Proceedings of the 70th International Academic Conference, Madrid

INTEGRATION OF FINANCIAL AND SUSTAINABILITY REPORTING: IMPLICATIONS FOR VALUATION AND FINANCIAL DECISION-MAKING

IVANA MARTINČEVIĆ, VESNA SESAR, ANA GLOBOČNIK ŽUNAC

Abstract:

This paper examines the integration of financial and sustainability reporting and its implications for corporate valuation and financial decision-making. In response to increasing regulatory pressures and stakeholder demand for transparency, sustainability-related information has become an important complement to traditional financial disclosures. However, while prior research has extensively explored the relationship between ESG performance and financial outcomes, a clear understanding of how integrated reporting enhances valuation and decision-making processes remains underdeveloped. This study addresses this gap by focusing on the decision-usefulness of combined financial and sustainability information. Objectives: The objective of this paper is to analyse how the integration of financial and sustainability reporting improves the usefulness of information for corporate valuation and financial decision-making, with particular emphasis on ESG-related value drivers. Data and Methods: The study is based on a structured literature review of recent academic research and relevant regulatory frameworks. The analysis focuses on the role of ESG information in shaping key valuation components, such as risk exposure, cost of capital and expected future cash flows. Results: The findings indicate that ESG information is increasingly value-relevant and progressively incorporated into valuation and financial decision-making processes. Prior literature suggests that high-quality ESG disclosure can reduce information asymmetry, enhance transparency and, in many contexts, lower perceived risk and the cost of capital, although the strength of these effects varies across markets and asset classes. Conclusions: Integrating financial and sustainability reporting enhances the quality, comparability and relevance of corporate disclosures, thereby supporting more informed, forward-looking and efficient financial decision-making.

Keywords: sustainability reporting; ESG; financial reporting; valuation; decision-making; integrated reporting

DOI: 10.20472/IAC.2026.070.009

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