CSR Research: Sustainability Reporting

In this study, researchers looked at a number of widely used environmental performance indicators from the big ratings agencies and categorized their metrics into two broad categories of measures: environmental processes and environmental outcomes. The researchers found a better environmental processes score was linked to a higher market valuation of the firm.

The level of engagement in sustainability activities, as well as the transparency of sustainability reporting, is affected by industry type, as firms from industries with higher pollution levels are more likely to participate in sustainability programs. In addition, membership and participation in a voluntary sustainability audit program increases the likelihood of transparent sustainability reporting.

KPMG studied the 250 largest companies globally, in addition to the largest 100 companies in 41 countries, and found that that the majority of companies are creating reports, and industry sectors that were once lagging are closing the gap.

A recent study investigated what factors affect a firm’s likelihood of creating an integrated report—one report providing information on company strategy, corporate governance, performance and prospects in such a way as to reflect its commercial, social, and environment context—and found that size, profitability, concentration and the adoption of reporting guidelines all play a role.

A recent study by GRI analyzed data gathered from Bloomberg Terminal, The KPMG Survey of Corporate Responsibility Reporting 2013 and its own Sustainability Disclosure Database to garner insights into external assurance activity. Researchers found that there is growth in the rate of companies seeking external assurance for their sustainability reports across the globe.

Companies seeking to maximize performance should consider transparent reporting as a possible source of value and insurance-like protection against downturns that can occur during crises. During these times, firms that are more transparent AND operate in a country with high levels of investor protection experience better stock price performance.

Firms with larger and more gender diverse boards are more likely to integrate corporate citizenship information with corporate strategy and accounting material to create a more complete picture of company performance.

For companies operating in China, looking at the attributes of your corporate partners may hold some important clues as to what they may expect in your ESG reporting. In China, voluntary reporting guidelines aimed at balancing environmental, social, and governance (ESG) impacts of economic growth are driving CSR reporting, especially when firms have ties to the government.

Companies in more concentrated/less competitive industries, such as power utilities, may gain a competitive advantage by transparently disclosing financial information, as firms in these industries tend to operate in a low-disclosure climate.

For firms engaged in environmental reporting, it is important to be aware of how your context and performance may influence your inclination to disclose. Depending on a variety of factors, firms may be more inclined to exaggerate—or in some cases under report—emissions reductions. Being aware of these tendencies may help reporters guard against these tendencies and produce more accurate reports.

On April 13, 2016, the Securities and Exchange Commission issued a new Concept Release regarding public company disclosures through Regulation S-K. The public comment period will be open until July 21, 2016.

A company's sustainability reporting is influenced by it's country's legal system, as many countries use a mix of features from common and civil law systems.