Impact of Sustainability Disclosure on Coca-Cola's Market Performance

This report investigates the effect of sustainability disclosure on Coca-Cola's market performance, focusing on Return on Assets (ROA) and Return on Equity (ROE). It uses data from Coca-Cola's sustainability reports, annual reports, and CSR Hub for the period 2003-2017. The analysis includes descriptive statistics, bivariate correlation, and regression analysis to determine the impact of Corporate Social Responsibility (CSR), Community Performance, Employee Performance, Environmental Performance, and Governance Performance ratings on Coca-Cola's ROA and ROE. The research aims to determine if sustainability disclosure significantly influences the company's financial performance, addressing research questions related to the impact on both ROA and ROE, and tests associated null and alternative hypotheses.

Running head: EFFECT OF SUSTAINABILITY DISCLOSURE OF MARKET
PERFORMANCE OF COCA COLA
Effect of Sustainability Disclosure onf Market Performance of Coca Cola
Name of the Student
Name of the University
Course ID

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EFFECT OF SUSTAINABILITY DISCLOSURE OF MARKET PERFORMANCE OF
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Table of Contents
1.0Introduction.................................................................................................................................2
1.1 Definition...............................................................................................................................2
1.2 Background of the research...................................................................................................2
1.3 Aim of the research................................................................................................................3
1.4. Research Questions...............................................................................................................3
2.0 Literature Review......................................................................................................................3
2.1 Importance of sustainability reporting...................................................................................3
2.2 Sustainability reporting and market performance..................................................................4
2.3 Hypothesis.............................................................................................................................5
3.0 Methodology..............................................................................................................................6
3.1 Data collection.......................................................................................................................6
3.2 Data analysis..........................................................................................................................6
4.0 Findings and Analysis................................................................................................................8
4.1 Descriptive statistics..............................................................................................................8
4.2. Bivariate correlation...........................................................................................................10
4.3 Regression............................................................................................................................11
5.0 Discussion................................................................................................................................13
5.1 H1: Sustainability reporting significantly influences Return on Assets of Coca – Cola.....14
5.2 H1: Sustainability reporting significantly influences Return on Equity of Coca – Cola.....15
6.0 Conclusion...............................................................................................................................15
6.1 Research aim and research question....................................................................................16
6.2 Limitation............................................................................................................................16
6.3 Recommendation.................................................................................................................17
7.0 Reference list.......................................................................................................................18

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1.0Introduction
1.1 Definition
Sustainability report of a company implies a composite report consisting economic, social
and environmental impact resulted from daily operation of the organization (Ogundare, 2013) In
other word, the sustainability report is a representative model of governance and value of an
organization (Nor et al., 2016). It also represents interlinkage between strategy of a company and
its commitments towards achieving a sustainable economy (Loh, Thomas & Wang, 2017)
Market performance of a company covers the ultimate results of different policies
including relationship between selling price and cost, output size, relative progressiveness of the
company, production efficiency compared to its rivals and others (Eccles, Ioannou & Serafeim,
2014). Different indicators of market performance include markets share, profitability, revenue,
return on equity, return on assets and the like.
1.2 Background of the research
The sustainability reporting has now a days become one major issue concerning across
the world. The main objective of sustainable practice is to meet the needs to present generation
without sacrificing the potential ability of future generation (Golicic & Smith, 2013) In regard to
this, investor now place a considerable importance on non-financial performance of a company.
The issue of corporate sustainability attracts significant attention in the phase of increased
regulation and awareness among the stakeholder (Hsu et al., 2016).
The research study analyzes impact of sustainability disclosure on market performance of
Coca-Cola. It is an American Corporation engaged in manufacturing and retailing of non-
alcoholic beverages and syrups (coca-colacompany.com, 2018). The company accounts its

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sustainability reporting covering two major objectives of documentation and assessment of
environmental and social impact of the company (Cheng, Green & Ko, 2014) Additionally, the
company incorporates its sustainability disclosure in order to access the scope to communicate
regarding its progress of sustainability and efforts to stakeholders of the organization.
1.3 Aim of the research
The present paper aims at evaluating how sustainability disclosure of Coca-Cola affects
market performance of the company.
1.4. Research Questions
In order to accomplish the research aim following research questions are prepared.
Does sustainability disclosure of Coca – Cola have any effect on return of assets (ROA) of the
company?
Does sustainability disclosure of Coca – Cola affects return of equity (ROE) of the company?
2.0 Literature Review
2.1 Importance of sustainability reporting
Several scholarly researches successfully proved implication of sustainability reporting of
an organization in modern business world (Khan, Serafeim & Yoon, 2016). In studies related to
ranking of sustainability, bankers, analysts and other were asked to report rank on different
accounting data to understand the perceived importance of sustainability (Nekhili et al., 2017).
These studies concluded that sustainability reporting is mostly ranked as moderately important
for financial community (Lu et al., 2014). Study also founded that sustainability reporting
accounted a higher importance in financial world compared to many of the components that were
crucial in past and attracted considerable attention of the researchers (Ekwueme, Egbunike &

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COCA COLA
Onyali, 2013) Sustainability reporting is considered as typically important as to represent
engagement and communication between an organization and its stakeholders. Stakeholders of a
company include shareholders, employees, investors, suppliers, community and government
(Andrikopoulos & Kriklani, 2013) It is of increasingly interesting for a company to know
sustainability practice of a company and performance of the company in managing impact of
sustainability on creating potential value of the company and mitigating future risks (Nobanee &
Ellili, 2016) This adds to the importance of sustainability reporting. The recent study confirmed
that senior directors and executives of a company now place great importance in handling issues
related to sustainability (Busch, Bauer & Orlitzky, 2016).
2.2 Sustainability reporting and market performance
Studies examining impact of sustainability reporting on market performance of an
organization used different aspects of market performance (Ng & Rezaee, 2015). One such study
examined the impact of social, environmental and ethical aspects on corporate performance for a
company named Alpha (Reimsbach & Hahn, 2015). The paper used measures like GRI,
guidelines for accountability and other reporting principles and concluded that for the selected
company social, environmental and ethical issues do not record much accountability to different
stakeholders (Kim & Lyon, 2014). Rather the evidences suggested a low accountability towards
sustainability reporting. Various external sources raised several questions regarding
stakeholders’ participation in reporting sustainability (Yusuf et al., 2013).
An empirical study analyzing importance of environmental disclosure revealed a positive
association between discretionary disclosure of a company and its environmental performance
(Chen, Feldmann & Tang, 2015). The paper made an extensive research design to study
importance of sustainability reporting. Results from past study questioned robustness of socio

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COCA COLA
political theories regarding prediction of environmental disclosure of a company. Analysis of this
study was based on the guidelines of Global Sustainability reporting. This study attempted to
assess the impact of environmental and social disclosure (Hahn & Kühnen, 2013). In this study,
191 firms were randomly chosen from five industries namely Pulp and Paper, Oil and Gas,
Metals and Mining, Chemicals and Utilities (Hahn & Lulfs, 2014). The chosen five industries
tend to have higher population propensity and subject to strict environment regulation in United
State in the last 30 years or more (Michelon, Boesso & Kumar, 2013). Literature based on public
listed companies in Malaysia suggested that there exists a significant and positive relation
between corporate social responsibility of these companies and institutional ownership.
2.3 Hypothesis
In order to analyze the two research questions following two hypotheses are developed.
Hypothesis 1
Null Hypothesis (HI0): Sustainability reporting of Coca- Cola has no statistically significant
impact on Return on Assets (ROA) of the company.
Alternative Hypothesis (H1A): Sustainability reporting of Coca-Cola has a statistically significant
impact on Return on Assets (ROA) of Coca-Cola.
Hypothesis 1
Null Hypothesis (H20): Sustainability reporting of Coca- Cola has no statistically significant
impact on Return on Equity (ROE) of the company.
Alternative Hypothesis (H2A): Sustainability reporting of Coca-Cola has a statistically significant
impact on Return on Equity (ROE) of Coca-Cola.

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3.0 Methodology
3.1 Data collection
Objective of the research study is to find out how sustainability reporting affects market
performance of Coca-Cola Company. The papers conducts an explorative research depending
upon raw data collected from sources (McCusker & Gunaydin, 2015). The data are available
publicly on official websites of the company ad website reporting sustainability practice and
sustainability ranking. The paper thus reviews data from published document of the selected
company, sustainability report and annual reports
In order to model sustainability reporting, rating in five different aspects are considered.
These are rating relating to Corporate Social Responsibility, Community performance rating,
Employees performance rating, Environment performance rating and finally Government
performance rating. All the ratings are measured on a scale ranging from 0 to 100. Data relate to
sustainability reporting of Coca- Cola are collected from CSR hub. Market performance of the
company is measured in terms of Return on Assets and Return on Equity. These data are
collected from annual reports available in the official website of the company. All the data are
collected for the last fifteen years ranging from 2003 to 2017.
3.2 Data analysis
As the paper explore relation between sustainability, reporting and market performance
quantitative data analysis method is appropriate here. Data on last fifteen years have been
analyzed using different statistical measures namely descriptive, correlation and regression
analysis. Summary or descriptive statistics helps to understand the overall trend of data series
including average, maximum, minimum, standard deviation and other. Bivariate correlation is
analyzed to find association of ROA and ROE with each of the sustainability indicator (Mertens,

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2014). The obtained association from bivariate correlation is finally verified using regression
analysis.
Two separate regression analysis has been conducted to find out the impact of
sustainability disclosure on market performance. In one model Return on Asset is taken as
dependent variable and independent variables are overall CSR rating, Community Performance
Rating, Employees Performance Rating, Environmental Performance Rating and Governance
Performance Rating. In the second model, Return on Equity is taken as dependent variable and
overall CSR rating, Community Performance Rating, Employees Performance Rating,
Environmental Performance Rating and Governance Performance Rating are the independent
variables.
3.2.1 Reporting of Sustainability
First part of the analysis requires information regarding sustainability disclosure of Coca-
Cola. The ratings are reported about Corporate Social Responsibility, Community Performance,
Employees Performance, Environmental Performance and government performance. The
sustainability reporting. Data on sustainability reporting of Coca-Cola is available at CSR Hub.
3.2.1 Return on assets and Return on equity
The dependent variables are ROA and ROE. Data on ROA and ROE are available at
official website of the company. From the published annual report data on net income, total
assets and total equity are collected for the last fifteen years. Return on asset is then computed
using data on net income and total assets. Using the data on net income and total equity return on
equity is computed for each of year.

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4.0 Findings and Analysis
4.1 Descriptive statistics
Table 1: Descriptive Statistics of Sustainability reporting
The average CSR reporting for the company is close to 56. This means in the last fifteen
years, Coca- Cola managed to obtain a CSR rating of 56 on an average. The standard deviation
of CSR rating has a relatively small value of 3.60. The minimum and maximum CSR rating for
the company is 52 and 63 respectively.
The average COM rating or the company is close to 53. This means in the last fifteen
years, Coca- Cola managed to obtain a COM rating of 53 on an average. The standard deviation
of COM rating has a relatively small value of 1.03. The minimum and maximum COM rating for
the company is 51 and 54 respectively.
Mean rating of EMP for the company is approximately 53. This means in the last fifteen
years, Coca- Cola managed to obtain a EMP rating of 53on an average. The standard deviation of

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EMP rating has a relatively small value of 0.91. The highest and lowest EMP rating for the
company is 54 and 51respectively.
The average ENV reporting for the company is close to 65. The standard deviation of
ENV rating has a relatively small value of 0.80. The minimum and maximum ENV rating for the
company is 63 and 66 respectively.
The mean GOV reporting for the company is close to 52. This means in the last fifteen
years, Coca- Cola managed to obtain a GOV rating of 52 on an average. The standard deviation
of GOV rating has a relatively small value of 1.95. The lowest and highest GOV rating for Coca-
Cola is 49 and 54 respectively.
Table 2: Descriptive Statistics for Return on Assets
Table 3: Descriptive Statistics for Return on Equity

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The average return on asset for Coca- Cola in the last fifteen years is 0.12. The same for
return on equity is slightly higher at 0.27. The standard deviation of ROS is relatively lower than
ROE implying the series of ROA has a greater stability than ROE. The minimum and maximum
value for ROA is 0.01 and 0.17. The corresponding value for ROE is 0.06 and 0.38 respectively.
4.2. Bivariate correlation
Table 4: Correlation Matrix of sustainability reporting and ROA and ROE
Bivariate correlation is analyzed to evaluate the association between ROA and ROE with
different measures of sustainability reporting. The correlation estimate between ROA and overall
CSR rating is positive with value of correlation coefficient is 0.44. That is overall rating of CSR

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constitute a positive association with ROA of the company. For community performance rating
estimated correlation between ROA and COM is positive but weak as reflected from the lower
positive value of correlation coefficient of 0.29. In case of Employee Performance rating the
obtained correlation is 0.49 indicating a moderate positive association between the two.
Correlation for environmental performance rating and that of ROA is 0.59. The association
between ROA and ENV is the strongest as revealed from the highest value of correlation
coefficient. The weakest association has been observed for Government Performance Rating and
ROA. The estimated correlation between GOV and ROA is the smallest of 0.04.
The correlation estimate between ROE and overall CSR rating is positive with value of
correlation coefficient is 0.25. That is overall rating of CSR constitute a weak positive
association with ROE of the company. In case of community performance rating estimated
correlation between ROE and COM is positive but weak as reflected from the lower positive
value of correlation coefficient of 0.37. For Employee Performance rating the obtained
correlation is 0.71 indicating a strong positive association between the two. The association
between ROE and EMP is the strongest as revealed from the highest value of correlation
coefficient. Correlation for environmental performance rating and that of ROA is 0.68. This is
also indication of a strong positive association. The estimated correlation between GOV and
ROA is the smallest of 0.43.
4.3 Regression
In the first model evaluating impact of sustainability reporting on market performance of
Coca- Cola, return on asset (ROA) is regressed on OSR, COM, EMP, ENV and GOV.
Table 5: Regression result of ROA on sustainability

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The coefficient of OSR in the model is 0.0083. This indicates overall CSR rating
positively affects ROA of the company. The regression coefficient associated with independent
variable of COM is 0.0012 reflecting positive linkage of COM with ROA. In the developed
model EMP has a positive coefficient with magnitude 0.0274. This implies EMP is positively
related with ROA. ENV also has a positive consequence for ROA with regression coefficient
being 0.0168. Only GOV has a negative relation with ROA. The associated coefficient value is -
0.0095. Not all the considered determinant of ROA is statistically significant. Among the five
included sustainability reporting indicator only two namely overall CSR rating and Employee
performance rating are statically significant.
In the second model for evaluating impact of sustainability reporting on market
performance of Coca- Cola, return on equity (ROE) is regressed on OSR, COM, EMP, ENV and
GOV.

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Table 6: Regression result of ROE on sustainability
The coefficient of OSR in the model is 0.0044. This indicates overall CSR rating
positively affects ROE of the company. The regression coefficient associated with independent
variable of COM is - 0.0025 reflecting inverse linkage of COM with ROE. In the developed
model, EMP has a positive coefficient with magnitude 0.0433. This implies EMP is positively
related with ROE. ENV also has a positive consequence for ROE with regression coefficient
being 0.0168. Only GOV has a negative relation with ROE. The associated coefficient value is -
0.0291. All the determinant of ROE as considered in the model are not statistically significant.
Among the five included sustainability reporting indicator only one namely Employee
performance rating is statically significant.
5.0 Discussion
The section discusses the obtained statistical results in relation to developed hypotheses.

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5.1 H1: Sustainability reporting significantly influences Return on Assets of Coca – Cola
The first hypothesis investigates significance of the relationship between sustainability
reporting and Return on Assets of the Coca- Cola. Null hypothesis suggests no statistically
significant relation exists between sustainability reporting and return on assets of the company.
Return on asset is an indicator of market of a company in the sense that it captures
profitability of the company relative to the value of total assets (Fernandez-Feijoo, Romero &
Ruiz, 2014). ROA helps investors, managers and business analysts an idea regarding efficiency
of the company and its management generating earnings to the investors and shareholders. ROA
represents net income as a proportion of total assets (Oikonomou, Brooks & Pavelin, 2014).
Higher ROA thus reflects a better performance for the company and vice-versa.
The present paper considers five indicators for sustainability reporting of Coca- Cola. A
mixed result has been obtained for evaluating influence of maker sustainability on return on
assets of the company. Most of the previous studies support the claim of positive relation of
sustainability disclosure with market performance (Elliott et al., 2013). In case of ROA, all the
sustainability rating except government performance rating has a positive effect on assets return.
That is with increase in sustainability rating of CSR, community performance, employees’
performance and environmental performance, return on assets increases. In case of government
performance, higher rating means a lower asset return. The values of coefficients are relatively
small implying sustainability reporting has a little impact on ROA. In determining ROA, the two
significant variables are employees’ performance rating and overall CSR ratings. Only two
dimensions of sustainability reporting thus significantly influence ROA.

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5.2 H1: Sustainability reporting significantly influences Return on Equity of Coca – Cola
The second hypothesis is based on determination of relative significance of sustainability
reporting in return on equity (ROE) of Coca – Cola. The null hypothesis here states that
sustainability reporting has no statistically significant effect on ROE of the company.
Return on Equity measures market performance of a company from perspective of
shareholders (Li et al., 2014). ROE is a measure that represents net income of the firm as a
proportion on equity of shareholders. Higher the ROE higher is the net income relative to equity
of the shareholders. It reveals the generation of profit with the invested money of the
shareholders. Higher ROE implies a better performance of the company (Qiu, Shaukat &
Tharyan, 2016).
The general hypothesis aims to find overall sustainability impact on equity return of the
company. As different sustainability ratings are considered, a combined result is obtained
regarding influence of sustainability on equity return. Except community performance rating all
other indices have a positive influence on equity return. That is, higher the rating of CSR, EMP,
ENV and GOV higher is the return of equity to the shareholder indicating a good performance.
For community performance rating, because of the inverse relation a lower rating means a higher
equity return and vice versa. Among the five indicative measures of sustainability disclosure the
rating on employees’ performance only has a significant influence on equity return. Rest of the
indicators are statistically insignificant.
6.0 Conclusion

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6.1 Research aim and research question
The study primarily aims to analyze effect of sustainability on market performance of
Coca- Cola. Depending two major indicators of market performance ROA and ROE there are
two secondary research questions.
The first question tries to investigate how sustainability disclosure influence ROA of the
company. The findings suggest that of the five sustainability disclosure only one indicator
(government performance rating) has a negative influence on ROA. Three of the five indicators
turn out as statistically insignificant and therefore, cannot be considered as significant
determinant of ROA. The two statistically significant variables are CSR reporting and employee
performance rating.
The second question attempts to explore how sustainability disclosure influence ROE of
the company. The findings suggest that of the five sustainability disclosure only one indicator
(community performance rating) has a negative influence on ROA. Four of the five indicators
turn out as statistically insignificant and therefore, cannot be considered as significant
determinant of ROE. The only statistically significant variables is employee performance rating.
6.2 Limitation
The paper studies data for last fifteen years. The sample size thus is relatively small.
Increasing number of years or inclusion of other companies can give a more robust result. This is
the first limitation of current research.
The second limitation is consideration of only ROA and ROE as indicator of market
performance. Several other indicators indicate market performance of a company. These
indicators include sales, profitability and such other measure.

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For reporting of sustainability, five indicators are considered. As a result, ambiguous
results are obtained for some aspects. Instead of five separate rating, consideration of an overall
composite index can provide a more precious and unambiguous result.
6.3 Recommendation
The study finds most of the sustainability reporting has a positive impact on ROA and
ROE of the company. Of these, employee performance rating has a positive significant influence
on both assets and equity return. Higher employees’ performance rating means a higher return
and vice versa. The company therefore should focus on improving performance of the
employees’ to enhance its market performance.
CSR is also has a positive significant influence on assets return of company. The
company thud should focus on accomplishing principles of Corporate Social Responsibility to
increase return on assets and hence to improve market performance.

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Ekwueme, C. M., Egbunike, C. F., & Onyali, C. I. (2013). Benefits of triple bottom line
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Kim, E. H., & Lyon, T. P. (2014). Greenwash vs. brownwash: Exaggeration and undue modesty
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Nobanee, H., & Ellili, N. (2016). Corporate sustainability disclosure in annual reports: Evidence
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Economics, 146(2), 501-514.

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Appendix
Ove
rall
CSR
Rati
ng
(OS
R)
Comm
unity
Perfor
mance
Rating
(COM)
Emplo
yees
Perfor
mance
Rating
(EMP)
Environ
mental
Perfor
mance
Rating
(ENV)
Gover
nance
Perfor
mance
Rating
(GOV) ROA ROE
Net
Incom
e
[Millio
n $]
Total
Assets
[Millio
n $] ROA
Total
Equity
[Millio
n $] ROE
54 51 51 63 49
0.01
3448
0.06
2286
$
1,182.
00
$
87,896
.00
0.01
3448
$
18,977
.00
0.06
2286
54 54 54 66 54
0.07
5054
0.28
2084
$
6,550.
00
$
87,270
.00
0.07
5054
$
23,220
.00
0.28
2084
55 52 54 65 54
0.08
1848
0.28
5903
$
7,366.
00
$
89,996
.00
0.08
1848
$
25,764
.00
0.28
5903
53 54 53 65 51
0.07
7415
0.23
3108
$
7,124.
00
$
92,023
.00
0.07
7415
$
30,561
.00
0.23
3108
53 52 53 66 53
0.09
5786
0.25
7955
$
8,626.
00
$
90,055
.00
0.09
5786
$
33,440
.00
0.25
7955
55 52 54 65 51
0.10
5438
0.27
3939
$
9,086.
00
$
86,174
.00
0.10
5438
$
33,168
.00
0.27
3939
55 54 53 65 53
0.10
8110
0.27
0856
$
8,646.
00
$
79,974
.00
0.10
811
$
31,921
.00
0.27
0856
54 53 54 65 53
0.16
1942
0.37
7080
$
11,809
.00
$
72,921
.00
0.16
1942
$
31,317
.00
0.37
708
56 54 54 65 51
0.14
0207
0.26
9234
$
6,824.
00
$
48,671
.00
0.14
0207
$
25,346
.00
0.26
9234
52 53 54 65 49
0.14
3315
0.28
3656
$
5,807.
00
$
40,519
.00
0.14
3315
$
20,472
.00
0.28
3656
53 54 54 66 49
0.13
8228
0.27
5064
$
5,981.
00
$
43,269
.00
0.13
8228
$
21,744
.00
0.27
5064
54 52 54 66 49
0.16
9542
0.30
0236
$
5,080.
00
$
29,963
.00
0.16
9542
$
16,920
.00
0.30
0236
62 54 53 66 53 0.16 0.29 $ $ 0.16 $ 0.29

23
EFFECT OF SUSTAINABILITY DISCLOSURE OF MARKET PERFORMANCE OF
COCA COLA
5562 7891
4,872.
00
29,427
.00 5562
16,355
.00 7891
63 52 52 66 52
0.15
4723
0.30
4173
$
4,847.
00
$
31,327
.00
0.15
4723
$
15,935
.00
0.30
4173
62 53 54 65 54
0.15
8986
0.30
8517
$
4,347.
00
$
27,342
.00
0.15
8986
$
14,090
.00
0.30
8517
Data Source
https://www.csrhub.com/CSR_and_sustainability_information/The-Coca-Cola-Company
https://www.cocacolacompany.com/content/dam/journey/us/en/private/fileassets/pdf/unknown/
unknown/koar_04_summary.pdf
https://www.cocacolacompany.com/content/dam/journey/us/en/private/fileassets/pdf/unknown/
unknown/form_10K_2006.pdf
https://www.cocacolacompany.com/content/dam/journey/us/en/private/fileassets/pdf/unknown/
unknown/2008_Coca-Cola_10-K_Item_08.pdf
https://www.cocacolacompany.com/content/dam/journey/us/en/private/fileassets/pdf/unknown/
unknown/2010_12_Coca-Cola_Item8.pdf
https://www.cocacolacompany.com/content/dam/journey/us/en/private/fileassets/pdf/
2013/03/2012-annual-report-on-form-10-k.pdf
https://www.cocacolacompany.com/content/dam/journey/us/en/private/fileassets/pdf/
2015/02/2014-annual-report-on-form-10-k.pdf
https://www.cocacolacompany.com/content/dam/journey/us/en/private/fileassets/pdf/investors/
2016-AR-10-K.pdf

24
EFFECT OF SUSTAINABILITY DISCLOSURE OF MARKET PERFORMANCE OF
COCA COLA
https://www.cocacolacompany.com/content/dam/journey/us/en/private/fileassets/pdf/2018/2017-
10K.pdf