AI Analysis Finds Transparency Gaps in Corporate Sustainability Reporting

A study from LMU Munich and the University of Cologne analyzed 2.9 million sustainability indicators from corporate reporting over the past decade, using AI methods. The research found that while companies are disclosing more about their carbon footprint, there are transparency gaps in reporting on value-chain emissions and social factors. The study covered the 600 largest listed companies in Europe from 2014 to 2023, before the introduction of the EU's Corporate Sustainability Reporting Directive, showing a significant increase in the number of reported metrics year on year.

The study found that weaker performers in ESG ratings are catching up on disclosure, with the number of reported metrics from low-rated companies increasing over the years. However, the increase in reported emissions does not necessarily mean an actual rise in emissions, as many companies are now recording more categories of emissions. The team is releasing its dataset and code through the Sustainability Reporting Navigator, an open-science platform, to provide policymakers, investors, and civil society with open access to compare companies and hold them accountable for their sustainability reporting.