Corporate sustainability reports are including less specific quantitative information and disclosures and leaning more toward puffery, even as the use of data tables and figures grew, according to a new study.
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Companies that adopt a framework tend to keep it, but sometimes add more frameworks instead of substituting one for the other. Over 80% of GRI-aligned reports in 2022 also aligned with SASB, and most adopters follow several frameworks at once. But even when following those detailed frameworks, the information didn't necessarily become more granular, especially among companies that recently began issuing sustainability reports.
"As reporting spread, reports became less specific, less quantitative (especially after 2015), and fluffier, even as the use of data tables and figures grew," said the study. "Part of this reflects a wave of thinner first-time reporters. But for specificity and quantitative content, it also reflects declines within firms that kept reporting."
Companies that have reported for a longer period of time tend to produce more concrete reports with more specific, quantitative information, and are less fluffy, with more tables and more negative news. But that gap mostly reflects which companies started reporting early, not what they've learned from experience. Once the researchers isolated the changes within a given company and netted out the calendar trends, most of the association disappeared. "What survives is confined to the first few years of reporting and to a few measures (less fluff, more tables, and slightly greater specificity)," said the study.
GRI adoption seems to be associated with more tables but lower quantitative density, and SASB with less fluff but also less quantitative density, while TCFD reporting appears to be associated with less fluff and more negative news disclosures. However, the researchers cautioned that these are associations, not causal effects.
"Society has invested heavily in voluntary corporate sustainability reporting," said the study. "In theory, these disclosures do real work: They could help civil-society groups, analysts and other stakeholders hold firms accountable for externalities that regulation leaves untouched, and they could help markets price risks that financial statements miss. In practice, critics dismiss the reports as mere marketing. They are often unassured and therefore not credible, not comparable across firms or over time, vague rather than verifiable, and cherry-picked to shield bad news."
They pointed out that an entire industry has grown up around fixing these disclosures. Nonprofits and shareholders are pressing companies to say more. Companies are increasingly paying for external assurance, and newer mandatory regimes often piggyback on the voluntary frameworks. The use of AI large language models enabled the researchers to analyze the thousands of PDFs in the sustainability reports to analyze them.
"For standard-setters and regulators, one practical lesson is immediate," said the study. "Clearer specifications, including required alignment language (as GRI does, distinguishing reports 'in accordance' with as opposed to 'with reference to' its standard) and data tables released in machine-readable rather than text-embedded formats, would sharply improve both automated and human comparison of reports. For boards and disclosure committees, the practical upshot is that reports can now be read at scale. The questions we ask of 15,000 documents can be asked of any dozen, to see how one company's reports score on specificity, quantitative content, fluff, and disclosure of negative, against-interest news, and how that compares to its peers."
