University of Vaasa - Vaasan yliopisto

Three-Phase Classification in the Context of Finnish Listed Firms
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Three-phase classification is meant to show and characterize logical steps how a firm
can systematically strengthen its sustainability reporting and its impact for internal
and external purposes. In this section we apply this classification for Finnish listed
firms in order to see what the current situation is in their sustainable reporting. Our
classification helps firms also to recognize potential issues and ways to improve their
GRI reporting .
For the purpose of analyzing current reporting practices we reviewed all OMX
Helsinki listed firms that published GRI based reports in 2006. Finnish firms have a
tradition of high quality financial reporting (Lindahl & Schadewitz, 2009). Therefore,
it is also among one of the best countries having a potential to find high quality
sustainability reporting. Legislation and regulation in Finland is also in line with the
European Union. Therefore the findings reported here are also relevant in the EU and
in its regulatory context. We based our sample construction on a leading experience
and knowledge in Finland in this. That guidance resulted to 18 companies providing
either a stand-alone sustainability report or a sustainability report as a part of their
annual report (GRI-based reporting practice among these firms is detailed in
Appendix). The sample represents different industrial sectors including materials (8),
industrials (2), information technology (2), finance (2), consumer discretionary (1),
consumer staples (1), health care (1) and utilities (1) companies. The sample
companies are typically among the largest companies in their industry and often also
recognized sector sustainability leaders, which are indicated by the fact that 78 % of
sample companies is or has previously been a component of some of the major
sustainability indices, such as Dow Jones Sustainability Index or FTSE4Good.
The categorization is based on the publicly available information companies
provided in their sustainability reporting. Companies were classified to the three
phases based on their sustainability reporting practices. The reports cover a wide
variety of sustainability information and relatively large amount of sustainability
performance indicators. Significant differences were identified when analyzing
companies’ activities in terms of sustainability target setting, data collection
procedures and use of data for internal management purposes, role of external
assurance and provision of financial value measures and discussion about the link
between sustainability performance and business performance.
The vast majority of the analyzed companies (14) represent the phase 1 GRI
implementation level (see Table 2 below). Those companies represent eight different
industries (forestry: 3 (firms), information technology: 2, chemicals: 1, industrials: 2,
finance: 2, pharmaceuticals: 1, food processing: 1, and metals: 2). No clustering for
certain industries can be recognized. For those companies the starting point for GRI
implementation has clearly been to produce an external sustainability report. They
collect sustainability data on annual basis and provide reports to external
stakeholders in order to communicate information on their sustainability activities.
Four companies are categorized in the phase 2 in their GRI implementation (one firm
from each of the following industries: energy, packaging, retail, and forestry). In this
second phase sustainability data is utilized also for performance management and
Group-level quantitative target setting. They have also implemented sophisticated