It is clear that sustainability reporting is here to stay. Environmental, social and governance (ESG) company data scroll down thousands of trading terminals. A full 95% of the Global 250 issue sustainability reports. Firms continuously seek new ways to improve performance, protect reputational assets, and win shareholder and stakeholder trust. The evidence is all around us.
The benefits of sustainability reporting go beyond relating firm financial risk and opportunity to performance along ESG dimensions and establishing license to operate. Sustainability disclosure can serve as a differentiator in competitive industries and foster investor confidence, trust and employee loyalty. Analysts often consider a company’s sustainability disclosures in their assessment of management quality and efficiency, and reporting may provide firms better access to capital. In a review of more than 7,000 sustainability reports from around the globe, researchers found that sustainability disclosures are being used to help analysts determine firm values and that sustainability disclosures may reduce forecast inaccuracy by roughly 10%.
- Better reputation: a 2011 survey on corporate reputation found that expanding transparency and reporting positive deeds were the two most important ways to build public trust in business. The 2013 Boston College Center for Corporate Citizenship and Ernst & Young survey revealed that more than 50% of respondents issuing sustainability reports reported that those reports helped improve firm reputation.
- Meeting the expectations of employees: a 2011 survey conducted by Ernst & Young and GreenBiz found that employees were a vital audience for sustainability reporting, with 18% of reporters citing employees as a report’s primary audience. More than 30% of reporters in the 2013 Boston College Center for Corporate Citizenship and Ernst & Young survey saw increased employee loyalty as a result of issuing a report.
- Improved access to capital: recent research found that reporting firms ranked highly for sustainability have Kaplan-Zingales Index scores that are 0.6 lower than the scores for low-sustainability companies. A lower score signifies fewer capital constraints.
- Increased efficiency and waste reduction: in a 2012 global survey of sustainability reporters, 88% indicated that reporting helped make their organizations’ decision-making processes more efficient.
The study was produced as a joint effort between Ernst & Young LLP and the Carroll School of Management Center for Corporate Citizenship at Boston College. The comprehensive survey covered various aspects of an organization’s ESG reporting. Topics included the cost and benefits of reporting, as well as making connections to financial performance. Respondents’ companies did not have to report in order to participate in the survey. See the entire report here.