Sustainability Reporting Adapts to Changing Political Environment

G&A has been publishing annual research on trends in corporate sustainability reporting since 2012 and we are currently analyzing 2024 trends for our next report (to be issued later this year). We expect this research to show continued high levels of sustainability reporting for the largest U.S. public companies, with the publication of annual sustainability reports now recognized as a best practice for S&P 500 and Russell 1000 companies.

While reporting levels are expected to remain high, the content of reports is clearly changing in response to anti-ESG backlash. In our Top Stories, we highlight several articles on how companies are adapting the way they communicate about ESG while at the same time not abandoning their underlying sustainability strategies and initiatives.

In an article for Trellis, Peter Lupoff, a fund manager and professor who teaches about impact investing, discusses “How the anti-ESG movement is reshaping corporate sustainability reports.” Lupoff notes that corporate sustainability reporting remains voluntary, with the U.S. Securities and Exchange Commission ending its attempt to introduce mandatory climate disclosure in March. He doesn’t expect sustainability reporting to decrease, but he does say, “Companies are in full-on ‘green-hushing’ mode, maintaining sustainability programs while avoiding explicit ESG language.”

Importantly, Lupoff believes the anti-ESG pushback will have a positive impact on the value of sustainability reporting, saying it is “forcing companies to demonstrate actual value rather than virtue signal.” He says: “Valuable reports now clearly connect environmental and social practices to business outcomes — how water efficiency reduces costs, employee engagement improves productivity or supply chain transparency reduces regulatory risk.”

The shift in how companies communicate about sustainability reflects the underlying trend within companies to focus more on aligning sustainability strategies with long-term business strategies. Joel Makower, co-founder and chairman of Trellis, writes in his article “No, corporate sustainability is not dying,” that he believes corporate sustainability is instead “getting smarter, quieter, more embedded and, in many respects, more effective.” He cites a chief sustainability officer who says, “we’re talking less, but we’re doing more.”

This trend within companies is also highlighted in an article in Economist Impact about the results of a recent survey of chief sustainability officers regarding their budgets. The survey reported that 77% of CSOs expect their budgets for sustainability-linked initiatives to remain stable or increase, despite mounting political sensitivity. In addition, 56% anticipate that sustainability will become a greater strategic priority within their organizations over the next five years.

The results of the survey also reinforced the point that while many companies are dialing down public communications due to political pressure, the work is still going on in earnest. “Over one-third of companies said they have scaled back their sustainability communications, while keeping business strategies unchanged.”

The G&A team is available to help companies navigate today’s challenging landscape for developing, implementing and communicating about your sustainability strategies. We continue to closely monitor trends in sustainability reporting and look forward to bringing you our latest annual research this fall. For more information contact us at: info@ga-institute.com.

This is just the introduction of G&A's Sustainability Highlights newsletter this week. Click here to view the full issue.