Sustainability reporting and value relevance. Empirical evidence from the beverage industry

Purpose – The financial information disclosed in the Annual Report using the accounting numbers is important, but it is not enough to evaluate the ability of value creation as companies no longer required to generate only financial performance but disclosure is also required for non-financial information. The growing importance of non financial information is confirmed by the recent approval of European Directive 2014/95/UE and by the new model of business reporting: Integrated Reporting, (IIRC, 2013). The objectives of the paper are: OB1: analysis of the recent requirements/frameworks for disclosure of non-financial information; OB2: recognition of the previous studies on the Value Relevance of non-financial information; OB3: empirical analysis of a sample of European listed companies belonging to the beverage industry. Design/methodology/approach – The methodological approach is based on two different fields: 1) the content analysis (Holsti, 1969; Neuendorf, 2002; Krippendorff, 2004) in order to evaluate the quantity and quality of NFI in companies’ reports and 2) established valuation models The 1995 Ohlson’s model (Barth et al., 1998; Barth and Clinch, 1998; Goodwin and Ahmed, 2006; Liang and Yao, 2005; Kallapur and Kwan, 2004; Wang, 2008; Wyatt, 2008) and its subsequent refinements (Feltham and Ohlson, 1995, 1996; Ohlson, 1995, 1999) has been employed in order to investigate the relationship between equity market values and NFI disclosure. In evaluation of the qualitative NFI disclosure, 70/81 (GRI G3/ GRI G4) issues of information are defined as the index to score disclosure in reports, as following: - Environment (including climate change and biodiversity); - Labor (including gender issues and health and safety); - Human Rights (including child labor and non-discrimination); - Anti-corruption and bribery; - product responsibility. The research will carry out a VR analysis on a sample of the European listed companies belonging to the beverage industry. This industry has often encouraged to identify opportunities to reduce their environmental impact, use resources more efficiently and share best practice. The drink sector is often under increasing pressure by customers and investors to produce some form of corporate sustainability report (KPMG, 2014). Originality/value – The expected findings may provide an interesting insight into the current state of reporting of NFI and about the value relevance of NFI in the beverage industry. These results should be evaluated in comparison with the ones of the research conducted on the same theme. In addition the expected results can be used by policy makers and regulators in order to develop or modify the regulatory frameworks on NFI reporting and to encourage the use and harmonisation of existing reporting guidelines to increase comparability. This research may contribute to the existing literature in regard to two different fields: 1) the recent studies on the field of non-financial disclosure, recently on Integrated Reporting (IIRC, December 2013) (Busco et al., 2013; Abeysekera, 2013, Gasperini, 2013) or on issues related to sustainability reporting (Hopwood et al., 2010; Adams et al. 2011, Branwijck, 2011; Eccles & Saltzman, 2011; Paoloni et al., 2012; Jensen & Berg 2012; Stubbs & Higgins, 2012; Parrot & Tierney, 2012; Babber, 2013; James, 2013, 2013a; Ewings, 2013) 2) the previous studies on VR and NFI information (Vafei et al., 2011; Liu et al. 2014). It is important to highlight that there are few studies on a VR analysis of NFI on the food and beverage industry. Practical implications –. The research in the field of VR and NFI, in particular focused on the social and environmental information, can be useful in particular to the management and especially to Corporate Social Responsibility (CSR) practitioners as they offer a valuable tool to appreciate the usefulness and relevance of a transparent non-financial disclosures. Limitations of the research carried out: 1) the size of the sample analyzed; 2) the analysis can be extended to other countries outside the European Union