ComplianceFebruary 24, 2021

How Are Companies Doing on ESG and Sustainability Performance?

Do you want to know where your company stands on “green” accountability with other corporations?

Every year, GreenBiz, in collaboration with S&P Global, produces a State of Green Business Index that reviews sustainability performance trends for some of the largest companies in the world.

This year’s assessment, the 14th annual, examines indicators derived from S&P Global Trucost environmental, climate, and impact data intelligence. For the first time, the report also used ESG data intelligence from S&P Global ESG Scores and the SAM Corporate Sustainability Assessment (CSA).

Below are a few highlights from the 2021 big picture as assessed from 500 United States companies and 1,200 globally (It should be noted that company-reported data does not include coverage of the COVID-19-related decreases in global carbon emissions observed since March 2020).

Sustainability Reporting and TCFD

First, a whopping 90% of U.S. companies published a sustainability report in 2019. An increase of 70% from 2011, where only 20% of the assessed companies published.

Second, more than 1,500 companies backed the Task Force on Climate-related Financial Disclosures (TCFD) reporting framework in 2020. This is five times the number from 2017.

The acceptance of this framework has surpassed expectations. According to the report, nearly 60% of the world’s 100 largest public companies either support the TCFD, report in line with its recommendations — or do both.

Geographically, the majority of companies (88%) supporting TCFD come from the European Union, followed by Asia, and then the United States.

They found that larger companies are more likely to disclose information aligned with the recommendations: “On average, 42 percent of companies with a market capitalization greater than $10 billion U.S. disclosed in 2019, while the average was 15 percent for companies with a market cap less than $2.8 billion,” the authors write.

Interestingly, half of all the companies that support TCFD are in the financial sector, with asset management/investment management, banks and pension funds together representing 75% of the supporting organizations.

ESG

Stockholders and investors alike are demanding a closer look at a company’s Environmental, Social, and Governance (ESG) performance. This is reshaping how a company tracks and discloses such information.

Because of this heightened emphasis, GreenBiz included it as a metric this year in its Index.

They found that a total of 597 different publicly traded U.S. companies, or 16%, mentioned ESG in SEC filings since 2006. While still low, the authors are encouraged. “The number…has increased steadily in recent years — from nine companies in 2016 to 36 in 2018 and 90 in 2019.”

Overall, the U.S. companies lag behind their global counterparts, averaging nine points lower over the last five years.

“This potentially reflects the differences in maturity of sustainability and ESG reporting practices across Europe and Asia, as compared to the U.S. companies,” write the authors.

For most industries, governance is the most material ESG dimension, on average, having a higher contribution to the overall ESG score than the environmental or social dimension.