ACT: Landmark research on 1000 European companies shows troubling poor quality of reporting on sustainability issues
17 February 2020
The Alliance for Corporate Transparency analysed the information that companies disclosed on their environmental and societal risks and impacts following the requirements introduced by the EU Non-Financial Reporting Directive.
The research arrives at the same time that the EU Commission initiates the process to reform the law and after Executive Vice President Vadis Dombrovskis announced plans to create EU standards for corporate sustainability reporting.
The poor quality and comparability of corporate disclosures hinder the efforts to scale up sustainable finance as investors do not have reliable information to inform their decisions. This leaves major financial risks stemming from sustainability challenges, especially climate change, unaccounted for in investor and corporate strategies, as well as important social and environmental impacts unaddressed.
The research of the Alliance for Corporate Transparency provides clear insights into the key gaps in corporate reporting practice that need to be addressed.
Common problems:
-
Disclosures are not specific enough to enable understanding of a company’s position and future developments. Reports focus on presenting general policies and commitments (80-90% for key issues such as climate, human rights, and anti-corruption), but not concrete targets, outcomes of policies with respect to these targets, and specific information on risks and impacts (20% on average).
-
Only 22% of companies provide their key performance indicators in summarised statements. This is in stark contrast with the way financial indicators are presented.
-
The numbers above focus merely on whether disclosures are specific, but not whether they include relevant information.
Full press release on ACT
Full report on ACT
© Alliance for Corporate Transparency
