University of Vaasa - Vaasan yliopisto

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responsibility issues (roadmap). First purpose is based on relevant academic
literature and empirical evidence from Finland. Regarding the second purpose, threephase
classification will be applied for Finnish listed firms.
We review the literature that shows how firms’ social and environmental impacts
have been tried to value. This is done in section two. Based on the identified void in
the prior literature, we will, in section three, suggest some possibilities for improving
the current state of the art in corporate responsibility reporting in order that the true
value of corporate responsibility could be better understood and valued by the
markets (in line with the view presented in Adams & Larrinaga-González, 2007;
Yachnin & Associates, & Sustainable Investment Group, 2006). Our valuation
measures are derived from the Global Reporting Initiative (GRI) context. Therefore,
the relevance of GRI-based reporting is presented at the beginning of section three.
Also in section three, our three-phase classification for responsibility valuation is
interpreted and used to certain Finnish firms. Section four summarizes the paper.
Valuation of Social and Environmental Impacts
Our overall valuation argument is that GRI disclosures enhance corporate
transparency and, therefore, reduce the uncertainty about corporation’s future cash
flows. Prior research has found that corporate environmental performance
information is valuable to investors in different settings (Clarkson, Li, Richardson, &
Vasvari, 2008 and literature cited there).
According to voluntary disclosure literature companies disclose “good news” in
order to differentiate themselves from other “bad news” firms. By this behavior the
“good news” companies try to avoid the adverse selection (Clarkson et al., 2008). By
the means of enhanced voluntary disclosure “good news” firms inform markets about
certain positive aspects in their operations and management that assist investors in
their valuation (Murray, Sinclair, Power, & Gray, 2006; Wahba, 2008). We propose
that more developed GRI disclosures, containing corporation’s social and
environmental impacts, would be useful when investors and other stakeholders
analyze firms.
Potential of GRI guidelines to support corporate valuation
GRI-based Sustainable Reporting from the Financial Valuation Perspective
Since the emergence of the GRI Sustainability Reporting Guidelines 1 , several
companies have issued comprehensive sustainability reports covering economic,
environmental and social performance data. The GRI is using a term ”sustainability
reporting” as a common name for overall corporate non-financial reporting covering