UCLA Anderson’s Center for Impact leads groundbreaking reporting initiative and finds the average ESG disclosure rate for 300 of the nation’s largest companies is 49.6%, with a minimum of 14.8% and a maximum of 74.8%
Q2 2022 hedge fund letters, conferences and more
Authored by UCLA Anderson Professor Magali Delmas and co-authors Kelly Clark and Tyson Timmer (both doctoral students at UCLA’s Institute of the Environment and Sustainability) and Moana McClellan (senior system scientist at the Institute of the Environment and Sustainability), this groundbreaking initiative gathered sustainability performance information from corporate sustainability reports, websites and the U.S. Securities and Exchange Commission’s (SEC) public filings.
Socially Beneficial Reporting Rates
The team gathered information that aligned with the framework developed by the World Economic Forum (WEF) around four pillars — Governance, Planet, People and Prosperity — concerning such topics as greenhouse gas emissions, water usage, diversity and inclusion, pay equality and taxes. The researchers crunched the data and concluded that, on average, firms are reporting information responsive to just under half of the WEF metrics (49.6%). Overall reporting rates ranged from a minimum of 14.8% to a maximum of 74.8%.
Not one firm disclosed 100% of the WEF’s metrics; Texas Instruments Inc. held the top ranking for overall disclosure rate at 74.8%. Of the 300 companies, “only 9.2% stated that their report has been fully audited,” according to lead author Delmas, who holds a dual appointment at UCLA Anderson and UCLA’s Institute of the Environment and Sustainability.
“We wanted to provide a window into the state of corporate sustainability disclosure so that investors, policymakers and the general public could see what data is out there,” Delmas said, “but also so that they could compare sectors and companies and weigh the information.”
The report presents a number of key findings:
- Based on publicly shared information from 300 top U.S. firms, the average disclosure rate for information requested by WEF metrics is 49.6%. However, corporate sustainability disclosures are voluntary in the U.S. and the data provided are often unstandardized. In some instances, companies have tracked data (such as employee demographics and water usage) but do not publicly disclose them.
- The report finds that companies are disclosing information at substantially lower rates within the WEF’s People (28.8%) and Planet (43.8%) pillars compared to the Governance (72.2%) and Prosperity pillars (53.6%). This deficit in reporting hampers efforts to understand whether firms are making progress in these critical areas.
- Firms appear to favor disclosing qualitative over quantitative information, even when the quantitative data are easily accessible. Firms are likelier to summarize their efforts in nonmeasurable narratives. Quantitative data are critical to evaluating firms’ progress toward improving their sustainability performance.
- Companies’ first step in working toward sustainability goals is sharing their data. It is critical that disclosure metrics be clear and transparent to maximize their usefulness to organizations and stakeholders.
- At present, less than 10% of the firms studied enlist third-party evaluation of their sustainability disclosures in their entirety. Without an independent third-party assessment of disclosures, companies are missing an important avenue of data reliability and accountability.
The team took about 18 months to pull together the information. According to Delmas, their goal is to publish an annual update regarding the data. “I’m a very strong believer in the power of information and transparency,” she said. “In order to promote change, you have to be able to identify the extent of the problem, investigate possible solutions to it, and be willing to address it. Problem recognition is the first step toward change.”
Emerging regulations may force companies to move away from the “vague promises and dodgy metrics” proliferating in sustainability reporting, Delmas pointed out. The SEC is pushing for mandated disclosure requirements, “where everyone has to disclose the same things, and the chief financial officer will have to be responsible for accurate reporting. If it happens, it’s going to be a real sea change.”
No matter the SEC’s time frame for reform, Anderson’s Center for Impact will be at the center of the conversation. The Center was founded in 2016 “to build core competency in impact measurement and support student interest in recognizing the role that they, as future business leaders, will have in shifting the norm of business’ role in society,” said Bhavna Sivanand, executive director of the Center for Impact. “The more we can engage and expose our students to cutting-edge topics like ESG, the more they can integrate innovation into the overall MBA experience.”
Read the report: The State of Corporate Sustainability Disclosure
About UCLA Anderson School of Management
UCLA Anderson School of Management is among the leading business schools in the world, with faculty members globally renowned for their teaching excellence and research in advancing management thinking.
Updated on
