State of Integrated and Sustainability Reporting 2018

Jon Lukomnik is Executive Director at the Investor Responsibility Research Institute (IRRCI). This post is based on an IRRCI report by Mr. Lukomnik; Sol Kwon, Senior Consultant at the Sustainable Investments Institute (Si2); and Heidi Welsh, Executive Director at Si2. Related research from the Program on Corporate Governance includes Socially Responsible Firms by Alan Ferrell, Hao Liang, and Luc Renneboog (discussed on the Forum here).

Sustainability reporting for large public companies around the world has become the norm. Si2’s research this year (2018) found that 78 percent of the S&P 500 issued a sustainability report for the most recent reporting period, most with environmental and social performance metrics. The rate of sustainability reporting for the world’s largest companies is even higher, with some figures noting as high as 93 percent. [1] This is a starkly different picture from the 1980s, when a handful of companies in vulnerable sectors—extractives and chemicals, which had to respond to public backlash against environmental mishaps—were the only ones to publish environmental reports with limited performance metrics. It was not until the 1990s that sustainability reports as we know them today started gaining traction, after the concept of “triple bottom line”—environmental, social and economic—corporate performance was introduced and became popular.

Integrated reporting reflects a critical point in the evolution of financial accounting practice. Its core purpose is to ensure that organizations provide a more accurate account of their creation or destruction of value among the different forms of capital. It achieves this by shifting the focus away from the traditional exclusivity of financial measurement.

— Dr. Robert Massie (Co-founder), GRI

Now, almost three decades later, the landscape is again ripe for a shift. This time, the new concept is “value creation,” that companies should create shared value for all—including investors, employees, suppliers, communities and the environment. Proponents say that companies should disclose how they integrate the triple bottom line impacts through a more holistic report of its inputs and outputs, through what’s called an integrated report. Integrated reports would elevate the status of material sustainability matters to be commensurate with financial ones, and help investors make more informed decisions.

Si2, with funding from the IRRC Institute, last looked at these issues in 2013 in a first-of-its-kind analysis of the state of integrated reporting among the S&P 500, Integrated Financial Sustainability Reporting in the United States. But the world has seen a number of important changes in the five years since then.

In the background are a number of historic developments including the spread of the Internet, the coming of age of the Internet generation, dwindling public trust in institutions and a scientific consensus about the threat of global climate change. All these factors have increased expectations from a wide range of corporate stakeholders—consumers, investors and regulators—about the role businesses should play in society and how they should make positive contributions.

At the same time, investors in the United States and around the world continue to integrate environmental, social and corporate governance factors into their analyses. The Principles for Responsible Investment, which call for such integration, are now supported by large institutional investors with a total of $82 trillion in assets under management. [2] By comparison, the entire Gross National Product (GNP) of the United States is about one-quarter of that amount. Investors are clearly fueling demand for more and standardized corporate environmental and social data. With investor attention on such information higher than ever, corporate sustainability reporting is ripe for the next phase of its evolution. In addition, introductions of new integrated reporting frameworks from the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) have raised expectations for companies in ways that may not only change how companies report on sustainability, but also how they define their corporate identities and approach business in general.

It is with this background that Si2 launched this year’s update of the 2013 review, using a new lens. This year’s research takes a higher level view of the S&P 500’s sustainability and integrated reporting than the earlier, more granular study. The 2013 report focused on what was being reported by the companies in their financial filings without regard to their status as mandatory versus voluntary measures. This year’s research focuses only on voluntary disclosures. This year’s research also concentrates on which sustainability reporting frameworks companies reference, to gauge the spread and influence of integrated reporting frameworks, as well as to uncover where corporate reporting is headed.

Broadly, Si2’s 2018 analysis looks at:

  • how many U.S. S&P 500 companies now are reporting on sustainability performance and strategy,
  • how many are issuing stand-alone integrated reports [3] and
  • how many are including voluntary sustainability information in financial reports.

Knowing the tally of reports is essential for assessing the voluntary inclusion of sustainability information in financial reporting. This year’s review therefore set out to capture the influence of many important new developments driving the convergence of corporate financial and sustainability reporting.

Key Findings

Si2’s key findings paint a dynamic picture of corporate sustainability reporting. Most companies reporting on sustainability issues are navigating the landscape in their own way, using multiple reporting models and customizing guidance for their own needs. The number of integrated reporters in the S&P 500 has doubled since 2013, although from a low baseline (14 now issue such reports, up from seven five years ago). But Si2 also found a surprising share of companies are including sustainability information in their financial filings—annual reports, Forms 10-K and proxy statements—indicating elementary but growing acceptance that sustainability information is material to investors. All these findings show most companies are paying attention and adapting to raised expectations from stakeholders, including but not limited to investors. Integrated reporting just may be the future of corporate disclosure its proponents assert, even if change is slow and constantly shifting.

More specifically, Si2 reached the following key findings from this year’s assessment of sustainability reporting among the S&P 500:

  • A total of 395 companies (78 percent) issue sustainability reports, in either a discrete, downloadable format (68 percent) or only on the web with unclear boundaries (9 percent).
    • Most of these reports (95 percent) offer environmental performance metrics (quantified measures that are comparable year-over-year), while 67 percent set quantified and time-bound environmental goals.
    • About 86 percent offer social performance metrics, although Si2 cast a wide net and gave full credit for the most common social metrics including injury and accident rates. Goal setting for social performance was much lower than for the environment, however, in place for just 40 percent of all reporting companies.
  • Most lack external assurance; only 36 percent of sustainability reports include it.
    • About 90 percent of external assurance pertains only to some data, in most cases greenhouse gas (GHG) emissions.
    • Only 3 percent of reporters stated their reports’ environmental and social performance data were externally verified, although significant ambiguity exists given the varying language companies use and the level of transparency they offer about external assurance.
  • Nearly all (97 percent) of reporting companies chose to customize extant sustainability reporting models—in style, format and content—instead of closely following any one framework.
    • Only 10 reporting companies issue sustainability reports that follow only one reporting framework closely, using either the GRI or an industry-specific model.
    • 106 companies (27 percent) reference and loosely follow just one framework, while 46 percent reference two or more reporting models.
    • 97 companies (25 percent) do not reference any reporting models.
  • A minority of the S&P 500 references a recognized integrated reporting framework. SASB is cited as an influence by 35 companies (9 percent), while four companies reference the IIRC.
  • Fourteen S&P 500 companies issued an integrated report in 2018, twice the number in 2013.
    • Neither the size of a company (in revenue) nor its share of income from international markets seems to influence the likelihood a company will use integrated reporting.
    • About half the integrated reporters obtained some form of external assurance for their sustainability data, a much higher rate than reporters as a whole.
  • Integrated reporters are more likely to treat sustainability information as material to investment decisions, making it easier for investors to review such information as part of normal research processes.
    • All 14 companies offered their integrated reports under the investor relations section of their websites.
    • Seven companies used their integrated reports as their annual reports, although only two—Intel and Clorox—included voluntary discussion of sustainability in their 10-K business descriptions.
  • Many more integrated reporters (71 percent) have a board committee overseeing sustainability issues than do general reporters (42 percent).
  • Integrated reporters noted varying degrees of influence from sustainability reporting models.
    • References to integrated reporting frameworks were low even in among those doing it, with just four citing SASB and three citing IIRC. Two companies—Pfizer and Praxair— referenced both SASB and IIRC.
  • IIRC’s influence may be greater than it seems, however. Eleven (79 percent) of the integrated reports address the concept of “creating shared value for all,” the central tenet of IIRC. This departs significantly from traditional business theory—that the sole purpose of business is profit—and addresses the increasing expectations of investors and other stakeholders about corporate ESG (Environmental/Social/Governance) data disclosure.
  • A surprising share of the S&P 500 includes voluntary sustainability information in financial reports, but the extent varies widely.
    • Companies representing about 40 percent of the S&P 500 now include the concept of sustainability in their annual reports or Forms 10-K.
    • A total of 191 companies (38 percent) include discussions of corporate responsibility or sustainability in their proxy statements, beyond the traditional discussion of board governance and executive compensation.
    • A total of 212 companies (42 percent) have a formal board committee overseeing sustainability. (As noted above, 71 percent of integrated reporting companies do.)

“To continue creating prosperity businesses must take on a bigger role in society. Let’s be clear, a business needs to make an acceptable profit since this is a measure of how effectively it uses society’s resources. Yet more is expected and needed from business. Eighty-seven percent of young Americans believe that businesses need to do more than make a profit. Companies also need to be held accountable for creating jobs, making sure free markets work and improving our communities.”

Allstate (Chairman’s Letter, 2017 Prosperity Report)

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The complete report is available here.


1See The Road Ahead: KPMG Survey of Corporate Responsibility Reporting 2017. back)

2As of April 2018. See back)

3Si2 counted as integrated reports those that were self-declared as such, with one exception. Allstate did not make a declaration but had all of the comparable qualities—mainly, combining financial and sustainability information within its annual report—and was counted as an integrated report.(go back)

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  1. Erik Thomas Johnson
    Posted Saturday, April 27, 2019 at 8:25 am | Permalink

    Dear Joel,

    Thanks so much for this great summary and the study itself. I am looking for the full report, but the link appears broken. Can you help?

    Thanks in advance,
    Erik Johnson
    Sr Consultant, Sustainability
    Confederation of Danish Industry

  2. Harvard Law School Forum on Corporate Governance and Financial Regulation
    Posted Monday, April 29, 2019 at 9:20 am | Permalink

    Dear Mr. Johnson,

    An updated link to the complete publication is now available here: