Finding common ground on ESG metrics

A new report reveals a disconnect between investors and companies on issues related to ESG disclosure and metrics.

The New York-based Investor Responsibility Research Center report finds that there is general agreement on key corporate sustainability issues, but not on the metrics used to measure the management of those issues, nor on the purposes served by examining corporate ESG information.

"Because traditional accounting metrics fall short in assessing sustainability, there is no agreement on how to measure corporate management of those issues," the study’s authors said in a press release. "As a result, investors find it difficult to gather and analyze corporate ESG data, even while companies are ‘survey fatigued’ by the time and resources required to fulfill data requests from various investors, investor advocates, and others seeking to create their own metrics."

The study finds that although ESG metrics are routinely reported on request by a substantial percentages of companies, few companies report all the ESG information they collect internally.

Among all U.S. firms in 2010, only 164 companies issued reports consistent with Global Reporting Initiative protocols (the standard for sustainability reporting) suggesting adoption rates of less than 15% among U.S. publicly traded companies.

"Too often the common vision of corporations and their shareowners to improve profitability and sustainability is obscured by disagreements over metrics and disclosure," said Jon Lukomnik, executive director of the IRRC Institute. "This report addresses that disconnect. It identifies environmental and social metrics that are meaningful to investors, companies and researchers. It also highlights the data mismatches between available corporate data and research needs. Finally, it suggests a way forward which could both reduce data gaps and ameliorate some of the reporting burden."

Read the full report.