Intelligize Survey: Uncertainty Abounds on ESG Reporting

Although corporations have good intentions when it comes to addressing environmental, social and governance issues, they need guidance from regulators on how to report their efforts to the public, according to a new report from Intelligize.

Download the full report here.

Our report, “The Conscience of Corporations: Public Company ESG Adoption,” analyzes the results of a survey of hundreds of respondents from publicly traded companies. They included C-suite executives and professionals in the compliance, investor relations, accounting and legal departments at a wide range of public companies.

We discovered a recurring theme in their responses about ESG issues: uncertainty. In general, corporate America suffers from a lack of clarity surrounding the ESG reporting process. And only half of respondents said their ESG reporting presents an accurate picture of their companies’ core values, suggesting a need to refine reporting standards.

Conversely, those surveyed don’t lack for clarity on their companies’ feelings about ESG. Three-quarters of respondents said their companies possessed a legitimate desire to achieve positive outcomes on ESG matters. The other 25% cited factors like pressure from activist investors and avoiding bad publicity. On the other hand, they also admitted to a lack of knowledge on certain ESG-related issues within their companies, like how costs impact their companies’ commitment to ESG initiatives. Additionally, respondents noted the absence of ESG incentives in executive compensation. Only 12% of respondents indicated their companies linked executive pay to ESG performance, while 32% said they weren’t sure.

There’s also confusion around whether to include ESG information in financial reporting. Slightly more than 40% of respondents indicated that their companies’ financial reports should include ESG disclosure; at the same time, a sizable percentage of respondents remained undecided on the question.

Interestingly, the responses demonstrated a belief that companies are focusing less on environmental issues and devoting more of their attention to social and governance concerns. The issues that attracted the most emphasis from respondents are the so-called “human capital” and diversity metrics in the social issues category.

Industry standards may emerge as companies identify best practices in ESG reporting. The survey suggests, though, that they would welcome more direction from the Securities and Exchange Commission on reporting standards for ESG performance. The Biden administration has made the development of a more rigorous ESG reporting framework one of the SEC’s top priorities. If and when the agency chooses to act remains to be seen.

CLICK HERE to read a copy of the report.