Corporate Sustainability Effectiveness: Social and Environmental Reports Grade of Disclosure and Economic Performance

Abstract

Nowadays, sustainable development is widely considered as the leading paradigm for future growth. Over the last years, research has provided a business case for sustainability, showing it pays in terms of superior financial, operative and competitive performance. Nevertheless, at business level, sustainability is often equated to eco-efficiency. The key to corporate sustainability goes beyond the efficiency point of view, regarding the effectiveness of firms’ sustainable strategies and policies: the question is not anymore whether being “green” or not, but how being “green”. Measuring sustainability effectiveness and its effects on firms’ performance is currently one of the major issues in the corporate sustainability theory building. This paper aims to contribute to this process in two ways: providing an innovative measure of corporate sustainability effectiveness, that is the level of disclosure of sustainable information in GRI non-financial reports, and analyzing the outcomes of effective sustainable strategies and policies on companies’ market value. I propose a longitudinal study of the Fortune Global 500 companies in order to show that higher level of disclosure determines higher market value. Results show that the issuance of a GRI referenced report determines a positive effect on market capitalization, even if a full disclosure stance (A and A GRI Application Levels) has a negative effect on market value in the period of analysis.