Abstract
Environmental, social, and governance (ESG) data are in high demand in financial markets. However, the ESG data provided by companies do not allow for use in the investment decision-making process. The main limiting point for this is a lack of comparability across companies. This paper analyzes the problem of comparability with the aim to evaluate the intra-industry comparability of sustainability reports, framing the analysis on Global Reporting Initiative (GRI) Standards and discussing the results with the support of legitimacy and stakeholder theories. Drawing upon stakeholder and legitimacy theories, as well as financial and sustainability accounting concepts, we propose a theoretical framework of comparability and a methodology to evaluate the level of comparability on a sector-specific basis. The methodological approach adopted in this study is broadly qualitative, with the use of a multiple-stages model. Based on the example of one industry, we discovered that, despite comparability being mostly relevant to the listed companies from the oil and gas sector, the sustainability reports of these companies are still not comparable. Our findings reveal that, despite the availability of a large amount of ESG data and the existence of sustainability frameworks, the problem of comparability is still relevant even for companies that are theoretically most inclined to be comparable.
Highlights
Over the last decade, sustainable investment, known as environmental, social, and governance (ESG) investing, has been at the center of debate in the accounting and financial literature [1].Several studies show that ESG investing influences a company’s financial results [2,3] and stock value [4]
Based on the example of one industry, we discovered that, despite comparability being mostly relevant to the listed companies from the oil and gas sector, the sustainability reports of these companies are still not comparable
The four stages of the research on the level of comparability are based on the sample of Global Reporting Initiative (GRI) reports that was built at Stage 0
Summary
Sustainable investment, known as environmental, social, and governance (ESG) investing, has been at the center of debate in the accounting and financial literature [1].Several studies show that ESG investing influences a company’s financial results [2,3] and stock value [4]. The authors analyzed over 2200 papers written on the topic. They found that 47.9% of the papers showed a positive correlation between ESG investing and financial performance and that 6.9% showed a negative correlation, while the remaining papers did not identify any correlation. Margolis, Elfenbein, and Walsh (2007) researched 167 analytical papers written on the topic [5]. Their findings showed that 67% of the papers did not show any significant relationship between ESG investing and company performance, 31% showed a positive relationship, and very few, only 2%, pointed to a negative relationship
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