Companies Failing to Disclose Meaningful ESG Data

The Alliance for Corporate Transparency project has assessed over 100 European companies to analyse how effectively they are disclosing the environmental, social and governance (ESG) impact information required by the EU Non-financial Reporting (NFR) Directive.

High quality disclosure on ESG matters is a vital component of the EU Commission’s Action Plan on Financing Sustainable Growth, which aims to nudge capital flows towards sustainable investments. However, the Alliance for Corporate Transparency report concludes that as the NFR Directive does not specify in sufficient detail what information and KPI’s must be disclosed, there is an information gap and investors will struggle to clearly understand companies’ impacts, risks and strategies.

The analysis concludes that companies are failing to disclose meaningful information about their ESG impact. While most companies acknowledge the importance of ESG issues, generally this information does not include clear concrete issues, targets or risks. For example, while 90% of companies report on climate change, 47% also clearly specify related policies.

The report recommends that legislation should clarify ESG reporting requirements. Without consistent reporting metrics, data cannot be comparable, making it far less useful. For ESG disclosure to be truly effective, it needs to be consistent, comparable and digital.