Indian Journal of Commerce & Management Studies ISSN : 2240-0310 EISSN: 2229-5674

SUSTAINABILITY REPORTING AND ITS IMPACT

ON CORPORATE FINANCIAL PERFORMANCE:
A LITERATURE REVIEW

Priyanka Aggarwal,
Assistant Professor,
Shaheed Bhagat Singh College,
University of Delhi & Research Scholar,
Department of Commerce, Delhi School of Economics,
University of Delhi – Delhi, India

ABSTRACT

Sustainability is the most critical issue faced by an organization today; having the potential to influence overall
performance and profitability of organization. The purpose of this study is to examine the impact of sustainability
reporting on corporate financial performance through review of extant literature. Various researches have been
conducted over the last decade for examining this relationship. The results are mixed, inconsistent and often
contradictory; ranging from positive, to negative, to statistically insignificant relationship; depending upon the
choice of measure of sustainability reporting, measure of financial performance, sample composition, time-period,
and control variables. We, however, observed that the majority of studies suggest positive relationship. This paper
attempts to critically analyze the existing researches to lay down scope for further research which may provide
better and more consistent results. Further, the laws, regulations and standards on sustainability reporting are
contemplated to become more stringent and mandatory in near future. Thus, the companies should adopt
sustainability reporting as early as possible to avoid regulatory actions in future. Another important issue which
needs to be addressed is concern over the reliability of sustainability reports. To resolve this issue, firms should get
their sustainability reports externally assured from credible assurance providers like KPMG, EY, etc. to establish
their image as a credible reporter in the perception of stakeholders. Without the credibility and trust that is put by
stakeholders, business is impossible to run.

Keywords: Corporate Financial Performance, Corporate Governance, Corporate Social Responsibility (CSR),
Environmental Responsibility, Stakeholder Engagement, Sustainability Reporting..
Introduction: (2011) defines „Sustainability Reporting‟ as – “The practice
of measuring, disclosing, and being accountable to internal
Sustainability is the most critical issue faced by an
and external stakeholders for organizational performance
organization today. World Business Council for Sustainable
towards the goal of sustainable development.”
Development (2002) defined Corporate Sustainability as -
The financial analysts, investors and other stakeholders are
“the commitment of business to contribute to sustainable
increasingly demanding information on non-financial, i.e.
economic development, and to work with employees, their
Environmental, Social and Governance (ESG) performance
families, the local community and society at large to improve
of companies, over and above their financial information, so
their quality of life.” In today‟s age, firms should take
as to take more rational and informed investment decisions.
accountability for and disclose impacts of their operations on
According to Hubbard (2008), the number of investors who
the overall society and environment in which they exist.
seek to invest in Socially Responsible Investments (SRI) has
Therefore, the concept of Sustainability Reporting has been
been growing rapidly; leading to the creation of various
assuming great importance. Global Reporting Initiative
sustainability indices, such as Dow Jones Sustainability Index
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(DJSI), Johannesburg Stock Exchange (JSE) SRI Index,  To build theoretical framework establishing linkage
Domini Social Index (DSI), etc. between sustainability reporting and corporate
KPMG (2011) in its International Survey on Corporate financial performance.
Responsibility Reporting found that 95% of the 250  To provide a review of extant literature in order to
largest companies in the world conduct corporate throw light on the findings, conclusions and limitations
responsibility reporting. About 50% companies in Asia of studies pertaining to our research topic, and to lay
Pacific carry out corporate responsibility reporting. down the scope for further research that may facilitate
The European firms are the leading ones. White (2012) future research in this area.
stated in his report that the JSE was the first exchange
to have mandated integrated reporting in a single Research Method:
report for listed companies from March 2010. The
Integrated Reporting Framework, which is the first of We used qualitative and descriptive research approach in this
its kind across the globe, is expected to be published literature review paper. We surveyed, studied, analyzed and
by the end of 2013. summarized the findings and limitations of various important
In India, the Ministry of Corporate Affairs (MCA) issued the research papers, studies, articles and other sources pertaining
„National Voluntary Guidelines (NVG) on Social, to our research objectives.
Environmental and Economic Responsibilities of Business‟ in
July 2011. These guidelines furnish principles and layout of Concept of Sustainability Reporting:
corporate responsibility reporting for all Indian companies, According to the International Institute of Sustainable
including MNCs and SMEs. The Securities and Exchange Development (IISD), the concept of Sustainability Reporting
Board of India (SEBI) issued a Circular on Business has evolved since 1980s when the first environmental report
Responsibility Reports, dated August 13, 2012, mandating appeared. It is sometimes also referred to as - Corporate
listed companies to practice NVG and to uniformly disclose Responsibility Reporting (CRR) or Triple Bottom Line
their responsibility efforts in Business Responsibility Reports (TBL) Reporting. Elkington (1998) developed the term
(BRRs) as part of Annual Reports. The provisions of circular “triple bottom line” to emphasize on three aspects - profits
are compulsory for top 100 listed entities based on market (economic), people (social), and planet (environmental).
capitalization at BSE and NSE as on March 31, 2012, and are Sustainability Reports are published by firms to provide a
applicable with effect from financial year ending on or after description of their triple bottom line performance and to
December 31, 2012 (SEBI, 2012). As per the report by John show the commitment of firm towards its diverse
(2012, Dec 11) - number of Indian companies who report as stakeholders. According to G3.1 Sustainability Reporting
per framework developed by Global Reporting Initiative guidelines developed by Global Reporting Initiative (2011) -
(GRI) has increased significantly from only 34 at the end of “The „environmental dimension‟ of sustainability concerns an
year 2011 to around 80 at the end of 2012. Among these are organization‟s impacts on living and non-living natural
popular companies like Wipro, TCS, ITC, Infosys, HUL, systems, including ecosystems, land, air, and water. The
L&T, Tata Steel, etc. „social dimension‟ of sustainability concerns the impacts an
It is widely believed that sustainability reporting lays a organization has on the social systems within which it
foundation for preserving and enhancing value of firm operates. The „economic dimension‟ of sustainability
through various strategic benefits such as – improved concerns the organization‟s impacts on the economic
stakeholder engagement or relations, better customer access, conditions of its stakeholders and on economic systems at
customer loyalty, new products, new markets, good brand local, national, and global levels.”
image, improved employee morale, retention and loyalty, risk
avoidance, easier access to capital, strengthened license to Global Reporting Initiative (GRI):
operate, cost savings, productivity, etc. (Warren & Thomsen,
2012). Various researches have been conducted over the last Global Reporting Initiative (GRI) is an international, non-
decade for examining the relationship between sustainability profit, network-based organization. It is a multi-stakeholder
reporting and financial performance. But the results are effort to provide a comprehensive sustainability reporting
mixed, inconsistent and often contradictory. framework which can be widely used by all companies
around the world. The Sustainability Reporting Guidelines
Objectives of the Study: are the basis and spine of GRI‟s Framework. They promote
transparent disclosure of company performance along key
This paper aims to achieve the following objectives: sustainability aspects. The GRI committee delivered the first
 To provide an overview of the concept of set of sustainability reporting guidelines in June 2000. The
Sustainability Reporting and GRI Framework. fourth generation version – G4 guidelines has recently been
 To study the impact of sustainability reporting on launched at GRI‟s 2013 Global Conference held on 22nd May,
financial performance of company. 2013. The G4 version is the most recent, comprehensive and
recommended version. It is more user-friendly and is more
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accessible for new reporters. Moreover, it harmonizes with C. Agency theory:

other major and significant global frameworks.
The agency theory is based on principal-agent
The GRI Sustainability Reports are prepared on the
relationship which exists between the owners and
basis of certain principles which define the contents and
managers. This theory has gained significance in the
quality of report. These include: Materiality,
wake of corporate governance scandals like Satyam
Stakeholder Inclusiveness, Sustainability Context,
scam. It is well known that conflict of interest and
Completeness, Balance, Comparability, Accuracy,
information asymmetry exists between company
Timeliness, Clarity and Reliability. The standard
managers (insiders) and shareholders & other
disclosures under GRI Sustainability Reporting
stakeholders (outsiders). In the absence of adequate
Guidelines include - Strategy and Analysis,
public disclosure by companies, the amount of risk
Organizational Profile, Report Parameters, Governance,
perceived by investors rises significantly (de Klerk & de
Stakeholder Engagement, and Management Approach
Villiers, 2012). This causes the market to under-value the
and Performance Indicators, i.e. Economic,
shares or demand more returns from firms which do not
Environmental, and Social Performance Indicators.
disclose appropriately. Sustainability Reporting reduces
Social indicators are further divided into four
information asymmetry and risk perceived by investors,
categories: Labor Practices and Decent Work, Human
increases market efficiency and reduces cost of capital to
Rights, Society, and Product Responsibility.
firm (Dhaliwal et al., 2011; Warren & Thomsen, 2012).
Other organizations and standards related to
sustainability reporting include International Integrated
Literature Review:
Reporting Council (IIRC) – formed in August 2010,
United Nations Environment Programme Finance A large number of research studies have been conducted in
Initiative (UNEP FI), ISO 14063 : 2006 on the context of sustainability reporting and its impact on
Environmental management & Environmental financial performance during the last two decades. Prior to
communication, AA1000AccountAbility Principles that emphasis was on examining the relationship between
Standard (AA1000APS- 2008), AA1000 Assurance Corporate Social Performance (CSP) and Corporate Financial
Standard (AA1000AS- 2008), Social Accountability Performance (CFP). The first study in this regard was
8000 (SA8000), etc. conducted by Narver in 1971. Margolis and Walsh (2003)
evaluated 127 published studies between 1972 and 2002 to
Theoretical Framework: study this relationship. Out of 127 studies, 4 studies analyzed
A. Legitimacy Theory: bi-directional relationship. 109 studies treated sustainability
performance as independent variable, out of which 54
Lindblom (1993) defined legitimacy as- “a condition which
showed positive relationship, 7 showed negative relationship,
exists when an entity‟s value system is in harmony with the
28 showed non-significant relationship and 20 showed mixed
value system of society.” According to this theory, it is
results. In 22 studies, corporate sustainability was taken as
essential to meet the societal norms and expectations to
dependent variable, out of which 16 showed positive
ensure the survival of firm in long-term. The proponents of
relationship. Orlitzky et al. (2003) performed a meta-analysis
legitimacy theory (Patten, 1992; Deegan, 2000) argue that
of 52 empirical studies and concluded that, “corporate social
sustainability reporting tends to reduce the risk of regulatory
performance is positively correlated with financial
actions and boycotts by stakeholders, and it strengthens the
performance and the relationship tends to be bi-directional
firm‟s license to operate.
and simultaneous.” They also found that CSR performance
measures were more highly correlated with accounting-based
B. Stakeholder theory:
measures than with marked-based indicators.
Stakeholders refer to those individuals, groups, or In SAM White Paper, SAM and Robeco (2011) argued that
organizations that are likely to influence, or be influenced sustainability reporting would impact corporate financial
by the operations and decisions of firm. According to performance either through cash flows or through cost of
Freeman (1984), the stakeholder theory upholds that firms capital. Some researchers use accounting-based measures like
have accountability towards a broad range of stakeholders, Return on Assets (ROA), Return on Equity (ROE), Return on
apart from shareholders, i.e. creditors, customers, Sales (ROS), Profit before Taxation (PBT), Cash Flow from
suppliers, employees, government, community, Operations (CFO), etc., while others use market-based
environment, future generations, etc. King (2002) measures such as Stock Returns, Share Prices, Market Value
recognized the significance of integrated sustainability Added (MVA), etc.
reporting in strengthening the relationship between firm The prior researches provide no clear and precise relationship
and society in which it operates. Ignoring the stakeholder between sustainability reporting and financial performance.
interests may taint firm‟s public image, which would The results are mixed and often contradictory. Now we
unfavorably affect its financial performance. organize the literature review into different parts; exhibiting

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positive, negative, not significant, or mixed relationship, to disclosures and financial performance owing to various
bring more clarity and make it easier to comprehend the synergies and benefits. Baumunk (2009) mentioned that
nature of association between sustainability reporting and primary advantages of sustainability reporting are: 1) higher
corporate financial performance. demand for firm‟s offerings; and 2) increase in stock prices.
The Table - 1 given below gives a description of some
Positive Relationship: important studies establishing positive relationship.
The majority of research studies provide evidence of a
positive and significant association between sustainability

Table – 1: Positive Relationship between Sustainability Reporting and Financial Performance

Measure of
Measure of Sustainability Remarks and Limitations
[Link]. Study Financial Sample Description & Data Sources Key Findings and Conclusions
Reporting (if any)
Performance

Using a field survey methodology, a

Return on Total
3 Indicators of sample of 60 manufacturing companies in
Assets (ROA), and Increased investment in sustainability
sustainability: employee Nigeria was studied; which were The paper recommends
amount expended on indicators led to increase in ROA;
Ngwakwe health and safety, waste categorized into 30 responsible firms and research into the relationship
1. fines, penalties and reduction in amount spent on fines,
(2009) management, and 30 irresponsible firms. between sustainability and
compensations penalties and compensations; and
community development. Test Period: 1997-2006. The data has been conflict management.
(FPC), including improved relations with stakeholders.
collected from financial statements of
litigation costs.
these firms and questionnaire.

Sample: US Companies (Asset4 Universe).

Amount by which ESG laggards exceeded estimates 61.5%
I/B/E/S Surprise History data was used for
Greenwald ESG Performance Scores Actual Reported of the time, while ESG leaders exceeded
2. earnings. Annual Earnings for the period -
(2010) from Asset4 database. Earnings exceed the estimates 70.8% of the time, indicating
2004-July 2010 & Quarterly Earnings for
Estimated Earnings. positive correlation.
2008-July 2010 are considered.
Sample: 37 US-based public cos. which
Sustainability Report Marker Reaction and The paper finds no significant market The paper examines only US
made press release announcement for the
Quality Content Analysis Cumulative abnormal reaction to the announcement. firms.
first-time issuance of a standalone
Score (CA Score) based on returns (CARs) over However, in cross-sectional analyses, The sample is quite small
Guindry and sustainability report over the period 2001-
3. 55 sustainability three-day event companies with highest quality reports (37).
Patten (2010) 2008.
performance indicators as period. CAR = a1 + exhibited significantly more positive The focus is only on
Academic Universe Lexis-Nexis database
per GRI, and scored on a b1CAscore + market reactions than companies issuing shareholders‟ or investors‟
and New York Stock Exchange value-
scale of 0-3. b2Industry + b3Size lower quality reports. perception of value.
weighted index were used as data sources.
The sample covered all listed firms in GRI based sustainability reporting is an
Market Value of
Schadewitz Existence of firms‟ GRI Finland that adopted GRI during the years important explanatory factor for market
Firm, based on
4. and Niskala based Sustainability 2002-05. value of firm. It reduces information -
conventional Ohlson
(2010) Reports. Thomson Financial Services (commercial asymmetry between mangers and other
valuation model.
database) was used. stakeholders.
A2IR (CSR) score
produced by Asset4 and Future changes in The sample consists of firms in the Russell The study finds that the source of
dummy variables - whether ROA, operating cash 1000 and grows over the period 2002- positive association between financial
Lys et al. firm issues standalone CSR flow scaled by total 2010. Total firm years = 6,285 performance and CSR investments is
5. -
(2011) report, whether report uses assets (CFO) and size The financial data is collected from more likely due to signaling value of
GRI framework, and adjusted stock returns Compustat and stock return information CSR disclosures, than positive returns on
whether report has been (SAR). from CRSP. those investments.
audited.
Study comprises all companies that
participated in SAM's annual Corporate Results reveal positive relationship
SAM and
Sustainability Scores from Sustainability Assessment between 2001- between sustainability and financial Emerging markets have been
6. Robeco Stock returns
SAM database 2010, excluding companies in emerging performance, demonstrating the superior excluded from sample.
(2011)
markets and Canada. Final data set alpha potential of sustainability leaders.
includes 465 companies p.a.
Scores on 4 Sustainability They found that firms with higher
Indices including – (22) Sales revenue growth Sample consisted of top 100 sustainable sustainability disclosure scores had
It focused only on top 100
items for environment, (SRG), return on global companies in 2008. significantly higher mean sales revenue
global sustainable companies
Ameer and Diversity (21), community assets (ROA), profit Test Period: 2006 to 2010. growth, ROA, PBT and CFO over the
which were mostly from
7. Othman (12), & ethical standards before tax (PBT), and ESG data was drawn from a content test period from 2006-2010.
developed economies. Future
(2012) (13). cash flows from analysis of sustainability reports. Financial The study suggested bi-directional
research should consider
Each item was scored from operating activities data were downloaded from Thomson relationship between sustainability
developing economies also.
0-4 based on disclosure in (CFO). financials Worldscope. practices and financial performance.
sustainability report.
Quantitative data consists of 110 annual This paper uses only annual
The results confirm that a high level of
reports of 40 Libyan companies and 149 report & ignores other
CSRD is strongly associated with
Level of Corporate Social questionnaires collected from managers corporate mass
company reputation for stakeholder
Responsibility Disclosure and employees to measure corporate communication means. Also,
groups.
Bayoud et al. (CSRD) represented by reputation. sample size is small (40) &
8. Corporate Reputation The results show that most companies
(2012a, April) Employee, Community, Test Period: 2007-09 content analysis may be
(60%) disclose all four categories of
Consumer and In qualitative data, 31 financial managers affected by subjectivity.
CSRD, whereas few companies (5%) do
Environment disclosures. and information managers express their Future research should
not present CSR information in their
perception about relationship between analyze various categories of
annual reports.
CSRD and corporate reputation. disclosures individually.
Two measures of CRR:
The classification scheme used
1st is a comprehensive Share prices (market
Sample: 69 companies; out of top 100 to select environmentally
disclosure measure against value of equity) using The share prices & market value of
South African companies by revenue, as sensitive industries may be too
de Klerk and 87 items using KPMG modified Ohlson companies with higher levels of CRR are
identified in KPMG Survey of 2008. restrictive.
9. de Villiers survey. (1995) model, as likely to be higher and CRR is value-
KPMG data set on CRR and McGregor For more extensive evidence,
(2012) 2nd measure is a dummy developed by Hassel relevant for investment decision-making.
BFA database for financial data have been this study can be replicated over
variable indicating whether et al. (2005).
used. a longer period of time and CRR
company uses GRI
measures can be refined further.
guidelines for CRR or not.

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180 US firms: 90 high sustainability firms The study provides evidence that High
Equal-weighted
Stock returns, ROA, and 90 low sustainability firms. Sustainability companies significantly
Eccles et al. Sustainability policies
10. ROE Test period: 1993 to 2010. outperform their counterparts over the -
(2012) index, ESG disclosure
Asset4 Database, Bloomberg ESG scores, long-term, both in terms of stock market
scores
SAM data are used. and accounting performance.
Sustainability reporting 45 public cos. listed on Singapore
The study found a positive and
index scores, using 5 Exchange main market from 2008-2010.
Khaveh et al. Revenue, Average significant relationship between
11. environmental and 5 social All financial data are collected from -
(2012) share price sustainability reporting and revenue and
indicators, based on G3.1 companies‟ annual reports, and scores
share price as well.
GRI Guidelines. from sustainability index constructed.
Sample: 32 companies listed on
Indonesian Stock Exchange during 2006 to
The result shows that sustainability
N. Burhan 2009.
reporting influences company Small sample size (only 32)
and Disclosure index scores Secondary data (annual report and
12. ROA performance. However, partially, only & Short time frame
Rahmanti based on GRI sustainability report) collected from
social performance disclosure influences considered (only 4 years).
(2012) Indonesian Stock Exchange Website,
the company performance.
company‟s website and Capital Market
Information Centre.

Negative Relationship: interests of firm resulting in loss of competitive advantage

and decline in financial performance. The sustainability
Cormier and Magnan (2007) argued that there are some
initiatives initially involve huge increase in costs and thus
potential costs and threats associated with extensive
have negative effect on financial performance in short run.
disclosure of information like R&D, product & process
Two studies exhibiting short-term negative relationship are
innovation, approaches to risk management, eco-efficiency,
described below in Table – 2.
training & development, etc. Competitors, regulators and
pressure groups may use such information against the

(Table – 2): Negative Relationship between Sustainability Reporting and Financial Performance
Measure of
Measure of Financial Remarks
S.N Study Sustainability Sample Description & Data Sources Key Findings and Conclusions
Performance & Limitations
Reporting

Sample: Two groups of 55 European Study finds negative impact of

PBT & Cost of Capital.
firms each of similar size and capital sustainability practices on
Financial data is obtained Longer time
Dummy variable, 0 structure, studied for the period 1998– performance in short-term, after
from Amadeus database, frame needs to
Lopez et al. if the firm belonged 2004. One group belonged to DJSI, controlling for size, industry and
1. financial statements & be considered in
(2007) to DJGI and 1 if it and another quoted on Dow Jones risk. Control variables were not
other corporate future
belonged to DJSI. Global Index (DJGI) but not on the significant and no significant
disclosures available on researches.
DJSI. difference was found between two
Internet.
groups w.r.t cost of capital.

The study used

Test Period: 1999 to 2008. The study found that share values
the corrected
Sample: 36 publicly-traded US agri- of agri-businesses react negatively
Patell test
business firms, which are members of & significantly, at least in the
statistic to test
Detre and Announcement for Share values and DJSI and are traded on NYSE, short-term, when the
for the presence
2. Gunderson firm‟s inclusion in Cumulative Abnormal NASDAQ, or AMEX. announcement is made that the
of abnormal
(2011) DJSI Returns (CAR). The study uses an event study firm will become a member of the
returns because
methodology using the software DJSI. This might be due to the
it corrects for
package Eventus. CRSP database is increased costs associated with
serial
used for returns data. sustainable initiatives.
correlation.

No Significant Relationship is often argued that varying effects of different sustainability

performance indicators (environmental, social, etc.) may
Some researchers believe that any relationship between
negate and counterbalance each other, resulting in no
sustainability reporting as a whole and company‟s financial
significant impact on financial performance (Ullmann, 1985;
performance is merely accidental (McWilliams & Siegel,
Ziegler et al., 2002; Statman, 2006; Galema et al., 2008).
2000). Some other researchers are of the viewpoint that
Some studies providing no significant relation between
sustainability disclosures have no significant impact on firm
sustainability reporting and financial performance are
performance in short-term, while the effect may be positive in
described in Table – 3 below.
long-term due to reputational benefits (Adams et al., 2012). It

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(Table – 3): No Significant Relationship between Sustainability Reporting and Company Performance
S. No. Study and Country Key Findings

Results indicate that sustainable behavior of company management neither improves nor decreases
1. Ziegler et al. (2002) –Europe shareholder value. The environmental performance has significant positive effect; while social
performance has negative effect on average monthly stock return.
Results indicate that high sustainability-rated portfolios have performed better than low-rated portfolios
2. Van de Velde et al. (2005) – Europe
in terms of average monthly portfolio returns, but not to a significant extent.
Results indicate that economic performance of companies that voluntarily submitted sustainability
reports to GRI (as measured by ROA, EVA and MVA) are better but not statistically significant, than
3. Buys et al. (2011) –South Africa
those who do not report as per GRI guidelines. However, there is no evidence that GRI reporting firms
are significantly more profitable in terms of ROE.
Results indicate that Sustainability Label (proxied by DJSI Membership) has no statistically significant
4. Adams et al. (2012) –US
impact on financial performance of firms in short term (as measured by % change in stock price).
Study finds that - Overall, there is no difference in financial performance (monthly portfolio returns) of
firms with high or low ESG rankings (as per SAM database). However, high rated firms are
5. Humphrey et al. (2012a) – UK
consistently larger in size. Thus, stocks with good ESG ratings are likely to be larger, more liquid,
easier to trade, and hence more desirable for investors.
Study finds no significant difference in risk-adjusted monthly total returns of portfolios with high and
6. Humphrey et al. (2012b) – UK low ESG ratings. Results also indicate that high and low rated firms do not differ in terms of their
idiosyncratic risk.
Results indicate null or weak significance of relationship between corporate social ratings (related to 8
different stakeholder groups) and financial performance in the sample as a whole. The study concluded
7. Venanzi (2012) – Europe
that this relationship is firm specific; and firms are not equally socially responsible towards all
stakeholders, but invest more in key and influential stakeholders.

Mixed Relationship – (Arguments suggesting use of performance (Ullmann, 1985; McWilliams & Siegel, 2000).
disaggregated approach): Therefore, it is better to separately investigate the impact of
each component of sustainability on financial performance to
Sustainability disclosures comprise of various components, arrive at clearer and more concrete results. Some studies
which may have varying impacts offsetting each other; adopting disaggregated approach and providing mixed results
making it difficult to arrive at any precise or significant are described in Table – 4 below.
relation between sustainability reporting and financial

(Table – 4): Mixed Relationship between Sustainability Reporting and Financial Performance
SN Study and Country Key Findings
Sustainability disclosure is found to be strongly & positively associated with some financial measures; while negatively
Jones (2005) –
1. associated with other measures. Overall, results indicate negative but weak association between GRI Reporting Index
Australia
Score and Market Adjusted Returns.
Composite Corporate Responsibility Disclosure Rating does not significantly correlate with ROA & ROE. However,
Bassen et al. (2006) –
2. Equity Risk (beta) is negatively & significantly correlated. Further, Social issues seem to be more significant for debt
MSCI World Index
risk (credit rating).
Main finding is that firms with higher social performance scores tend to achieve lower stock returns. Further,
Brammer et al. (2006)
3. environmental and community indicators are negatively correlated with returns; while employment indicator is weakly
– UK
positively related.
Semenova et al. (2009) Overall finding is that companies with higher environmental and social performance tend to achieve higher returns
4.
– Switzerland using Ohlson model (1995). Specifically, Employee Relations have significant negative relation; while Environment,
Community and Suppliers have significant positive relation with market value of equity.
Aggregate ESG Score has no significant effect on stock returns over test period from 1991-2006. Corporate
5. Manescu (2011) – US governance, diversity, and environment scores have no significant effects; while Community relations have positive
effect on risk-adjusted stock returns.
Results provide evidence that there is sustained increase in firm‟s performance (measured by mean Cumulative
Robinson et al. (2011)
6. Abnormal Returns) subsequent to its addition to DJSI, while no significant effect is observed following a firm‟s
– North America
removal from DJSI.
Bayoud et al. (2012b) – Results reveal that corporate responsibility disclosure has positive & significant relationship with financial performance
7.
Libya & reputation. However, study finds no significant association between such disclosure and employee commitment.
Firms with large size and those in high profile industries tend to disclose more sustainability information. Presence of
Faisal et al. (2012) – 24
8. extra voluntary statement has significant & positive relationship with Sustainability Disclosure Index Score. However,
countries
no association between board independence and disclosure score is found.
Results show that UK companies‟ disclosures are higher than US companies‟. Over the test period from 2005-09, study
Mohd Taib and Ameer finds significant differences in financial performance of UK & US cos. in terms of sales growth, but no difference in
9.
(2012) - UK and US terms of Leverage, ROA & ROE. Empirical results show that Community, Business Ethics & Environment Indices do
not have, but Diversity Index has positive & significant impact on financial performance of companies.

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Conclusions: Study Based on the Top Global Corporations. Journal

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The number of companies who issue sustainability reports
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has significantly increased during the last decade. Various
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researches have been conducted over the last decade for
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examining the linkage between sustainability reporting and
[4] Baumunk, J. (2009). Sustainability reporting and
corporate financial performance. There also exists a strong
XBRL. Available at SSRN 1620567.
theoretical framework in support of sustainability reporting;
[5] Bayoud, N. S., Kavanagh, M., & Slaughter, G. (2012a,
encompassing Legitimacy, Stakeholder and Agency Theory.
April). Corporate Social Responsibility Disclosure and
Particularly, 30 studies have been analyzed in this regard.
Corporate Reputation in Developing Countries: The
The results are mixed and range from positive, to negative, to
Case of Libya. Journal of Business and Policy
statistically insignificant relationship, depending upon the
Research, 7(1), 131-60.
choice of measure of sustainability reporting (may be
[6] Bayoud, N. S., Kavanagh, M., & Slaughter, G.
disclosure index scores, independent sustainability ratings,
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