University of Vaasa - Vaasan yliopisto

a wide variety of themes, such as: corporate responsibility, sustainability, CSR,
environmental health and safety (EHS) and environmental reporting.
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There is evidence that the systematic implementation of GRI-based reporting
provides business benefits for firms in terms of improved sustainability performance
and efficiency. When companies make the link between sustainability and business
strategy explicit and visible, stakeholders are in a better position to assess how
sustainability strategy and actions contribute to firm performance and value. For
example, if an automotive company discusses its decisions to develop hybrid cars for
growing environmental awareness among its consumer base and the emergence of
regulations limiting carbon emissions, stakeholders can make better sense of
company’s strategy and relate sustainability performance to overall corporate
performance. Furthermore, this kind of information is often relevant also for
financial valuation purposes.
Only by following good stewardship of resources a firm can create value for its
stakeholders in the long run. Within firms it is possible to track impact of
sustainability activities to company’s financial results and financial position
measured in the profit and loss statement and balance sheet. The GRI guidelines
emphasize this in the section Strategy and Analysis (GRI 2006, p. 22-23). Based on
the GRI guidelines, the analysis of significant sustainability impacts, risks and
opportunities should focus on the long-term prospects and financial performance of
the corporation. The GRI guidelines recommend that in their sustainability reports
companies should explain a company’s sustainability strategy and key priorities, and
how market trends and issues link to a company’s sustainability strategy and key
priorities. Part of the GRI standard disclosures is also a discussion of key
sustainability risks and opportunities and their implications for business strategy and
financial performance. This should be supported by the provision of sustainability
performance data, which highlights key achievements, failures and performance
against targets. Disclosed information should be standardized and comparable
through time and across companies.
Contrary to GRI guidelines vast majority of companies are not yet disclosing
financial value analysis in their reports in an attempt to assist readers to recognize
links between sustainability and financial performance in terms of income statement
and balance sheet. From financial valuation perspective the biggest shortfall in
sustainability reporting occurs when they fall to make the link between a company’s
sustainability strategy and performance and its overall business strategy and
performance. These shortcomings in information supply, in turn, cause difficulties
for firm valuation.
Yachnin et al. (2006) carried out a study to develop a pilot framework for analyzing
the relevance of sustainability metrics for financial valuation. They concluded that it
is possible to transfer the impact of corporate sustainability practices into financial
valuation measurements. For their study they used five mining companies and the
data reported in their sustainability reports as a basis for analysis. Sustainability
performance indicators were analyzed based on their relevance and potential for
translation into financial valuation measures. The study addresses seven performance
indicators: two environ-mental, four social, and one economic. The analysis
demonstrates how corporate sustainability performance can be translated into