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  • Writer's pictureDaniel Goelzer

Sustainability Reporting Reaches an All-Time High, But Investors Have Qualms About the Content

Updated: Dec 5, 2022

In 2022 Sustainability Reporting in Focus, the eleventh annual edition of its research series tracking sustainability reporting trends, the Governance & Accountability Institute (G&A) finds “all-time highs across the board in sustainability reporting.” For example, 81 percent of Russell 1000 companies published a sustainability report in 2021; of the 500 largest companies, 96 percent issued such a report. Moreover, 68 percent of the bottom half of the Russell 1000 published such a report in 2021–a substantial increase over 2020.

While sustainability reporting has become nearly universal, there are significant questions as to how well this reporting is meeting the needs of investors. In How can corporate reporting bridge the ESG trust gap?, the EY Global Corporate Reporting and Institutional Investor Survey finds “a significant disconnect between the expectations and goals of companies and their investors when it comes to corporate and sustainability reporting.”


G&A released its 2022 report on sustainability reporting by companies in Russell 1000 indices on November 16. According to the press release accompanying the report, key findings include:

  • Eighty-one percent of Russell 1000 companies published a sustainability report in 2021, “an impressive increase” from 70 percent in 2020.

  • The smallest half of the Russell 1000 index by market cap had the largest increase in reporting, with 68 percent publishing a report in 2021, up from 49 percent in 2020.

  • Ninety-six percent of the largest half of the Russell 1000 index (i.e., the S&P 500 companies) published a report in 2021, up from 92 percent in 2020.

  • Sixty-seven percent of sustainability reports aligned with the reporting standards of the Sustainability Accounting Standards Board (SASB). For the first time, SASB was the reporting standard most frequently used by Russell 1000 companies.

  • Eighty-nine percent of sustainability reports published by Russell 1000 companies in 2021 discussed the impact of the COVID-19 pandemic.

G&A first published an analysis of S&P 500 company sustainability reporting in 2012, covering 2011 reporting. Since that time, sustainability reporting has gone from relatively rare to almost universal; G&A’s initial report found that just 20 percent of S&P 500 companies published sustainability reports or disclosures in 2011. In 2019, G&A expanded its research to include all companies in the Russell 1000 Index and reported that 60 percent of Russell 1000 companies published sustainability reports in 2018. For a summary of the 2021 G&A report, see Sustainability Reporting: (Almost) Everybody Does It, November-December 2021 Update.

G&A’s findings with respect to three key topics – industry breakdown of reporters and non-reporters, use of disclosure frameworks, and external assurance on sustainability reporting -- are summarized below.

  • Industry sectors and sustainability reporting. In four of the eleven Russell 1000 industry sectors – Consumer Staples, Materials, Real Estate, and Utilities -- all companies issued sustainability reports in 2021. At the other end of the spectrum, almost half (44 percent) of the companies in the Communications sector failed to issue a sustainability report (19 non-reporters out of the 43 companies in the sector). Communications was also in last place in 2020 and 2019, although four more companies reported in 2021 than in 2020. Second-from-the-bottom was Health Care with 31 percent of the sector not reporting (38 non-reporters in the 121-company sector). Information Technology was third lowest with 29 percent of the 184 companies not reporting.

  • Use of ESG disclosure frameworks. As noted above, SASB’s standards were the most-used reporting framework in 2021 among the Russell 1000, with 67 percent of sustainability reports aligning with SASB. An additional nine percent referred to the SASB standards but did not align their disclosure with SASB. Fifty-four percent of the Russell 1000 companies aligned with or referred to the Global Reporting Initiative (GRI) framework, compared to 52 percent in 2020. Sixty percent of those companies reported in accordance with GRI’s “Core” option and four percent utilized the more extensive “comprehensive” level of GRI reporting; the remaining 36 percent referenced GRI but were not fully in accord with its standards. G&A also analyzed several other approaches to sustainability disclosure. Use of the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) rose to 34 percent, double the 17 percent that used TCFD in 2020. In addition, 449 Russell 1000 companies responded to the CDP Climate Change Questionnaire. For the 500 largest companies, the percentage of CDP responders was 69 percent, while only 20 percent of the smaller half of the Russell 1000 responded to CDP. In 2021, 456 companies referenced the UN’s Sustainable Development Goals (SDGs) in their reporting, and 409 of those companies disclosed alignment to specific SDGs and their relation to the company’s ESG strategy, initiatives, and other factors; the remaining 47 companies broadly referenced the SDGs.

  • External assurance on sustainability reporting. A growing number of companies obtain external assurance from an auditor or other professional on their ESG disclosures. In 2020, 38 percent of Russell 1000 reporters obtained external assurance on their non-financial ESG disclosures, up one percent from 2020. Eighteen percent of companies in the smallest half of the Russell 1000 obtained such assurance, unchanged from 2020. Forty-nine percent of the companies in the largest half obtained assurance, compared to 44 percent in 2020. As it did last year, G&A states that “assurance provides increased recognition, transparency, and credibility * * * while reducing risk. Seeking external assurance often indicates strong internal reporting and management systems. Overall, assurance improves stakeholder communication and trust.”

G&A concludes with this observation: “G&A’s 2022 research findings show corporate sustainability reporting is no longer just a best practice for mega-cap and large-cap companies; it is rapidly becoming a best practice for mid-cap companies as well. We expect this trend to continue trickling down as smaller-cap companies face increasing pressure from investors and other stakeholders to provide more disclosures on sustainability and ESG strategies and initiatives.”


In How can corporate reporting bridge the ESG trust gap?, the EY Global Corporate Reporting and Institutional Investor Survey presents the views of 1,040 senior finance leaders at companies that issue ESG reports and of 320 institutional investor users of such disclosures. EY reports that three themes emerged from its survey:

  • The disconnect between companies and investors. Seventy-eight percent of investors surveyed think companies should make investments that address ESG issues relevant to their business, even if it reduces profits in the short term. In contrast, only 55 percent of finance leaders believe their company should address ESG issues if the result is a short-term reduction in financial performance and profitability. Ironically, companies apparently see investors as the cause of their inability to prioritize long-term sustainable performance; 53 percent of companies surveyed with annual revenues of over $10 billion said that they “face short-term earnings pressure from investors, which impedes our longer-term investments in sustainability.”

  • The importance of effective corporate reporting. Ninety-nine percent of investors surveyed said that they utilize company ESG disclosures as a part of their investment decision-making (including 74 percent of investors who said they use a “rigorous and structured approach.”) However, most investors do not believe that current ESG disclosures meet their requirements and expectations. For example, 76 percent of investors agreed that “companies are highly selective in what information they provide to investors, raising concerns about greenwashing” and 88 percent thought that “unless there is a regulatory requirement to do so, most companies provide us with only limited decision-useful ESG disclosures.” Company finance leaders also had reservations about the usefulness of ESG disclosures, although their concerns were somewhat different than those of investors. Forty-two percent of finance leaders thought that “lack of assurance and supporting evidence to provide trust in the information” is a challenge to the usefulness and effectiveness of company sustainability reporting. Forty percent were concerned about the “disconnect between ESG reporting and mainstream financial information.”

  • Understanding expectations. EY suggests that, to close the gap between investors and companies on ESG reporting, “companies should build a better understanding of the sustainability expectations of long-term investors and earn their trust by defining the involvement of the finance function in ESG disclosures.” EY summarizes its findings by recommending a “change in mindset. Those companies that embrace transparency — including being open when initiatives are not going according to plan — will be more likely to earn the trust of their shareholders and stakeholders.”

Comment: As stated in prior Updates, given the increasing investor and regulatory emphasis on ESG disclosure, it seems inevitable that these issues will become an important aspect of the audit committee’s work. Audit committees that are not already doing so should focus on what ESG disclosures their company makes, how the information is collected, and how the disclosures impact financial reporting. As investors rely more heavily on ESG disclosures in their decision-making, the reputational and liability risks associated with inaccurate disclosure increase. To address these risks, audit committees should explore with management the controls and procedures to which sustainability disclosures are subject. These controls should be as rigorous as those applicable to traditional financial reporting. Obtaining third-party assurance over sustainability disclosures should also be considered.

Audit committees might also want to ask management how it decided what to disclose and whether it has a basis to believe that the company’s ESG disclosures are useful to investors. EY’s study found that 80 percent of investors surveyed thought that “too many companies fail to properly articulate the rationale for long-term investments in sustainability, which can make it difficult for us to evaluate the investment.” The question whether to make ESG disclosures has largely been resolved at most large companies. The focus should now shift to how to make those disclosures meaningful to investors.

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