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financial valuation measures. The study recommends disclosure of direct links
between sustainability performance and financial performance. However, they
figured out that current reporting practice does not provide sufficient specific and
quantitative information. This limits the valuation of the vast majority of a
company’s reported sustainability performance.
Characterizing Various Phases for GRI-Implementation
Standardized and comparable reporting is necessary in order to communicate
adequate sustainability data for financial valuation purposes. Companies have
published various kinds of environmental and sustainability reports from the early
1990s. However, a systematic, generally accepted sustainability reporting practice is
still evolving. The boost for the development of standardized and comparable
sustainability reporting was the establishment of the Global Reporting Initiative (GRI)
sustainability reporting guidelines in 2000. Despite the guidelines, the content of
those reports has remained highly heterogeneous. The current reporting practice for
sustainability performance is insufficient for financial valuation purposes.
Many companies struggle with how to most effectively communicate their
sustainability performance to investors so that it can be understood and integrated
into their decisions. To be useful for investors, sustainability data should be
standardized and comparable over time to facilitate comparisons between current and
historic performance. It should also be comparable across companies as this allows
investors to distinguish between the performances of different companies. (White,
2005; Gilbert & O’Loughlin, 2009)
Based on strong practical experience we propose a classification that characterize
firm’s GRI reporting and potential development path in the future. This classification
hopefully helps to create an approach that implements GRI systematically from the
point of view of financial valuation. This three phases of GRI implementation is
based on experience derived from corporate reporting practices (Alenius, 2005) and
empirical studies conducted by a corporate responsibility consulting company
Proventia (Lovio & Kuisma, 2006, Niskala et el. 2004, Proventia 2006). It should be
mentioned that three phase classification is stylized in order to highlight major
characteristics in each of the phases. In reality the boundaries of each class are
somewhat overlapping.
Currently several companies produce corporate sustainability reports with external
communication being the major driver for the GRI implementation. Phase 1 is the
first step for implementing GRI as a framework for external reporting purposes
(Table 1 below). In this phase, a company provides a stand-alone GRI report which
is published separately from the corporate financial reporting cycle (need for an
external report at corporate level). At this phase GRI data collection is carried out in
different ways without unified reporting procedures. The information provided is
typically annually consolidated data with statements and qualitative information. In
phase 1, it is also difficult to establish Group-wide quantitative targets, because of
data availability and credibility limitations. In phase 1, a company can provide