Since we published our last study on U.S. sustainability reports 12 months ago, political attacks on ESG have escalated heading into the 2024 U.S. presidential campaign. As a result, companies are now facing critical questions on how to communicate their ESG strategies and initiatives, especially within annual sustainability reports that are now the norm for most companies.
For example, would eliminating the acronym “ESG” from corporate communications help quell the backlash? How can companies assess the risks and opportunities of proactively communicating their ESG strategies? What happens if companies miss or reset an ESG goal?
At the same time, global regulations mandating ESG disclosures from companies, including many U.S. companies, are being finalized. These global mandates for ESG disclosures are in direct conflict with the Republican-led anti-ESG movement in the U.S. Given all of this, companies should expect continued turbulence in the coming year.
To help companies navigate this environment, we are publishing a series of research reports based on our analysis of 250 sustainability reports from S&P 500 companies published in 2023. In this paper, the first of our series, we provide Teneo’s (i) study methodology; (ii) top 10 takeaways from 2023 sustainability reports and (iii) key statistics of 2023 sustainability reports. Over the next several months, we plan to publish follow-up pieces from Teneo ESG thought leaders on disclosure-related topics such as diversity, governance, executive compensation and materiality assessments, as well as a piece from Teneo Studio dedicated to effective sustainability report design.
Our analysis included 250 sustainability reports from S&P 500 companies published between January 1-June 30, 2023 (2023 sustainability reports). For the purposes of this report, all references to 2023 sustainability reports refer to any annual ESG disclosure report regardless of its naming convention. The majority of 2023 sustainability reports reviewed were published by large-cap companies, and the sector breakdown generally aligns with that of the S&P 500.
Top 10 Takeaways From 2023 Sustainability Reports
01: Say You, Say ESG
By any metric that we tracked, companies remained resolute on their ESG priorities despite the political rhetoric. Almost 80% of companies disclosed that all of their ESG goals were on-track. CEOs still signed or co-signed 95% of report cover letters. Average length of 2023 sustainability reports increased by 6%. Even the use of the “ESG” acronym increased by about 20% from last year – with more companies including ESG in the report title (eight) than removing it (five).
02: Don't You Forget About "G"
Corporate governance issues such as board composition and shareholder rights have managed to stay largely out of the anti-ESG political fray. Company disclosures on how both management and the board oversee ESG strategies have become much more detailed.
03: We are Living in a [Double] Material World
While single materiality assessments continue to be most common, almost 10% of companies conducted a double materiality assessment. More companies are likely to do the same over the next few years given that new European rules will require double materiality assessments of many U.S. companies with significant operations in Europe.
04: Don't Stop Believin'
Companies communicated in more detail about their ESG goals, including whether an ESG goal is off-track, or its timeline/scope has been reset. This increased transparency was likely an attempt to help prevent greenwashing claims from stakeholders (including regulators).
05: We Are the World
While we await the U.S. Securities & Exchange Commission’s final rule on climate disclosure, Europe seems to be just getting warmed up. The European Union finalized its mandatory ESG disclosure regime that will cover thousands of U.S. companies, with more ESG disclosure regulation being drafted in Europe and around the world.
06: Express Yourself
A majority of companies issued a press release with their sustainability report publication – though less common than in prior years perhaps due to the ESG backlash. In addition, a vast majority of companies published ESG microsites within their corporate website highlighting their primary ESG initiatives.
07: You May be Right
Companies continued to seek greater internal and external assurance on certain environmental and social data, largely on a limited assurance standard (as opposed to a reasonable assurance standard). External assurance providers included many firms outside of the “Big Four” auditors.
08: Who's the Boss
Companies disclosed a variety of positions who were primarily responsible for ESG, including Chief Sustainability Officers, Chief Executive Officers, General Counsels and Chief Communications Officers. In some instances, companies noted that multiple executives shared responsibility for ESG.
09: Freeze Frame
SASB and TCFD continued to dominate company use of disclosure frameworks. SASB was used by over 90% of the companies in our research, while TCFD (77%), GRI (69%) and UN SDGs (68%) were also quite prevalent.
10: Everybody Wants to Rule the World
ESG is likely in for a bumpy ride over the next 12 months. Republicans are likely to continue to use anti-ESG rhetoric as part of their stump during the U.S. presidential election. At the same time, other stakeholders such as investors, employees and global regulators are likely to continue pressing companies to address ESG issues as part of overarching business strategies.
Key Statistics of 2023 Sustainability Reports
I. Sustainability Report Communications Characteristics
II. Sustainability Report Content Characteristics
III. Sustainability Report Governance Characteristics
1Note we only reviewed reports published between January 1 and June 30, 2023.