Navigating the CSR Landscape: A Comprehensive Analysis of Corporate Sustainability Reporting and Its Impact on ESG Performance

Abstract

In response to the surge of investors expressing interest in incorporating sustainability into their strategies, companies published their first environmental reports in 1989. Since then, various reporting frameworks have been created. Despite all this, a 2023 United Nations Sustainable Development Goals progress report states we are “moderately to severely off track.” Though corporations are not solely responsible, this prompts the question of sustainability reporting efficacy. 

The research explores the correlation between the transparency and quality of a company’s sustainability report and ESG ratings. An analysis was conducted on five Dow Jones 30 companies reports of different industries for 2019 and 2022: Chevron Corporation (Energy), Coca-Cola Company (Consumer Discretionary), Cisco Systems (Information Technology), UnitedHealth Group (Healthcare), and Verizon (Communications). 

Hypothesizing a relationship between a corporation’s transparency/quality (TQ) of their sustainability reports and their ESG performance, Cisco Systems and Chevron Corporation were used for data testing as they had consistent ESG ratings. The TQ was measured quantifiably through the types of “goals” a company mentioned in the report: the current year,  previous years, and those with progress updates. Each goal type received a different value and was added to that company’s overall TQ score.

Applying Pearson's Formula, the results showed there was a positive linear correlation between Cisco’s ESG and TQ score and a negative correlation between Chevron’s ESG scores and their TQ score.

The conclusion is a company that incorporates quality and transparency is more likely to “sustainably perform” better as opposed to one that does not. This led to a proposal for sustainability reporting guidelines to require regularly updating the goals that are included. Also, the observations made from all 5 companies’ reports lead to a list of key things for investors to observe in such reports that could potentially increase a report’s quality/transparency.