Global ESG Monitor 2021 reveals serious deficits
For the Global ESG Monitor (GEM), we joined forces in an international collaboration with the research institute Kohorten, the Australian sustainability communications specialist Currie, and the U.S. communications strategy consultancy Xenophon Strategies. We examined 140 companies from DAX, EUROSTOXX, ASX 50 and Dow Jones with regard to their sustainability reporting. The result: alarming. On average, the companies scored only 26 out of 66 points in the GEM ASSAY ™ Score.
Global ESG Monitor creates comparability
The topic of ESG has rapidly gained importance in recent years. Sustainable financial products are on the rise and are seen as one of the biggest growth areas in the financial market. In addition, ESG reports are expected to fuel competition among companies for sustainable business practices – but globally, there is still no standardized form of reporting. This makes it difficult for investors and other stakeholders to compare the ESG performance of different companies and make well-informed decisions. It is true that most companies use frameworks such as GRI (Global Reporting Initiative) or the SDGs (Sustainable Development Goals) now, so they cover the most important issues. However, they do so only superficially, resulting in a lack of concrete information on targets, stakeholder engagement and risks, as the Global ESG Monitor results show.
The study of ESG reports thus reveals the transparency problems that many reports still have and the improvements that are still urgently needed. This should be an incentive for companies to continuously improve their own performance and to take the topic of ESG reporting more seriously than before.
Globally, the field of ESG has room for improvement
The lack of transparency in the reports is problematic simply because it is difficult for outsiders to understand how reliable the information and data presented are and how they were gathered. Only a quarter of the companies explain the methodology behind their own ESG reporting, and only a fifth describe how the data provided was collected.
This is particularly critical in the area of financially relevant ESG information identified for each industry by SASB standards. Although most companies refer to the standards, the relevant information is actually only included in 29 percent of the reports. This shows that the capital market lacks the most important and interesting data to make good investment decisions.
In comparison, European companies have performed better than the rest. They account for eight of the top 10 companies in our ranking. By contrast, six of the worst ten companies are from the Dow Jones. This is where the most incomplete and non-transparent reports can be found: Out of 66 achievable points, the companies from the Dow Jones only achieved an average score of 23 points. One possible reason: In Europe, the first statutory reporting requirements for non-financial information already exist (in Germany, for example, the CSR-RUG) – overseas, they do not (yet).
Where is the benchmark? SMEs can also identify important clues for their own ESG reporting in the GEM results. Click here to access the full results.