Globally, companies tend to report most fully on qualitative governance measures and provide limited information on environmental and social indicators, but overall, the most transparent companies report on not much more than half of essential ESG variables.

Download the full report.

Scope ESG’s findings are based on analysis of how the world’s 2,000 largest companies by market capitalisation report on 414 individual ESG cross-sectoral indicators. For Scope’s country ranking, only the 23 countries which were home to at least 15 of the large-cap companies, equivalent to a total of 1820 firms, were included.

Eight of the 12 countries with the most transparent disclosure, with companies reporting on 50-55% of ESG indicators, are European: UK, Italy, France, Switzerland, Germany, Ireland, Denmark and Spain. In North America, companies in Canada and the US are relatively transparent. In Asia, Thailand and South Korea are home to the more transparent firms.

“The limited transparency in ESG reporting that we find among such large, high-profile companies is a reminder of the challenges investors face in assessing corporate sustainability in the absence of internationally agreed, standardised data and reporting standards,” says Diane Menville, head of ESG at Scope.

“We recognise there is progress on these fronts, led notably by private-sector associations, the European Commission and most recently the Securities and Exchange Commission in the US,” says Menville.

“The relative transparency of companies headquartered in Europe and North America show how regulation and liquid, efficient capital markets respectively help determine the quality, and not just the quantity, of corporate ESG disclosure,” she says.

In Europe, the EU approved the Non-Financial and Diversity Information directive in as long ago as 2014, calling on large companies to disclose sustainability-related data. In 2014, the EU also adopted the Non-Financial Reporting Directive (“NFRD”) to assist “large companies” in disclosing non-financial information in a more consistent and comparable manner. The EC issued guidelines on non-financial reporting in 2017 and the EU Taxonomy on climate change will be an important milestone this year.

“Levels of voluntary ESG reporting can also be relatively high in efficient markets where there is investor demand for increasingly transparent corporate disclosure,” says Menville. New York-based BlackRock, the world’s biggest asset manager, has urged companies to commit to net zero greenhouse-gas emissions by 2050, suggesting it might remove those that do not from its actively managed funds.

“ESG disclosure regulations in the US seem set to tighten,” says Menville. The SEC said on 15 March that it is reassessing its disclosure rules with a view to facilitating the disclosure of “consistent, comparable, and reliable information on climate change.”

Scope’s study also looked at reporting of different ESG factors. “We see large gaps in corporate disclosure which include significant variations between non-financial sectors and wide divergence in the quantity and quality of reported data,” says Menville. “Disclosure ranges from ample but often uninformative for governance to more limited for social and uneven for the environment,” she says.