University of Vaasa - Vaasan yliopisto

Three Illustrations of Deriving and using Sustainability Reporting Information for
Financial Valuation Purposes
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In this section we derive some financial valuation measures based on information
actually disclosed in phase 2. The constructed measures are examples of phase 3
measures. In other words, we develop GRI measures in the direction of an explicit
financial valuation. The sample companies here were selected because of data
availability and a long track record in quantitative sustainability performance
improvement. We picked up three examples where financial valuation related
information can be derived from companies’ sustainability reports. In other words,
our examples are built on actually disclosed data in firms’ sustainable reporting.
These examples represent financial valuation potential of occupational health and
safety (table 3, B3), energy (table 3, A1), air emissions (table 3, A4), and
environmental expenditures (table 3, A7)
Improvement of Safety Performance in Fortum
For an energy company, such as a Finnish energy firm Fortum, the occupational
health and safety issues are relevant also from the business point of view. Fortum is
implementing corporate level safety guidelines and instructions. As a result of safety
management activities Fortum has improved its safety performance remarkably 5 . The
evidence of this is found from the development of lost time injuries frequency from
the year 2000 to 2006 (see Figure 1 below).
Lost time injuries frequency (LTIF) is a common and intuitively fairly
straightforward indicator used in sustainability reporting. LTIF is defined as:
Lost time incident frequency (LTIF) = (LTI divided by worked man
hours)* 1,000,000 hours
The indicator describes the frequency of lost time injuries. Based on Federation of
Accident Insurance Institutions (2007) 6, the average lost time injuries frequency in
Finland was 39,0 in 2005. This statistic covers only those injuries which result in
three or more days absence from work which gives a much lower frequency than the
definition provided above. Another important measure for injuries is the average
severity rate of lost time injuries, which is the average amount of time that
employees are absent from work due to injury. These indicators correlated with
financial measures due to additional costs caused by lost time and other injuryrelated
costs. It is estimated that one day absence results average direct costs of 5.600
Euros (European Agency for Safety and Health at Work, 2002)
In Fortum, the lost time injuries frequency was 15 in the year 2000. However, the
average lost time injuries frequency in similar industries worldwide was at that time
below 4. Since then Fortum has established company Group-wide targets for lost
time injuries and has improved its performance: in 2006 LTIF was 3.7 and target for
2007 is 2. The ultimate, stated, goal for lost time injuries in Fortum is zero.