examines the degree of water performance disclosure and stakeholder’srelevance for water issues in business activity. This study aims to expand Guenther et al. (2016)
study findings to the wider field of environmental performance or sustainability in general.
Considering Target 12.6 of SDGs, this study divides the sample into developed and developing
countries, in order to find differences depending on economic conditions. This study investigates thetrends of water performance disclosure over years from 2010 to 2015 by CDP water questionnaire.
This study focuses on three issues: 1) the differences between developed and developing countries,
by particular questions from CDP water project’s questionnaires; 2) the awareness of companies
about water performance disclosure related requirement of suppliers; 3) the relationship between
stakeholders and water performance disclosure, distinguished by developed and developing
countries, in order to compare the results with Guenther (2016).
Regarding the first analysis, there are 4 categories of water performance disclosure in CDP
water projects (Table 1). These are water withdrawals, water discharge, water recycled, and water27

consumption. Table 2 shows key questions for calculating water performance disclosure in this study.
In questionnaires from 2010 to 2013, there are dichotomous disclosures (yes or no) of three out offour categories, where as there is no disclosure data about water consumption. While in 2014, allfour categories are included in questionnaire, answers for which are numeric, in 2015 answers arealso numeric but there are only three categories involved, except water recycled.
Regarding the second analysis (requirement of key supplier), this study uses questionnaires
from CDP water questionnaire: W6.4 (2010), W3.3 (2011), W3 (2012), W3.3 (2013), W2.5 (2014),
and W1.3 (2015). The questions from 2010 to 2015 is “do you require your key suppliers to reporton their water use, risks and management?” and its answers are Yes/ No/ no answer.
Regarding the third analysis, this study uses W2.4a (2014) and W2.7 (2015) questions.
The question is “which of the following stakeholders are always factored into your organization’s
water risk assessments?” Stakeholders are divided into customers, employees, investors, local
communities, NGOs, other, other water users at local level (LL), regulators (LL), statutory special
interest group (LL), suppliers, water utilities/suppliers (LL), and river basin management authorities(only in 2015). Its answers are divided relevant (included, included for suppliers/FA, not yet
included) three types, not evaluated, and not relevant (explanation provided, included) two types.
We focus on ‘relevant, included’ options to see the degree of relevance of each stakeholder.
Regarding developed and developing countries, sample firms are separated according to
the List of Developing Economics published in International Monetary Fund (IMF) in 2015. The
developed countries are Australia, Belgium, Canada, Finland, France, Germany, Hong Kong, Ireland,Israel, Italy, Japan, Luxembourg, Netherland, Norway, Portugal, Singapore, South Korea, Spain,
Sweden, Switzerland, Taiwan, United Kingdom, and USA. The developing countries are Bermuda,
Brazil, Chile, Colombia, Hungary, India, Indonesia, Mexico, Russia, South Africa, Thailand, andTurkey.

28

4. Result
4.1 Water performance disclosure
Table 3 shows the answers that are separated into four categories of water disclosure,which are water withdrawal, water discharge, water recycle, and water consumption. The percentage
of firms with answer ‘yes’ is calculated. The higher percentage means the higher degree of water
disclosure companies did. Total observation of companies tends to increase from 2010 to 2015. It
implies that the awareness of water disclosure of companies keeps rising over the time. In general,the percentage of water withdrawals and discharges appear decreasing over time, whereas water
recycle and consumption tend to increase.
Comparing each of the four items, the percentages of withdrawal are larger than thepercentages of discharge, whereas discharge is larger than recycle in general. It indicates thatcompanies from 2010 to 2013 paid more attention to the water disclosure in the order of withdrawals,
discharge, and recycle. In 2014 and 2015, the trends of water withdrawal, water discharges, water
recycle were similar each other as that from 2010 to 2013. However, the water consumption tends tobe reported more than water discharge in 2014 and 2015. In addition, regarding developed anddeveloping countries, comparing the percentage of total companies, companies from developing
countries (97%, 86%, 58%, and 44%) seem more willing to disclosure their water performance thancompanies from developed countries (95%, 82%, 46%, and 35%).

4.2 Requirements of key suppliers
Table 4 shows the percentage of requirements of key suppliers for their water disclosure.
The higher percentage means more companies require their key suppliers to disclose about water
operations. From 2010 to 2015, the percentage of disclosure requirement of supplier increased from
25% to 36% in developed countries. On the other hand, the percentage of developing countries tends
to be fluctuated, but relatively small (below 25% except for 2015). In total, it shows that morecompanies from developed countries (32%) are willing to do the requirement than the companies
from developing countries (23%).

29

4.3 Stakeholders
Table 5 and 6 shows stakeholder questions in 2014 and 2015 respectively. The upper sideof the tables’ shows developed countries and the lower side indicates developing countries.
Regulators at the local level (65%), local communities (58%), employees (58%), customers (52%),
and water utilities/suppliers (51%) were ranked by larger percentage in the developed countries in
2014. In the developing countries the highest degrees of relevance were also regulators at the local
level (79%), employees (71%), local communities (69%), investors (69%), and water
utilities/suppliers (57%). On the other hand, in 2015, the highest degrees of relevance in developed
countries were employees (72%), regulators at the local level (70%), local communities (69%),
investors (61%), and customers (59%). In developing countries the highest degrees of relevance
were also regulators at the local level (73%), employees (71%), local communities (68%), investors(68%), and water utilities/suppliers (60%).
This ranking of percentage shows that in the developing countries in 2014 and 2015, therelevance of stakeholders and water disclosure were similar, where highest rates were regulator at
the local level, employee, local communities, investors, and water utilities/suppliers. Whereas indeveloped countries, ranking changed slightly from 2014 to 2015 but the following four stakeholders,regulator at the local level, employee, local communities, and customers, tend to be in top five inboth years. This indicates that non-financial stakeholder (regulator, employee, and local
communities) acts as an important role to water issues. Note that these stakeholders do notnecessarily affect water disclosure, but have close relationship with corporate activity with water
issues. In developing countries, water utilities/suppliers seem also significant.

5. Conclusions
The purpose of this study is to investigate the trends of water performance disclosure overyears from 2010 to 2015, and to expand former literature Gunther et al. (2016) to the wider field ofenvironmental (water) performance or sustainability in general, to see whether the conclusions of30

Gunther et al. (2016) is transferable beyond climate-change issues and effect on water projects.
Considering Target 12.6 of SDGs, this study focuses on three points: 1) the differences of water
disclosure between developed and developing countries, 2) the awareness of firms about water
disclosure related requirements to their suppliers, and 3) the relationship between stakeholders andwater performance disclosure, distinguished by developed and developing countries.
The results have the following tendencies. Regarding the first analysis, in general, thehighest degrees of water disclosure were found in the order of water withdrawals, discharge,
consumption, and recycle. In addition, we find that companies in developing countries seem to be
more willing to disclosure their water performance than companies in developed countries.
Regarding the second analysis, the results show that firms’ water disclosure-related requirement of
their supplier increased year by year in developed countries (from 25% to 36%), whereas indeveloping countries that seems fluctuating but relatively small (below 25% except for 2015).
Regarding the third analysis, the results reveal that in recent years, the relevance of stakeholder andwater disclosure in the developing countries has a similar tendency. That is, highest rates are
regulator at the local level, employee, local communities, investors, and water utilities/suppliers.
Guenther et al. (2016) found that stakeholder groups (e.g. government GHG politics, thegeneral public, the media, employees, and customers) are regarded as relevant stakeholders to whom
the firms disclose their climate change related efforts. They found that firms headquartered incountries with stronger GHG politics (government), and more potential for the general public toinfluence the regulatory process disclose more carbon-related information. In this study of water
issues, regulator at the local level, local communities also act as important factors to water
performance disclosure. It means that the result of Guenther et al. (2016) about carbon disclosure
also can be transferable to water-related issues.
Furthermore, Guenther et al. (2016) shown that employees and customers as stakeholders
were positively associated with the carbon disclosure of firms. In this study, employees andcustomer act as important roles to firms in developed countries, whereas in developing countries
only employees affect water performance disclosure in a higher degree. In addition, water31

utilities/suppliers (instead of customers in developing countries) play a significant role in affecting
water disclosure.
Also, Guenther et al. (2016) revealed that government acts as a moderator for the
relationship between carbon performance and carbon disclosure. In this study, local regulators andlocal communities are appeared as major relevance with water performance disclosure. However,this study does not examine whether they act as a moderator or not.
From this study, we consider some policy implications. Regarding SDGs 12.6, in order toachieve integrating sustainability information in firms’ reporting cycle, water performance
disclosure should not be ignored. Although the awareness of firms arises, water disclosure of recycle
and consumption is still under-expectation. In addition, companies from developing counties should
be encouraged to require their suppliers about water disclosure-related efforts. Because it cannot be ahigh-quality water performance disclosure without knowing the water performance disclosure of
their raw material, which is provided by the suppliers. Policy maker (e.g. government) should dosuch encouragement to aware the importance of water related disclosure requirements in thedeveloping countries.
Furthermore, non-financial stakeholders are always being important factors for firms’
water performance disclosure. In order to encourage water disclosure of firms’ performance in bothdeveloped and developing countries, the pressures of non-financial stakeholders are needed.
Specifically, government should encourages stakeholders such as regulator at the local level,
employee, local communities, and water utilities/suppliers in developing countries to giveassessment towards firms, while encourage regulator at the local level, employee, local communities,
and consumer in developed countries. These kinds of encouragement will do a great help tocompleting SDGs’ target 12.6.
This study does not analyze the situation of water performance disclosure in certain
companies. Thus, further study can be conducted to examine the relevance of stakeholders of certain
companies.

32

References
Guenther, E., T. Guenther, F. Schiemann, and G. Weber, 2016, “Stakeholder Relevance for Reporting:
Explanatory Factors of Carbon Disclosure,” Business & Society, Vol. 55 (3), pp. 361–397.
doi:10.1177/0007650315575119
UnitedNations,

2015a,“The

Sustainable

Development

Agenda.”<http://www.un.org/sustainabledevelopment/development-agenda/>. (accessed May 12,2016)
United Nations, 2015b, “Sustainable Development Goals.” <https:// sustainable development.un.org/
post 2015/ transforming our world> (accessed May 12, 2016).
United Nations Development Program (UNDP), 2015, “The Millennium Development Goals Report.”<http://www.undp.org/content/undp/en/home/librarypage/mdg/the-millenniumdevelopment-goals-report-2015.html> (accessed May 12, 2016)33

Table 1 CDP Water Questionnaires for analysis
Year

2010

2011

2012

2013

2014

2015

Withdrawals

W13

W7.1

W7.1

W7.1

W5.1

W1.2a

Discharges

W15

W8.1

W8.1

W8.1

W5.1

W1.2b

Recycle

W14

W7.2

W7.2

W7.2

W5.1

‒

Consumption

‒

‒

‒

‒

W5.1

W1.2c

34

Table 2. Questions for Table 3
Year2010-2013

Key questions
Are you able to provide data, whether measured or estimated, on water
withdrawals/ discharge/ recycle/ consumption within your operations? Answers:
Yes/ No/ No answer.

2014

Please report the total withdrawal, discharge, and consumption and recycledwater volumes across your operations for the reporting period. Answers: Numericnumbers. (In order to keep consistent with the analysis of former years, in data
analyzing part the author decide to consider numeric numbers disclosed bycompany as the answer ‘yes’)

2015



Water withdrawals: for the reporting year, please provide total water
withdrawal data by source, across your operations



Water discharges: for the reporting year, please provide total water
discharge data by destination, across your operations

 Water consumption: for the reporting year, please provide total water
consumption data, across your operations
 Answers: Many different answer options for each question. (In order to keep
consistent with the analysis of former years, this study focused on Total
disclosure, and considered the answers disclosed in total column as theanswer ‘yes’.

35

Table 3 Water performance disclosures in developed and developing countries

Group/Year

obs

Withdrawals

Discharges

RecycleConsumption

2010

133

92% (122)

91% (121)

42% (56)

‒

2011

201

96% (193)

81% (163)

56% (113)

‒

2012

245

98% (240)

82% (200)

58% (141)

‒

2013

277

97% (269)

77% (214)

59% (164)

‒

2014

278

95% (265)

76% (212)

69% (192)

78% (217)

2015

328

93% (306)

88% (290)‒

91% (298)

Total

1462

95% (1395)

82% (1200)

59% (666)

85% (515)

2010

12

100% (12)92% (11)67% (8)

‒

2011

29

100% (29)

79% (23)

72% (21)

‒

2012

31

100% (31)81% (25)

81% (25)

‒

2013

45

96% (43)

82% (37)73% (33)

‒

2014

47

94% (44)83% (39)

94% (44)87% (41)2015

63

98% (62)95% (60)‒

94% (59)

Total

227

97% (221)

86% (195)

80% (131)

91% (100)Developed countries

Developing countries

Notes: The percentage of answer ‘Yes’ in water performance disclosure. See Table 1 for question numbers in each year.

36

Table 4. Disclosure requirement for Suppliers (%)

Developed countries

Developing countries

Year

obs

%

obs

%

2010

133

25% (33)12

25% (3)2011

201

30% (60)29

17% (5)2012242

31% (75)33

21% (7)2013

277

33% (91)45

16% (7)2014280

29% (82)47

32% (15)

2015

351

36% (127)65

23% (15)

Total

1484

32% (468)

231

23% (52)

37

Table 5. Degree of association between stakeholders and corporate activity (2014)
obs

Relevant,
included

Relevant,
included forsuppliers/FA

Relevant,
not yetincludedNotevaluated

Not relevant,explanation
provided

Not relevant,included(blank)Customers
Employees
Investors
Local communities
NGOs
Other
Other water users (LL)
Regulators (LL)
Statutory special interest groups (LL)
Suppliers
Water utilities/suppliers (LL)

251
251
251
251
251
251
251
251
251
251
251

52% (130)
58% (145)
50% (126)
58% (146)
42% (106)
4% (11)38% (95)
65% (163)
25% (63)35% (87)
51% (129)

7% (18)12% (30)
10% (24)
20% (49)14% (36)
1% (3)
20% (50)15% (38)
15% (38)
23% (58)
19% (48)

10% (25)
6% (15)10% (24)
5% (12)
7% (18)<1% (1)
9% (22)
4% (9)
8% (20)11% (28)
6% (15)14% (36)
14% (34)19% (48)9% (22)23% (57)
24% (60)
22% (55)
8% (20)33% (84)
17% (43)
11% (28)

9% (23)
3% (8)
3% (8)
1% (3)
4% (11)
2% (5)
3% (8)
2% (4)
5% (12)
4% (11)4% (9)

2% (4)
1% (2)
1% (3)
2% (4)
2% (5)‒
2% (4)
1% (2)
4% (9)
2% (4)
2% (5)

6% (15)
7% (17)7% (18)
6% (15)
7% (18)68% (171)
7% (17)
6% (15)10% (25)
8% (20)7% (17)Developing countries
Customers
Employees
Investors
Local communities
NGOs
Other
Other water users (LL)
Regulators (LL)
Statutory special interest groups (LL)
Suppliers
Water utilities/suppliers (LL)

42
42
42
42
42
42
42
42
42
42
42

45% (19)
71% (30)
69% (29)
69% (29)
55% (23)
10% (4)45% (19)
79% (33)
38% (16)
33% (14)57% (24)

12% (5)
7% (3)‒
12% (5)5% (2)‒
14% (6)
10% (4)
5% (2)
14% (6)
14% (6)19% (8)
14% (6)
5% (2)
7% (3)
17% (7)‒
7% (3)‒
21% (9)21% (9)14% (6)

10% (4)
5% (2)
19% (8)7% (3)
14% (6)
17% (7)19% (8)
10% (4)21% (9)14% (6)
10% (4)

10% (4)‒‒
2% (1)
5% (2)
2% (1)
5% (2)‒
7% (3)
10% (4)
2% (1)

2% (1)‒
2% (1)‒
2% (1)
2% (1)
2% (1)‒
2% (1)
2% (1)‒

2% (1)
2% (1)
5% (2)
2% (1)
2% (1)
69% (29)
7% (3)
2% (1)
5% (2)
5% (2)
2% (1)

Stakeholder
Developed countries

38

Table 6. Degree of association between stakeholders and corporate activity (2015)
Stakeholder
Developed countries
Customers
Employees
Investors
Local communities
NGOs
Other
Other water users (LL)
Regulators
River basin management authorities
Statutory special interest groups (LL)
Suppliers
Water utilities/suppliers (LL)
Developing countries
Customers
Employees
Investors
Local communities
NGOs
Other
Other water users (LL)
Regulators
River basin management authorities
Statutory special interest groups (LL)
Suppliers
Water utilities/suppliers (LL)

obs

Relevant,
included

Relevant,
included forsuppliers/FA

Relevant,
not yetincludedNotevaluated

Not relevant,explanation
provided

Not relevant,included(blank)

309
309
309
309
309
309
309
309
309
309
309
309

59% (182)
72% (223)
61% (189)
69% (214)
49% (150)
6% (20)50% (154)
70% (216)
36% (110)32% (100)45% (139)
55% (170)

7% (22)
9% (27)
6% (19)13% (41)
13% (41)
2% (5)
17% (51)
11% (35)
20% (63)17% (51)
19% (60)
19% (58)

6% (20)5% (15)
6% (19)5% (16)
7% (21)<1% (1)6% (19)5% (14)
9% (27)7% (22)
11% (33)
6% (20)11% (33)
7% (22)
16% (49)6% (17)19% (60)
28% (88)
17% (54)
7% (21)17% (51)
27% (82)
15% (45)
9% (29)11% (35)
3% (10)5% (15)
3% (10)6% (20)5% (14)
6% (17)2% (7)
9% (28)9% (29)5% (15)5% (15)

2% (7)‒
2% (5)<1% (1)
2% (5)<1% (1)
1% (2)‒
1% (4)
3% (8)
1% (4)
1% (3)

3% (10)4% (12)
4% (13)
3% (10)4% (12)58% (180)
4% (12)
5% (16)
8% (26)
6% (17)
4% (13)
4% (13)

62
62
62
62
62
62
62
62
62
62
62
62

50% (31)71% (44)68% (42)68% (42)56% (35)
10% (6)48% (30)
73% (45)53% (33)
35% (22)35% (22)60% (37)5% (3)
3% (2)‒
11% (7)2% (1)‒
13% (8)
6% (4)
5% (3)
3% (2)
13% (8)
8% (5)

15% (9)10% (6)
6% (4)
8% (5)
16% (10)2% (1)
8% (5)
11% (7)15% (9)15% (9)19% (12)
16% (10)13% (8)13% (8)18% (11)
8% (5)
16% (10)23% (14)23% (14)
5% (3)
16% (10)31% (19)
23% (14)
8% (5)

15% (9)‒5% (3)
3% (2)
3% (2)
11% (7)
5% (3)‒
5% (3)
6% (4)
3% (2)
3% (2)

2% (1)
2% (1)
2% (1)‒
3% (2)‒‒‒‒

2% (1)
2% (1)
2% (1)
2% (1)
3% (2)
55% (34)
3% (2)
5% (3)
6% (4)
6% (4)
3% (2)
5% (3)39

3% (2)
3% (2)‒

Chapter 3. Corporate governance and green purchasing and procurement in Japan:
Empirical insights from a neo-institutional framework

Hayato Fujii, Michiyuki Yagi, and Katsuhiko Kokubu

Abstract
This

study

aims

to

empiricallyexaminehow

corporate

governanceaffects

green

purchasing/procurement from the viewpoint of a neo-institutional framework. This study uses survey
data from Toyokeizai Corporate Social Responsibility database, which consists of 1,007 Japanesefirms observations of various industries in 2015. Regarding the board size, this study finds that board
size is negatively related to green purchasing, indicating that Japanese company with smaller board
size implements more green purchasing. Further, we find that board diversity is positively related togreen purchasing; showing that increasing the number of female board members makes company toimplement greener purchasing. On the other hand, regarding green procurement, this study finds thatit does not affect much both board size and board diversity. These findings indicate that green
purchasing is affected by both board size and board diversity in Japanese companies in 34 industries,
which suggests that company that has smaller board size and a higher ratio of female board member
tend to implement more green purchasing, leading to the achievement of Goal 12 of SCP and SDGs.

Key words: Corporate governance; Green purchasing and Procurement; Neo-institutional theory,Japan
JEL classification: M12, M14, Q56

40

1. Introduction
The 2030 Agenda for Sustainable Development includes a set of 17 Sustainable
Development Goals (SDGs) which was adopted on 25 September 2015. The SDGs build on the
success of the Millennium Development Goals (MDGs) and aim to eradicate all forms of poverty,
fight inequalities and tackle climate change by 2030. The purpose of the SDGs is to “call for action
by all countries, poor, rich and middle-income to promote prosperity while protecting the planet”(United Nations, 2016). Among 17 Goals of SDGs, this study focuses on the sustainableconsumption and production (SCP) of Goal 12. SCP is about “the use of services and related
products, which respond to basic needs and bring a better quality of life while minimizing the use ofnatural resources and toxic materials as well as the emissions of waste and pollutants over the life
cycle of the service or product so as not to jeopardize the needs of future generations” (United
Nations Environment Programme (UNEP), 2016).
Among 11 targets under Goal 12, this study focuses on the target 12.7: promote public
procurement practices that are sustainable in accordance with national policies and priorities. “Thepotential to affect SCP through sustainable public procurement is significant, since an increasing
number of countries around the world consider the environmental and social impacts of their public
spending and have implemented Sustainable Public Procurement or Green Public Procurement”(UNEP, 2015, p.37). Specifically, this study examines the green purchasing and procurement
implemented by Japanese companies as sustainable procurement practices, using dataset from
Toyokeizai corporate social responsibility (CSR) in 2015.
The purpose of this study is to investigate the determinants of implementing green
purchasing/procurement from the viewpoint of corporate governance (CG). Since the final decisionof implementation of green purchasing/procurement might be related to the board members in acompany, this study focuses on the relationship between CG such as board size and board diversity.
Specifically, this study examines how CG affects green purchasing/procurement from the viewpointof neo-institutional theory; following Ntim and Soobaroyen (2013) study findings. The authors
examine why CG drives CSR practices and how a firm’s governance mechanisms drive its CSR

41

based on the neo-institutional theory. The authors also investigate the relationship between CG andCSR practices, and consequently examines whether CG can positively moderate the association
between corporate financial performance (CFP) and CSR.
This study uses corporate data from Toyokeizai CSR database, which consists of 1,007
Japanese firms’ observation of different industries in 2015. As proxy for CG, this study uses two CG
indicators: total number of board members and a ratio of female board member. As CSR indicators,
this study adopts two CSR indicators: the percentages of firms that implement green purchasing andprocurement.
In summary, this study finds that board size is negatively related to green purchasing.
Further, we find that board diversity is positively related to green purchasing. As of green
procurement, this study finds that it is not related to two CG variables, because no correlation isfound. These findings indicate that only green purchasing is affected by both board size and board
diversity in Japan, suggesting that a company with smaller board size and a higher ratio of female
board member tends to implement more green purchasing, leading to the achievement of Goal 12 of
SCP and SDGs.
This paper is structured as follows. Section 2 reviews neo-institutional framework in termsof CG and CSR strategy. While section 3 discusses the methodology focusing on scatter plots andsurveyed data, section 4 explains the dataset obtained from Toyokeizai CSR database. Section 5shows the results about the relationship between CG and green purchasing/procurement. Section 6
concludes with a short summary of the results and implications.

2. Background
This

study

examines

howcorporate

governanceaffectcompany’s

greenpurchasing/procurement, based on the framework of Ntim and Soobaroyen (2013). The authors
examined why and how a company’s internal CG might influence its CSR strategies based on the
neo-institutional theory. The neo-institutional theory is that it has been successfully employed in42

predicting the diffusion and/or imposition of a number of corporate practices at the national level,
but has rarely been applied at the organizational level of analysis relating to CG/CSR.
Ntim and Soobaroyen (2013) also examined why and how the association between CSR
and CFP might be intensified by CG. Their empirical findings were based on a sample of South
African listed corporations from 2002 to 2009 in five main industries: basic materials, consumer
goods, consumer services, industrials, and technology/telecoms. In the regression analysis, theauthors made 8 hypothesizes and found that there is a significantly positive relationship between 6
relations: internal CG quality and CSR practices, government ownership and CSR practices, board
size and CSR practices, independent directors and CSR practices, board diversity and CSR practices,
and CG index and CSR-CFP relationship. On the other hand, the authors also found that there is asignificantly negative relationship between the two relations: block ownership and CSR practices,
and institutional ownership and CSR practices. The authors explained that CSR practices are low inthe corporations with high block and institutional ownership, but high in corporations with highgovernment ownership, and larger, diverse and more independent boards. The authors also
concluded that a combination of CSR and CG practices has a strong positive effect on CFP, implyingthat CG positively moderates the CSR-CFP connection.
The reason why this study follows the neo-institutional framework of Ntim andSoobaroyen (2013) is that their methodology and analysis of CG and CSR relationship can beapplied to our study about the association between CG and green purchasing/procurement in Japan.
Specifically, this study focuses on their hypotheses 5 and 7.
The hypothesis 5 is that there is a positive association between board size and CSR
practices. Ntim and Soobaroyen (2013) investigated how board size drives its CSR practice based on
the neo-institutional theory. Following them, board size plays an important role for CSR practicebecause larger boards are associated with greater diversity in terms of stakeholder representation,
which can enhance corporate reputation and image. In the results of analysis, the authors found that
there is a positive effect of board size on the CSR practices.
The hypothesis 7 is that there is a positive association between board diversity on the43basis of ethnicity and gender, and the CSR practices. Following Ntim and Soobaroyen (2013), board
diversity is important for a firm’s CSR practices, because boards of diverse gender (and ethnic
backgrounds) help to improve efficiency by connecting a firm to its external environment andattracting resources. In the results of their analysis, the authors found that board diversity has astrong positive relationship with CSR practices.

3. Methodology
This study aims to examine how CG is related to green purchasing/procurement, following
the framework of Ntim and Soobaroyen (2013). Following Ntim and Soobaroyen (2013), twohypotheses have been tested in this study. One hypothesis is that there is a positive association
between board size and the green purchasing/procurement. The other hypothesis is that there is apositive association between board diversity and the green purchasing/procurement. In the former
hypothesis, this study examines whether board size such as the total number of board members is
related to the green purchasing/procurement. In the latter hypothesis, this study examines whether
board diversity such as the ratio of female board member is related to the green
purchasing/procurement.
As of the definitions of green purchasing and green procurement, the green purchasing is
the selection and buying of equipment, expendable supplies and office supplies that minimize
impacts on the natural environment, while green procurement is the selection and buying ofenvironmental friendly materials and manufacturing components which are necessary for
manufactured goods. This study carefully examines the relationship between CG and green
purchasing/procurement, using firm and industry average scores with Toyokeizai CSR data in 2015.

4. Data
Dataset of this study is obtained from Toyokeizai CSR database in 2015. This database44

contains surveyed data of 1,305 companies (1,259 listed companies and 46 unlisted companies).
Toyokeizai conducted questionnaire survey by sending questionnaire to all 3,580 listed Japanesecompanies and unlisted major companies and compiled CSR data. Toyokeizai conducted a CSR
evaluation of each company to assess and publish each company’s level of CSR engagement andadequacy. Each company is evaluated and assigned one of the five ratings (AAA, AA, A, B, and C)
from the viewpoint of 4 main CSR areas such as ‘human resources,’ ‘environment,’ ‘corporate
governance,’ and ‘social contribution’. Among the CSR areas, there are 64 key questions on the basisof the questionnaire’s results of total 33 industries and 1,325 responding companies.
Regarding green purchasing/procurement, this study uses questions 12 and 13 ofenvironment data. Question 12 asks to what extent your company makes green purchasing (1: wemake green purchasing based on the guideline of Green Purchasing Network (GPN); 2: we makegreen purchasing based on our original guideline; 3: we don’t make green purchasing; 4: Others).
Question 13 asks to what extent your company makes green procurement (1: we make green
procurement based on our comprehensive guideline; 2: we make green procurement based on ourpartial guideline; 3: we don’t make green procurement; 4: no business necessity; 5: others). In bothquestion 12 and 13, this study adds up the number of companies which answer 1 and 2, compilingthe data of green purchasing/procurement and making the percentage of companies by industry.
Regarding corporate governance variables, this study uses question 6 of CG data. Question
6 asks the situation in the appointment of the board members (1: the number of female board
members; 2: the number of male board members; 3: the number of foreign board members; 4: a ratioof female board members). In question 6, this study uses two CG indicators. The first CG indicator is
the total number of board members (female and male). The second CG indicator is the ratio of
female board members. This study analyzes two hypotheses at the industry average level.

5. Results
Table 1 shows industry average scores for green purchasing/procurement and CG. The

45

number of observations is 1,007 in 34 different industries (33 TOPIX Sector Indices and unlistedcompanies). From Table 1, regarding green purchasing, we find that industries with the highest
implementing percentage are air transportation (100%), electric power and gas (90.91%) and electric
appliances (78.41%), while industries with lowest implementing percentage are securities andcommodities futures (16.67%), real estate (20.69%) and services (22.08%). On the other hand,regarding the green procurement, Table 1 shows that industries with highest implementing
percentage are electric appliances (80.68%), rubber products (80.00%), transportation equipment(72.73%) and electric power and gas (72.73%), while industries with lowest implementing
percentage are mining (0%), securities and commodities futures (0%), other financing businesses(0%) and services (5.19%). Furthermore, the average industry scores for green purchasing and green
procurement are 53.92% and 37.34% respectively. This indicates that more Japanese companies tend
to implement green purchasing rather than green procurement, because of its CSR strategy or its
business necessity.
Regarding board size, Figures 1 and 2 show the scatter plots of industry average towardgreen purchasing and procurement respectively. Correlation of board size and green purchasing andgreen procurement are −0.432 and 0.106, respectively (Figures 1 and 2). Figure 1 shows that there isa negative correlation between board size and green purchasing, and this correlation does not support
our hypothesis (the hypothesis 5 of Ntim and Soobaroyen (2013)). Further, Figure 2 shows that there
is no correlation between board size and green procurement, and hence this finding also does notsupport our hypothesis (the hypothesis 5 of Ntim and Soobaroyen (2013)). These findings indicatethat the board size negatively affects the decision to implement green purchasing and does not affectmuch the decision to implement green procurement.
There are some outliers in Figure 1 such as air transportation (100%), electric power andgas (90.91%) and real estate (20.69%), while Figure 2 such as electric appliances (80.68%), rubber
products (80.00%), electric power and gas (72.73%), and real estate (13.79%). Regarding theseoutliers, we consider that electric power and gas and real estate industries are not related to theassociation between board size and green purchasing/procurement, because there is no business46

necessity in these industries.
Regarding board diversity, again, Figures 3 and 4 show the scatter plots of industry
average toward green purchasing and procurement, respectively. Correlation of board diversity andgreen purchasing and green procurement are 0.396 and 0.108, respectively, in Figures 3 and 4.
Figure 3 shows that there is a positive correlation between board diversity and green purchasing,supporting our hypothesis and the hypothesis 7 of Ntim and Soobaroyen (2013). On the other hand,
Figure 4 shows that there is no correlation between board diversity and green procurement, hence
not supporting our hypothesis and the hypothesis 7 of Ntim and Soobaroyen (2013). These findings
indicate that board diversity such as a ratio of female board member positively affects the firm’s
decision to implement only green purchasing, not green procurement.
In addition, Figure 3, we find that there are 4 types of typical industries in the relationshipbetween board diversity and green purchasing: air transportation (higher board diversity and more
green purchasing); securities and commodities futures (lower board diversity and less green
purchasing); electric power and gas (lower board diversity and more green purchasing); and marinetransportation (higher board diversity and averagely green purchasing).
In Figure 3, the outliers are air transportation (100.00%) and marine transportation(50.00%), while in Figure 4 are air transportation (50.00%) and marine transportation (50.00%).
Regarding these outliers, we consider that transportation industry does not much affect therelationship between board diversity and green purchasing/procurement, because there is no businessnecessity in these industries. Also, regarding the outliers, Figures 1, 2, 3, and 4 explain that 4
industries such as air and marine transportation, electric power and gas, and real estate are notrelated to green purchasing/procurement.

6. Conclusions
The purpose of this study is to examine how CG affects the green purchasing/procurement,
following the neo-institutional theory framework of Ntim and Soobaroyen (2013), based on the47

dataset from Toyokeizai CSR database in 2015. This study finds that there is a negative correlation
between board size and green purchasing, and that there is no correlation between board size andgreen procurement. This suggests that board size is negatively related to only green purchasing,since the companies which have smaller (larger) board size, the more (less) they implement green
purchasing. This is probably because it is more difficult to control and manage the larger boards
compared to the smaller boards. Also, we find that green procurement is not affected by board size,
since the implementation of green procurement is strongly influenced by its industrial needs orcharacteristics.
Further, this study finds that there is a positive correlation between board diversity andgreen purchasing, but that there is no correlation between board diversity and green procurement.
This suggests that board diversity is positively related to only green purchasing, not green
procurement, since the more (less) company has board diversity, the more (less) company implement
green purchasing. This is probably because “recruiting the female board members can bring diversity
in ideas and opinions to board discussions” (Ntim and Soobaroyen, 2013, p.473). In addition, we
find that board diversity is not related to implement green procurement, probably because of its
industrial needs or characteristics, again.
This study contributes to the literature on CG-CSR relationship in Japanese companies invarious industries. Regarding green purchasing, both board size and board diversity are considered
to be important CG variables to achieve Goal 12.7 of SCP and SDGs, because there is a direct
relationship between two CG variables and green purchasing. In addition, this study also contributes
to the neo-institutional theory by adding new finding for Japanese companies. That is, board
decisions to implement green purchasing are related to both board size and board diversity inJapanese companies in various industries.
The limitation of this study is the selection of CG variables. Following the framework of
Ntim and Soobaroyen (2013), using other CG variables such as government ownership, blockownership, institutional ownership and independent directors will help us to find new results in theanalysis of association between CG and green purchasing/procurement. The second limitation is that,48

we test only hypothesis 5 and 7 of Ntim and Soobaroyen (2013), and results might be different by
testing other hypothesis of Ntim and Soobaroyen (2013).

49

References
Ntim, C.G. and T. Soobaroyen, 2013. “Corporate governance and performance in socially
responsible corporations: New empirical insights from a neo-institutional framework,”
Corporate Governance, Vol. 21 (5), pp. 468–494. doi:10.1111/corg.12026
UnitedNations.

2016,

“The

sustainable

development

agenda.”<http://un.org/sustainabledevelopment/development-agenda/> [Accessed at 23 July 2016]
United Nations Environment Programme (UNEP), 2015, “Sustainable consumption and production
indicators

for

the

futureSDGs,”UNEP

Discussion

Paper,

pp.7–38.

<https://sustainabledevelopment.un.org/content/documents/2301SCP%20indicators.pdf>[Accessed at 23 July 2016]
UnitedNations

Environment

Programme(UNEP),

2016,

“What

is

SCP?”

<http://www.unep.org/10yfp/About/WhatisSCP/tabid/106246/Default.aspx> [Accessed at
23 July 2016]50

Table 1. Industry average scores of green purchasing/procurement and CG
TOPIX Sector Indices

Obs

Implementing
green
procurement
(1+2)
50.0%
0.0%
41.7%
52.5%
45.5%
44.4%
51.9%
46.7%
33.3%
80.0%
33.3%
33.3%
54.5%
55.0%
50.9%
80.7%
72.7%
43.8%
53.6%
72.7%
17.6%
50.0%
50.0%
8.3%

Board
size

Board
diversity

2
2
48
40
22
9
79
15
3
10
12
12
11
20
57
88
33
16
28
11
17
2
2
12

Implementin
g greenpurchasing
(1+2)
50.0%
50.0%
54.2%
67.5%
50.0%
66.7%
51.9%
60.0%
66.7%
60.0%
41.7%
58.3%
45.5%
55.0%
54.4%
78.4%
69.7%
62.5%
53.6%
90.9%
64.7%
50.0%
100.0%
41.7%

Fishery, Agriculture & Forestry
MiningConstruction
Foods
Textiles and Apparels
Pulp and Paper
Chemicals
Pharmaceutical
Oil and Coal Products
Rubber Products
Glass and Ceramics Products
Iron and Steel
Nonferrous Metals
Metal Products
Machinery
Electric Appliances
Transportation Equipment
Precision Instruments
Other ProductsElectric Power and Gas
Land Transportation
Marine Transportation
Air Transportation
Warehousing and Harbor
Transportation
Information & Communication
Wholesale Trade
Retail Trade
Banks
Securities and Commodities Futures
Insurance
Other Financing Business
Real Estate
Services
Unlisted companies

16.00
20.50
20.81
16.90
30.82
26.89
22.16
18.27
18.67
39.60
25.00
17.83
27.27
21.15
21.65
25.23
21.24
21.50
19.50
14.55
19.06
18.00
8.50
18.92

0.0%
3.3%
1.6%
1.0%
0.9%
3.0%
2.0%
4.6%
0.0%
0.0%
0.3%
2.5%
0.2%
0.7%
4.7%
2.8%
1.0%
0.8%
2.9%
1.7%
4.9%
11.3%
16.7%
0.0%

69
94
90
29
12
8
13
29
77
35

36.2%
51.1%
27.8%
44.8%
16.7%
50.0%
69.2%
20.7%
22.1%
51.4%

10.1%
14.9%
6.7%
3.4%
0.0%
50.0%
0.0%
13.8%
5.2%
42.9%

21.43
16.32
22.76
21.55
22.50
40.50
13.46
44.93
23.04
19.46

1.4%
2.8%
0.8%
0.8%
0.0%
1.4%
1.1%
2.9%
2.5%
2.6%

51

Figure 1. Board size and green purchasing

52

Figure 2. Board size and green procurement

53Figure 3. Board diversity and green purchasing

54

Figure 4. Board diversity and green procurement

55

Chapter 4. Sustainable Consumption and Production:
The Porter Hypothesis testing in ASEAN and Japan

Wencheng Guo, Michiyuki Yagi, and Katsuhiko Kokubu

Abstract
The study investigates the relationship among environmental regulation, environmental performance,
innovation and competitiveness in ASEAN countries, where sustainable consumption andproduction has become a concerned topic. We choose three ASEAN countries - Thailand,
Philippines and Indonesia, also Japan, to test Porter Hypothesis. From the macro viewpoint, we test
whether environmental regulation stimulates innovation and enhance countries’ environmental
performance and competitiveness to provide some evidence for policy makers when they makeenvironment-related policies.

Key words: Porter hypothesis, Sustainable consumption and production, ASEAN and JapanJEL classification: O53, Q55, Q56

56

1. Introduction
The Sustainable Development Goals (SDGs), officially known as the 2030 agenda for
Sustainable Development, are an intergovernmental set of 17 Goals with 169 targets. As a centralcomponent of the goals (SDG 12), achieving sustainable consumption and production (SCP) will
require a set of indicators to monitor the impact of policies and initiatives promoting this shift inconsumption and production patterns, as well as the institutional capacity to implement themeffectively (United Nations, 2015). The need for monitoring to support national policies andincreasing reporting requirements from various global initiatives on sustainable development issues
is generating a significant burden on countries. This suggests the need to converge towards common
statistical standards that can relate and interconnect with one another (UNEP, 2015).
The challenges faced in protecting the natural resources and advancing the material
well-being of society, are tackled in different ways by the different member states of Association ofSouth East Asian Nations (ASEAN). Some governments focus on enacting new laws and regulations
at the national level. Others establish or strengthen requisite institutions. Joining internationalorganizations and signing to international agreements and conventions, is another strategy which has
been used. Since 1977, ASEAN has nevertheless embarked on regional initiatives aimed at tacking
such challenges. Several agreements and frameworks have been drawn up. They are part of theprocess of regional cooperation and community building (Koh, 2009).
The motivation of this study is that ASEAN continues to be actively engaged in addressing
global environmental issues in accordance with the principle of common but differentiatedresponsibilities. ASEAN is expected to reach a critical milestone by the end of 2015 through thelaunch of the ASEAN Community. This milestone event in Southeast Asia’s regional integration
process happens to coincide with the adoption of a new global set of development goals – theSustainable Development Goals (SDGs) – which will replace the Millennium Development Goals(MDGs) from 2016 (Olsen et al., 2015). SDGs carry forward the unfinished MDG agenda in the first
7 Goals and build with cross-cutting issues such as economic growth, job creation, industrialization,
inequality, and peace and justice (SDGs 8, 9, 10, and 16), and the ecological sustainability related57

goals (SDG 11-15), besides stronger means of implementation through a reinvigorated global
partnership (SDG-17) (ESCAP, 2016).
This study examines whether economic regulations can lead to environment-related
innovation and the innovation can improve environmental performance and how it is related tocountries competitiveness at country level, including 3 countries in ASEAN, Thailand, Philippines
and Indonesia, and make a comparison with Japan for each. This study follows Porter hypothesis
framework. Porter Hypothesis mentioned that if properly designed, environmental regulations canlead to “innovation offsets” that will not only improve environmental performance, but also
partially—and sometimes more than fully—offset the additional cost of regulation (Ambec et al.,2013). In addition, Porter and van der Linde (1995) explained that there are some reasons why
properly crafted regulations may lead to these outcomes, for example, “regulation creates pressurethat motivates innovation and progress” (Ambec et al., 2013).
This paper is organized as follows. Section 2 introduces the background of Porter
hypothesis. Sections 3 and 4 explain the methodology and data, respectively. While section 5 shows
the results, section 6 discusses and concludes the paper.

2. Background
2.1 Porter hypothesis
Porter hypothesis was formulated by the economist Michael Porter in an article in 1995
(Ambec et al., 2013). The hypothesis suggests that strict environmental regulation triggers thediscovery and introduction of cleaner technologies and environmental improvements, the innovation
effect, making production processes and products more efficient. The cost savings that can beachieved are sufficient to overcompensate for both the compliance costs directly attributed to new
regulations and the innovation costs.
Porter hypothesis can be divided into the three types: weak, strong, and flexible versions(Ambec et al., 2013). Weak version is that properly designed environmental regulations may spur

58

innovation. This has often been called the “weak” version of the Porter hypothesis because it does
not indicate whether that innovation is good or bad for firms. Strong version is that in many cases
this innovation offsets any additional regulatory costs. That is, environmental regulation can lead toan increase in firm competitiveness. Finally, in what has been called the “narrow” version of thePorter hypothesis, it is argued that flexible regulatory policies give firms greater incentives toinnovate and thus are better than prescriptive forms of regulations.

2.2 Review of recent environmental policies
Following Zhao and Schroeder (2010), we review recent environmental policies inThailand, Indonesia, and Japan. Against the backdrop of the global financial crisis and economic
recovery plans, many Asian countries have implemented stimulus packages, partly dedicated to‘greening’ the economic structure. The effects of some of these measures are now visible in therecovery that is occurring across the region.
Thai government’s “strong Thailand” programme is nominally worth around US$ 42
billion, or 16% of GDP over three years. In Thailand, the National Sustainable Consumption
Strategies have been developed to accommodate the 10th National Economic and Social
Development Plan, which was effective from 2006 to 2011. The plan aimed to achieve sustainable
development via traditional Thai cultural and religious principles of moderation and sufficiency. On
the other hand, Indonesia issued the plan ‘Sustainable Consumption and Production Programme(under development)’, to support for Indonesia National Action Plan on climate change.
South Korea and Japan have stimulus packages worth about 5.5% of GDP, similar in size
to programmes in India, Philippines and Vietnam. Japan issued ‘Fundamental Plan for Establishing aSound Material-Cycle Society’ in 2003, to restrain the consumption of natural resources; reducematerial input and resource extraction; minimize water consumption; and reduce energy
consumption.

59

3. Methodology
Porter hypothesis framework is useful to examine whether environmental regulations canstimulate innovation and enhance competitiveness. Using this framework, we can examine how
Porter hypothesis works at the country level. We used Porter hypothesis that would lead us a way toachieve the goal of SCP by making reasonable environmental policies.
Following the Porter hypothesis, we examine 3 hypotheses. Regarding weak version of the
hypothesis, we test (H1) environmental regulations can stimulate innovation. Regarding the strong
version of Porter hypothesis, we test (H2) innovation can lead to competitiveness and (H3) there is apositive relationship between environmental innovation and a good environmental performance.
To test the 3 hypotheses, we examine four categories: environmental regulation, environmental
innovation, competitiveness and environmental performance. We examine the relationship between
environmental regulation and environmental innovation (H1), environmental innovation andcompetitiveness (H2), and environmental innovation and environmental performance (H3). We
review the above 3 hypothesis from macro viewpoint in ASEAN countries and Japan from 2005 to
2013. By conducting these three hypotheses, we expect positive relationship between environmental
regulation and environmental innovation is positive (H1), environmental innovation andcompetitiveness (H2), and environmental innovation and environmental performance (H3).

4. DataThis study uses OECD statistics and World Bank Open Data (Table 1). In terms of proxyfor environmental regulations, we use environmental policy stringency index (EPS), environmentally
related tax revenue (ETR), and fuel price (FP). Each indicator may have missing values since not all
variablesareobtainable

in

the

countries.

EPS

is

that

a

country-specificandinternationally-comparable measure of the stringency of environmental policy, which is calculated
by OECD statistics. Stringency is defined as the degree to which environmental policies put an
explicit or implicit price on polluting or environmentally harmful behavior. The index ranges from 060

(not stringent) to 6 (highest degree of stringency). The index is based on the degree of stringency of
14 environmental policy instruments, primarily related to climate and air pollution. ETR, also
calculated by OECD statistics (US$, 2010 USD PPP), that contains detailed qualitative andquantitative information on environmentally related taxes, fees and charges, tradable permits,
deposit-refund systems, environmentally motivated subsidies and voluntary approaches used forenvironmental policy. Environmentally related taxes are an important instrument for governments toshape relative prices of goods and services. FP (US$ per liter) is used for Thailand because Thailand
does not have specific environmental tax; we use the price of gasoline in replace (Deloitte Touche
Tohmatsu Limited, 2015).
In terms of environmental innovation, we chose environmentally related patents per capita(PR). PR is calculated by selected environment-related technologies, divided by all technologies(total patents). Further, we use GDP per capita (GDPper) for competitiveness. Again, we use metrictons of CO2 per capita (CO2) to represent environmental performance which is a common andwidely used indicator to measure the effect of country or regions environmental performance.

5. Results
Table 2 shows the variables related to Porter hypothesis in Japan, Indonesia, Thailand, andPhilippines. Table 3 summarizes tendencies of each proxy in Table 2. In terms of environmental
regulations, only Philippines shows a negative trend since the ETR is decreasing from 2005 but only
increases in 2009 and 2012. On the other hand, the other 3 countries have a positive trend on thisitem. Further, Japan shows increasing trend) in environmental innovations exception to 2013. On theother hand, Indonesia and Thailand also rise, but relatively fluctuated in Philippines.
Nevertheless, in terms of competitiveness, the GDP per capita in ASEAN countries raises
remarkably but slightly in Japan. Again, the environmental performance of Indonesia and Philippines
is stable, while Japan has a positive trend, and negative trend in Thailand.
Following the above results, we conclude the three hypotheses as follows. In Japan, H161

has been accepted since the positive relationship between environmental regulation and innovation.
H2 has also been accepted since the environmental innovation and competitiveness both increaseslightly. H3 has been accepted since the environmental performance has also been improved a little
bit. In the same way, we conclude the other 3 countries as follows. In Indonesia and Thailand, H1
and H2 are accepted but not in Philippines. None of the three countries show an apparent
relationship between environmental regulation and performance, and therefore, H3 is not accepted.

6. Conclusions
The purpose of this study is to test whether good environmental regulations can lead to
improved innovation, thus to positively influence countries’ environmental performance orcompetitiveness, motivated by Porter hypothesis, to provide some evidence for policy makers when
they make environment-related policies. This study finds that in Japan, there is a positive
relationship between environmental regulation and a good environmental innovation (H1),environmental innovation and competitiveness (H2), and environmental innovation and performance(H3). On the other hand, in Indonesia and Thailand, it shows the similar result that H1 and H2 areaccepted; however, in Philippines, there is no obvious trend that can verify our hypothesis. In
addition, H3 is not accepted. One of the most interesting findings is that while environmental
regulations of Philippines falls, the environmental performance also falls but with a relatively
fluctuated innovation.
This study contributes to Porter Hypothesis theory by adding new findings considering
comparative analysis of companies in ASEAN and Japan positively participating in SCP, which
reveals that environmental stringency does have a positive influence on environmental innovation,competitiveness, and performance. It implicates that policy makers should be active in making
environmental regulations because it may help to improve the environmental performance andenhance the country’s competitiveness.
Remaining issues of this study are as follows. Firstly, even though environmental innovation can

62improve competitiveness (in Japan, Thailand, and Indonesia), the trend of innovation is not apparent.
Besides GDP per capita usually rises a lot among ASEAN counties these years due to their industrial
development, the evidence that environmental innovation can directly lead to better competitivenessthat is still weak. Secondly, according to Porter hypothesis, it is still unsolved that whether
environmental regulations directly influence competitiveness and performance or it influences these
two by affecting innovation. Finally, it is hard to make any conclusions for Philippines. In the future
research, we need more available data to test the fluctuation on innovation as well as figure out thereason why ETR of Philippines goes down, which is different from any other countries.

63

References
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uide-2015.pdf>
ESCAP, United Nations, 2016, “Achieving the Sustainable Development Goals in South Asia: Key
PolicyPriorities

andImplementation

Challenges.”<http://www.unescap.org/sites/default/files/SDGs%20South%20Asia%20report%202016%20rev%2014%20April%202016.pdf>
Koh, K.L., 2009, “ASEAN Environmental Law, Policy and Governance: Selected Documents(Volume I),” ASEAN Environmental Law, Policy and Governace: Selected documents.
<http://ssrn.com/abstract=1469388>
Porter,M.E.

andC.V.D.

Linde,

1995,“Towarda

New

Conception

of

the

Environment-Competitiveness Relationship,” Journal of Economic Perspectives, Vol. 9 (4),pp. 97–118. doi:10.1257/jep.9.4.97
Olsen, S.H., S.W.C. Teoh, and I. Miyazawa, 2015, “Chapter 4. ASEAN Community and theSustainable Development Goals: Positioning Sustainability at the Heart of Regional
Integration,” in IGES (eds.), Greening Integration in Asia: How Regional Integration Can
Benefit

PeopleandtheEnvironment,

IGES

White

Paper

V.

<http://pub.iges.or.jp/modules/envirolib/view.php?docid=6051>
Ambec, S., M.A. Cohen, S. Elgie, and P. Lanoie, 2013, “The porter hypothesis at 20: Can
environmental regulation enhance innovation and competitiveness?” Review ofEnvironmental Economics and Policy, Vol. 7 (1), pp.2–22. doi:10.1093/reep/res016
UNEP,

2015,

“A

proposalfor

SCP

indicators

andcapacitybuilding”.

<http://www.unep.org/10yfp/Portals/50150/PROPOSAL%20FOR%20SCP%20RELATED%20SDG%20INDICATORS%20AND%20CAPACITY%20BUILDING%20STRATEGY.
pdf>
United Nations, 2015, “Transforming our world: the 2030 Agenda for Sustainable Development(A/RES/70/1)”,

UnitedNations

Sustainable

Development

Summit2015.

<https://sustainabledevelopment.un.org/post2015/summit>
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doi:10.1111/j.1477-8947.2010.01275.x

64

Table 1. Variables Explanation
Proxy

Variable

Name

SourceEnvironmental

EPS

Environmental Policy Stringency Index: from 0

OECD stat.

(not stringent) to 6 (highest degree of stringency)

Regulation
ETR

Environmentally related tax revenue (US$, 2010

OECD stat.

USD PPP)

Environmental

FP

Pump price for gasoline (US$ per liter)

World BankPR

Environmentally-related Patents Ratio: = SelectedOECD stat.

Innovation

environment-related technologies / Alltechnologies (total patents)

Competitiveness

GDPper

GDP per capita (US$)

World Bank

Environmental

CO2

CO2 emissions, metric tons of CO2 per capita

OECD stat.

performance

Notes:

OECD(tons)

statistics<http://stats.oecd.org/>.

<http://data.worldbank.org/>.

65

World

Bank

Open

Data

Table 2. Variables in ASEAN and JapanCountry

Year

EPS

ETR

FP

PR

GDPper

CO2

Japan

2005

1.67

583.21‒0.077

35781.27

9.69

2006

1.63

581.741.1

0.081

34075.98

9.63

2007

1.69

580.59‒0.082

34033.70

9.77

2008

1.69

552.36

1.4

0.084

37865.62

9.42

2009

1.73

543.15‒0.10239322.61

8.60

2010

2.03

538.991.6

0.11142909.23

9.13

2011

2.71

‒

‒

0.115

46203.71

9.29

2012

2.63

‒

2.0

0.099

46679.27

‒

2013

‒

‒

‒

‒

38633.71

‒

2005

0.44

‒

‒

0.054

1263.58

1.51

2006

0.44

‒

‒

0.066

1590.18

1.51

2007

0.44

‒

‒

0.063

1860.62

1.62

2008

0.44

‒

‒

0.037

2167.86

1.75

2009

0.44

‒

‒

0.089

2262.72

1.70

2010

0.44

‒

‒

0.093

3125.22

1.81

2011

1.10

‒

‒

0.070

3647.63

1.90

2012

1.10

‒

‒

0.072

3700.52

‒

2013

‒

‒

‒

‒

3623.53

‒

2005

‒

‒

‒

0.090

2874.43

3.89

2006

‒

‒

0.7

0.074

3351.12

3.99

2007

‒

‒

0.095

3962.75

3.99

2008

‒

‒

0.092

4384.78

3.98

2009

‒

‒

0.098

4231.14

4.20

2010

‒

‒

0.158

5111.91

4.47

2011

‒

‒

0.121

5539.49

4.53

2012

‒

‒

1.6

0.081

5917.92

‒

2013

‒

‒

‒

‒

6229.17

‒

2005

‒

22.37

‒

0.204

1196.62

0.87

2006

‒

16.897‒0.100

1395.21

0.77

2007

‒

14.75

‒

0.080

1678.85

0.78

2008

‒

14.72

‒

0.105

1929.13

0.84

2009

‒

15.35

‒

0.183

1836.87

0.82

2010

‒

12.66

‒

0.119

2145.24

0.88

2011

‒

13.79

‒

0.096

2371.85

0.87

2012

‒

14.10

‒

0.099

2604.66

‒

2013

‒

12.93

‒

‒

2786.95‒

Indonesia

ThailandPhilippines

0.9
1.4

66

Table 3. Summary in ASEAN and Japan
Environmental

Environmental

Competitivenes

Regulation

Innovations

Environmental
performance*
4

EPS

ETR

FP

PR

GDPper

CO2

Japan

rise

stablerise

rise slightly

rise slightly*3

rise slightly

Indonesia

rise

‒

‒

rise slightly*1

risestablePhilippines

‒

fall

‒

fluctuate*2

risestableThailand

‒

‒

rise

rise slightly*3

rise

fall

Notes:*1: From 2011, however, it falls.
*2: It falls dramatically from 2006 but kept relatively stable then.
*3: It falls from 2011.
*4 Since we use metric tons of CO2 per capita as an indicator to measure the performance, it isimportant to be noticed that a high degree of CO2 emissions shows a negative performance.
Therefore, the tendency shown in the table is the trend of performance but not CO2 emissions.

67

Chapter 5. Green product development in Japan and Thailand:
Academic, business and consumer perspectives

Minhwa Kang, Michiyuki Yagi, and Katsuhiko Kokubu

Abstract
Recently, the concept for sustainable management and green product development has been
gaining momentum comparing to the past. One of the important issues of green productdevelopment is how green product development is affected by the stakeholders. This study
reviews the concept of green product development and analyze the green product developmentwith three perspectives; academic, industry, and consumers. This study compares Japan and
Thailand, and discusses the steps of development for green product of advanced countries andnewly industrialized country.

Key words: Green product development; Sustainable consumption and production; Thailand andJapan
JEL classification: O53, Q55, Q56

68

1. Introduction
Comparing to past, the importance of recognition of green product development has
been given prominence as the range of stakeholder has been wider with complicated business. The
concept of sustainable management started to attract attention of business researchers, industry
and customers. Green product development is the one of ways for sustainable management.
According to Vinodh and Rajanayagam (2010), the main objective of green production system isdecreasing environmental impact by merging product and product design effects with processplanning and control in order to identify, measure, evaluate and handle the flow of environmental
waste.
The study on sustainable management is famous in Japan and many studies contributedin this filed (e.g. Drieessen et al., 2013; Jasti et al., 2015) With regard to Thailand, the green
product development is considered while the expansion business of multinational-company–
especially in case of manufacturing company as labor cost becoming higher and higher. Whenthey consider the business expansion to Thailand, main issue is to achieve the economic
performance, however, now necessity of sustainable management and consumption is recognized.
Therefore, it will be worth reviewing for multinational company SCP in Thailand.
With the rapid economic development, Thailand has severe economic problems that leadto serious problems. In the past, Thailand was an agricultural country. However, many
globalization companies have expanded their business to Thailand and the structure of Thailand
has started to transform to industrially development country. Therefore, green productdevelopment is essential concept for both countries for sustainable management.
The motivation of this study is “sustainable management” as it has become an importantconcept in business. One of the important issues of green product development is how green
product development is affected by the stakeholders – consumers, business and academic. This
study reviews the concept of green product development and analyzes the green productdevelopment with three perspectives; academic, industry, and consumers. By comparing to twocountries (Japan and Thailand), we aim to discuss the steps of development for green product ofadvanced countries and newly industrial country –Japan and Thailand as case.
This paper is constructed as follows. Section 2 explains the background of study, and69

section 3 introduces the data explaining present condition of two countries. Section 4 discusses theresult and contribution.

2. BackgroundThough the importance of green product has been recognized, there is no specificdefinition for green product development. The definition suggested by academic field andresearchers are unclear (Jasti et al., 2015). However, there is a framework to explain green productdevelopment proposed by Jasti et al. (2015). As there are many stakeholders, or green productdevelopment, it cannot be performed only business activity or industrial activity., This study
explains green product development with other insights. For example, it is essential to seek
stakeholder’s commitment because of their high influencing abilities and expertise to impact
organizational learning (Jasti et al., 2015).
The framework for green product development can be divided into 3 perspectives:
academic, business (industry), and consumers. Nowadays, green concepts are well established inacademic field. In this perspective, education is considered to play an important role forsustainable management (Brundtland, 1985, and many researches support the assertion (e.g., Durif,
2010; Drieessen et al., 2013; Johansson and Sundin, 2014; Mazar and Zhong, 2010). The
recognition is needed regarding sustainable management and green product development – what
the meaning of sustainable management is and why the meaning of sustainable management isimportant.
In terms of business (industry), green product development emphasizes “end of pipe
technology” where the firms are aware of ecological issue through the process of production andproduct design. Green product development consists of eight stages of product development andpollution analysis which are the procedures to identify the environmental hazards, identify thesources of pollution during the product’s life cycle and minimize the environmental impacts (Bhat,
1993). It is worth reviewing the R&D expenditure for both countries because R&D expenditure
can be interpreted as willingness of company for innovation.
Significant investment in green R&D symbolizes that a company has integrated
70sustainability into its core strategy. It serves as a strong indicator for investors who are betting on
increasing consumer demand for green products. On the other hand, green patent can indicate thewillingness and interest regarding environmental recognition of companies. The degree of green
patents will be related to the green product development.
In terms of consumers, it is meaningful to review the green product development with
consumer perspective. In past, consumers had considered just from two perspectives: productprice and quality. Nowadays, however, the consumers’ behavior on purchasing has been changed.
The increased concern and feeling of responsibility for society have led to remarkable growth in
the global market for environment-friendly products (Hunt and Dorfman, 2009). However, thespecific key issues are waste and energy (Avalon et al., 2014). Waste problem in Thailand is one of
big problems. The amount of trash has increased and the government has been emphasized on theimportance of recycling. Government educated the importance of recycling to Thailand citizen.
On the other hand, regarding energy, the decision for purchasing green product has been started
with the recognition for importance of environment. Reviewing waste and energy literature, we
may be able to see consumers’ recognition level for environment and green product.

3. Methodology
This study compares two countries, Japan and Thailand, following green productdevelopment from three perspectives: academic, business (industrial), and consumers. Fromacademic perspective, we focus on the number of universities in both countries because thenumber of university means the educational institutes for role of letting people know theimportance of sustainable management and green product development. Further from businessperspective,

weexamineR&D

andenvironmental-related

patents.

Regardingenvironmental-related patents, we focus on 4 items; percentage (%) of all technologies, thenumber of inventions worldwide, inventions per capita, and percentage (%) of international
collaboration of environmentally-related technology in all technologies. From consumer
perspective, we review final energy consumption expenditure and waste for two countries.

71Regarding waste, this study focuses on the recycling rate as proxy to the recognition for green
product.

4. Data
For the academic perspective, the number of university under Ministry of Education,
Culture, Sports, Science and Technology, Japan and Ministry of Education, Thailand areconsidered in this study. OECD and World Bank data have been used for R&D and patent,
respectively. From consumer perspective, final energy consumption data is obtained from
Ministry of Environment in Japan and Ministry of Energy in Thailand. Finally, waste data is
obtained from statistics in Thailand and Japan.

5. Results
From academic perspective, Table 1 shows the number of universities in Japan and
Thailand in 2012. It shows that there are more universities in Japan than Thailand, implying themore education institute the more people recognize the importance of green product development.
We can assume that the educational infrastructure in Japan is prepared even more than Thailand.
In terms of business perspective, Table 2 shows R&D expenditure for both countries in2012. R&D expenditure can be interpreted as willingness of companies for innovation. It showsthat the expenditure for R&D of Japan is about 14 times as much as Thailand’s expenditure.
Further, Table 3 shows patent of Japan and Thailand from 1990 to 2012. It shows that Japan is amaturity country for patent related to the environment. However, it is interesting that the rate ofdevelopment of environment-related technologies had been increased since 2000 in Thailand.
With regard to international collaboration in the development of environment-related technologies,
the tendencies for Thailand are similar with Japan. However, the rate is fluctuating with lower
percentages.
From consumer perspective, Table 4 shows final energy consumption expenditure byenergy source in Thailand from 2008 to 2012. It shows that energy consumption has been72

constantly increased in Thailand. Again, the renewable energy consumption has been slightly
increased indeed.
Table 5 and 6 show the amounts of waste in Thailand (2001-2008) and Japan (2013),
respectively. The amount of trash has become increased and the government has been emphasizedon the importance of recycling. From the recycling rate, we can assume the recognition for green
product. The higher importance of water recycling indicates that consumers recognize the essenceof potential environment impact. In Japan, the amount of waste for per person is about 958g perday, and the recycle rate is about 20.6% in 2013. The figure is similar with Thailand. However,there are little differences in trash disposal and recycling rate between Thailand and Japan. Thisimplies that consumer recognition for green product development has little differences.

6. Conclusions
The purpose of this study is to examine and anticipate the green product development
for Japan and Thailand. This study compares Japan and Thailand from the academic, business, andconsumer perspectives.
This study finds that the education level in Japan is higher than Thailand. Moreover, theenrollment rate of university in Japan is 5 times higher than Thailand. From business perspective,
there are many companies in Japan that have already tried to develop green product. However,Thailand suffers from the environmental problem as it is a newly industrialized country. It is thefirst stage for Thailand to recognize the importance for green product development. On the other
hand, in Japan, R&D expenditure is 14 times higher than Thailand. There are many differences in
the perspectives of business and academic. Therefore, there is potential for Thailand to develop
the green product as the recognition for environment importance. However, in terms of consumer
perspective, there seems little difference in trash disposal and recycling rate between Thailand andJapan. This implies that consumers’ recognition for green product development has little
difference.
The limitation of this study is the exact definition for green development should beestablished. Furthermore, the case of maturity country for sustainable management, should73

consider for further research.

74

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Vinodh, S. and D. Rajanayagam, 2010, “CAD and DFM: enablers of sustainable product design,”
International

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doi:10.1080/19397038.2010.501870

75

Engineering,

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(4),

pp.292–298.

Table 1. The number of University in Japan and Thailand in 2012
Country

National university

Public university

Private university

ETC

Total

Japan

86

95

597

−

778

Thailand

−

92

69

3

164

Technology,

Japan

Source:Ministryof

Education,

Culture,Sports,Scienceand<http://www.mext.go.jp/a_menu/koutou/houjin/detail/__icsFiles/afieldfile/2015/11/04/1362122_01.pdf>
OfficeoftheHigher

Education

Commission,

Ministryof<http://www.mext.go.jp/a_menu/koutou/houjin/detail/__icsFiles/afieldfile/2015/11/04/1362122_01.pdf>

76

Education

Table 2. R&D expenditure in Japan and Thailand in 2012
Country

R&D expenditure

as a % of GDPJapan

133,226

3.39

Thailand

1,233

0.25

Units: US dollar
Source: OECD statistics <http://stats.oecd.org/>

77

Table 3. Environment-related patents in Japan and Thailand.
Development of environment-related technologies

Year
1990
1995
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

(1)% all technologies
Thailand
Japan
0
5.47
6.97
6.33
1.94
7.24
6.96
7.72
5.95
7.53
10.86
7.92
4.01
7.81
2.22
7.94
10.49
8.22
13.46
8.68
9.81
8.29
7.01
9.82
22.97
10.63
2.92
10.96
4.86
9.48

(2) % inventions worldwide
Thailand
Japan
0
30.1
0.01
29.47
0.01
31.57
0.02
32.54
0.01
30.77
0.03
31.7
0.01
31.28
0.01
30.4
0.03
28.62
0.04
27.79
0.03
23.83
0.02
23.77
0.06
24.76
0.01
25.44
0.01
23.46

(3) Inventions per capita
Thailand
Japan
0
13.96
0.01
15.01
0.01
26.31
0.03
27.69
0.02
28.29
0.06
30.29
0.02
31.93
0.01
32.58
0.07
34.02
0.1
35.58
0.08
31.28
0.06
34.05
0.19
40.64
0.02
42.51
0.03
34.68

Source: OECD statistics < http://stats.oecd.org/>

78

International collaboration in development ofenvironment-related technologies(4) % collaboration in all technologies
Thailand
Japan
‒
6.02
0
7.04
5.95
8.37
6.25
8.83
9.62
8.47
0
8.59
0
8.54
8.05
8.65
5.95
9.17
6.36
9.75
9.7
9.64
0
11.23
12.63
13.23
10.58
16.06
4.72
11.71

Table 4. Final energy consumption expenditure by energy source in Thailand (2008-2012)
Year
Petroleum ProductsElectricity
Natural Gas
Lignite/Coal
Renewable Energy
Consumption
growthRenewable energy
growth

20081092113.58
397923.71
53866.98
28672.51
103990.79

2009
960067.42431165.4
49271.84
28610.66
115267.48

2010
1106667.85
474670.88
68723.6
29737.78
129369.72

20111220581.85
471604.11
97665.65
31195.45
119672.56

20121311027.18
550672122509.42
31606.59
122626.95‒−5.50%

14.19%

7.27%

10.19%‒

10.84%

12.23%−7.50%

2.47%

Source: The ministry of energy in Thailand
Note: unit is THB Million. THB is the money unit of Thailand.

79

Table 5. Amount of waste in Thiland
Description

2001

2002

2003

2004

2005

2006

2007

2008

1. BMA (unit:)

9317

9616

9340

9356

8291

8403

8532

8780

2. Municipality and Pattaya

11903

11976

12100

12500

12635

12912

13600

14766

3. Sanitary distric

‒

‒

‒

‒

‒

‒

‒

‒

17423

17632

17800

18100

18295

18697

18200

17477

Total Waste generation (t/d)

36643

39225

39240

39956

39221

40012

40332

41023

Waste Recycle Amount (t/d)

6027

7123

7671

8493

8630

8740

8904

9239

%of generated waste

15.6

18.2

19.5

21.3

22

21.8

22.1

22.7

4. Out of Municipailty andsantitary district

Source: Chiemchaisri, C., 2011, “Development of Waste Statistics to estimate Activity Data:
Waste sector in Thailand”.
<http://www-gio.nies.go.jp/wgia/wg9/pdf/3-wg1-5_%EF%BD%83hart_chiemchaisri.pdf>

80Table 6. The present condition for waste in 2013 in JapanThe sum amount of waste

4487 miliion ton

The amount of waste for per person

958g

The rate for disposal

454 million ton

Decreased rate for disposal

98.60%

Reclamation rate

1.40%

Recycle rate

20.60%

Source: Ministry of environment in Japan <https://www.env.go.jp>[2016.9.26 1225]

81