KORESPONDENSI_Adopting Sustainability Programs: Balloning Costs or Promoting Efficiency (Evidence from Indonesian Banking Sector)

Abstract

The adoption of sustainability programs has entered a new phase in Indonesian banking sector in which it does not stop merely a jargon, but has been implemented by some banks in Indonesia. Although not all Indonesian banks has embraced sustainability programs, the trend shows a positive trajectory where there are more and more Indonesian banks that have published their sustainability reports annually. Some argue that adoption of sustainability programs will only burden companies with more costs because the incurred costs will reduce revenue gained. While others contend that the adoption will promote efficiency, since it will drive the managers to comprehend cost behaviour for managing cost efficiency. This research aims to investigate the implementation of sustainability programs in Indonesian banking sector and compare adopters and non-adopters of sustainability programs in dealing with efficiency. The research employs quantitative approach and uses purposive sampling method. There were 12 banks selected for this research during the period 2013-2015. Data collected were, furthermore, analyzed using one-way analysis. Researchers divides Indonesian banks into three categories of adopters and non-adopters of sustainability programs: (1) sustainability-adopting state-owned banks (SASOB) (2) sustainability-adopting private banks (SAPB) and (3) sustainability-non adopting private banks (SNAPB). The result showed out of four efficiency ratios (NIM, ROA, LDR and Operating Expenses Ratio-OER) measured in this research indicated that there are differences between adopters and non-adopters of sustainability programs. In the case of SASOB and SNAPB, there are efficiency differences between these categories especially for NIM, ROA and OER. While in the case of SAPB and SNAPB displayed that there are not efficiency differences between two-category banks, but the adopters had better level of efficiency.