CSR Reporting Is on the Rise, and So Is Its Impact

More companies are publishing corporate social and sustainability reports on their operations amid fresh evidence that transparency enhances valuations.


Efforts to push companies to publish high-quality reports on the material, non-financial factors that affect their business — everything from water usage and workforce diversity to proximity to human rights violations — have produced a few triumphs recently.

Companies around the world published 7,838 corporate social responsibility, or CSR, reports last year, 30 percent more than in 2010, according to CorporateRegister.com, an online directory of CSR reporting. And in May 2014, former New York mayor Michael Bloomberg and former Securities and Exchange Commission chair Mary Schapiro lent their names to the cause by signing on as chair and vice chair, respectively, of the Sustainability Accounting Standards Board, a nonprofit that seeks to develop and promote accounting standards on sustainability issues ranging from environmental risks and labor relations to regulatory risks and business ethics.

A new working paper from two finance experts at Baruch College’s Zicklin School of Business in New York adds to the good news. The researchers have found that firms operating in environmentally and socially sensitive industries such as oil and gas extraction, mining and weapons production enjoy significantly higher stock market valuations when they issue comprehensive CSR reports.

“Higher CSR performance itself is not enough to create the impact that firms would like to have on the market and on their valuations,” says Mert Demir, a research associate who co-authored the paper with professor Terrence Martell. “CSR performance has to be accompanied by high-quality CSR disclosure — that definitely elevates the impact on firm valuation.”

The researchers drew their data on the quality of the reports from the CSR-Sustainability Monitor, developed and overseen by Baruch College’s Weissman Center for International Business. The Monitor scored 614 reports based on the quality of information provided in 11 categories, including the environmental, human rights, labor relations and supply-chain risks.


Lauren Compere, director of shareholder engagement at $2.2 billion Boston Common Asset Management, says that as someone who regularly combs through CSR reports to determine their utility, the research findings are in line with her experience, but not necessarily for the most obvious reasons.

“Disclosure in many ways is not a means to an end but an articulation of the way that a company is implementing a governance structure for the way they’re managing ESG,” or environmental, social and governance factors, Boston-based Compere says. “Better disclosure can indicate a better or more proactive way of managing key ESG risks.”

There is plenty of room for improvement in CSR reports. Compere says she wants to see companies better articulate what their sustainability goals are, so investors can “have a sense of the road map by which companies are managing the key risks.” Although environmental reporting has improved by leaps and bounds in recent years, she says companies still tend to report selectively about environmental impacts on key regions or home markets, rather than gathering and reporting data on their global impacts. Companies also struggle to spell out their operations’ human rights risks, Compere says. She hopes the new United Nations Guiding Principles Reporting Framework, which focuses on this realm, can start to change that.

Smaller companies need to catch up with their larger counterparts on the reporting front, and all need to do a better job of quantifying the return on investment of CSR programs, according to Mike Lombardo and Erica Lasdon, senior sustainability analysts at Calvert Investments, a Bethesda, Maryland–based mutual fund firm that manages $13.4 billion. For those reasons, the firm plans to continue its engagement with companies to help them improve their CSR reports so that more investors start paying attention.

“In recent years we’ve seen a strong push for reporting that more clearly links to the overall strategy and overall operations of a business,” Lombardo says. “It’s really pushing CSR reporting to next level, which will resonate with a much larger base of investors.”