The Securities and Exchange Commission is in the process of setting new requirements for corporate environmental disclosure, and that could have a major impact on a large number of U.S. companies that today disclose nothing at all about their environmental or climate impact.
A new study by Just Capital found that one-third of Russell 1000 companies make no environmental disclosures. The report looked at 13 environmental metrics, which include performance outputs like greenhouse gas emissions, water usage, and recycled waste, as well as policies like climate commitments.
On average, a Russell 1000 company discloses about three data points, with the largest companies disclosing about three times as many as the smallest companies, according to the report. For the 13 individual data points themselves, disclosure rates range from a low of 7% (Science Based Targets initiative’s 1.5°C commitments) to a high of 57% (Scopes 1 and 2 carbon dioxide emissions).
Disclosures appear to be more prevalent in certain industries. Utilities and personal products lead the pace with, on average, eight and seven disclosures respectively. Oil and gas companies, and other industries that emit lots of greenhouse gases, also rank high because of the scrutiny they’re under.
Disclosures are improving. The number of companies reporting on greenhouse gas emissions jumped from about 40% a year ago to over 50% now. In addition, the number of companies linking executive pay to ESG performance criteria jumped from 13% to about 27%.
“In business, you have to incentivize people to drive performance, right?” said Martin Whittaker, CEO of Just Capital. “I think you are seeing a trajectory of greater disclosure and more reporting.”
The bigger issue now is credibility. It’s one thing to report the data, another to believe it.
For example, 80% of executives give their organization an above average rating for their environmental sustainability effort, according to a recent global survey of 1,491 executives across 16 countries conducted by The Harris Poll for Google Cloud. Another 86% said they believe their efforts are improving sustainability according to the report. But just 36% of respondents said their organizations actually have the tools in place to quantify their efforts, and only 17% are optimizing their practices based on the measurements.
A majority of those surveyed said they agree that there’s some hypocrisy around sustainability, and that their organization has sometimes “overstated their sustainability efforts.” Executives in Financial Services and Supply Chain/Logistics had the highest admission rates. About two-thirds of those surveyed even questioned how genuine some of their organization’s sustainability initiatives are.
The new SEC rules are aimed at bringing some consistency of performance so that the data can be trusted.
“The market needs to be confident in what companies are saying, they need to believe the data,” said Whittaker. “And it’s not just investors, consumers, it’s employees who want to work for a company that is aligned with their values.”
