Relationship between ESG Performance and Financial Performance

Running head: FOUNDATION IN ACCOUNTING
Foundation in Accounting
Name of the Student
Name of the University
Author Note

1FOUNDATION IN ACCOUNTING
Executive Summary
The purpose of this study is to evaluate the relationship between ESG performance and financial
performance. The performance frontier helps in determining the relationship between ESG
performance and financial performance. It summarizes the relevant material ESG issues that it
needs to consider and calls for the need for sustainable innovation to improve both financial
performance and ESG performance. This study also discloses various environmental and social
disclosures of Rio Tinto, a mining company in Australia. These disclosures have been taken from
the sustainability reports of the company from the years 2015 and 2018.

2FOUNDATION IN ACCOUNTING
Table of Contents
Introduction......................................................................................................................................3
Discussions......................................................................................................................................4
Innovation and performance........................................................................................................4
Pushing the frontier......................................................................................................................6
Own perspective..............................................................................................................................8
About Rio Tinto...............................................................................................................................8
Sustainability report for 2015..........................................................................................................8
Environmental disclosures...........................................................................................................8
Social disclosure..........................................................................................................................9
Sustainability report for 2018........................................................................................................10
Environmental disclosure..........................................................................................................10
Social disclosure........................................................................................................................11
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

3FOUNDATION IN ACCOUNTING
Introduction
Most companies nowadays have sustainability programs and are making major
significant progress towards achieving goals of sustainability. Sustainable innovation is a type of
innovation that enhances profits, provides a better view of social outcomes and has less
environmental consequences. Sustainable innovation leads to practices involving changing staff,
restructuring energy use in addition to innovating operations in marketing, sales and brand
marketing. It has fostered a more stronger case for change than regular innovation practices.It
offers changes in aspects that include changing consumer behaviors, using renewable
technologies etc. Sustainable innovation requires greater collaboration among individuals,
divisions and organizations in order to facilitate change in business practices that will ultimately
lead to a greater benefit in terms of cost reduction and having the license to grow and evolve. In
this study, the tradeoff between financial performance and ESG performance is compared. While
improving one type of performance causes a deterioration in other type of performance and vice
versa.
Discussions
Innovation and performance
Nowadays most multi million dollar companies considers financial perspective and
disregards environmental implications altogether. They put controls in place only after the
mishap has already occurred. These misguided decisions are made as a result of negative
externalities impacting pollution, abusive labor actions etc that are borne by the society which in
turn benefits the shareholders. However activities like voluntary reducing emissions or
promoting education among youths that actually help the society create costs of the firm.