The financial performance of publicly traded companies is reported in accordance with SEC requirements. However, financial statements do not give much information about the impact that such companies’ activities have on their environment, customers, employees, and the broader community, nor the governance policies and practices that they adopt to avoid possibilities of fraudulent acts and consequent damage to their reputation. In order to gather that information, one must examine the environmental, social, and governance disclosures of companies, commonly referred to as sustainability or corporate social responsibility (CSR) disclosures, which are often provided separately from the annual financial report.

This article describes the findings of a study that examined the existing form and content of the sustainability disclosures made by a sample of the smallest 100 companies included in the S&P 500 Index. According to the Governance & Accountability Institute’s “Sustainability Update” webpage, 72% of S&P 500 companies publish sustainability reports in some form (“Flash Report: 72% of S&P 500 Companies Now Publishing Sustainability/Responsibility Reports,” June 2014, The companies that constitute the S&P 500 include some of the largest companies listed on U.S. stock exchanges. If approximately 3⁄4 of these companies are voluntarily choosing to disclose information about their sustainability activities, it would be useful to examine the issues that these companies consider worthy of reporting and the prominence with which they report these issues.

Past research has generally found a positive relationship between company size and the voluntary disclosure of sustainability information; the reasons frequently cited include greater exposure to media and higher political visibility. Therefore, this article focuses specifically on the smallest 100 of these companies to observe how much support senior management provides to sustainability efforts, as well as what kind of issues these companies consider worthy of pursuing and disclosing—even though they may not experience the same level of scrutiny and public exposure as the larger companies in the S&P 500.

Definition of Sustainability

The Global Reporting Initiative (GRI) Sustainability Reporting Guidelines acknowledge that sustainability is the same as CSR and define a sustainability report as “a report published by a company or organization about the economic, environmental, and social impacts caused by its everyday activities. A sustainability report also presents the organization’s values and governance model and demonstrates the link between its strategy and its commitment to a sustainable global economy” (“What Is Sustainability Reporting?” This definition indicates that sustainability is not a one-time activity; it must be built into an organization’s overall philosophy and strategy. Based on the GRI guidelines, the authors also use the terms sustainability and CSR interchangeably; all references to sustainability also pertain to the CSR initiatives undertaken by the sampled companies.

Data Collection and Findings

The companies were selected based on the S&P 500 Index as of December 31, 2014. The list was pared down to the smallest 100 companies by market capitalization. A large majority (86%) of the companies in this sample published on their sustainability activities via either a stand-alone, structured report or in the form of loose disclosures on the corporate website; “companies” below refers to these companies unless otherwise stated.

Sustainability disclosures do not follow a standardized format among different companies, primarily because there are no regulatory requirements.

Of the 56 companies that published a stand-alone report, most also supplemented it with additional information on their websites. The length of the stand-alone report varied from 20 pages to more than 100 pages. Since it is not a regulatory requirement, several companies did not update their stand-alone sustainability report concurrently with their annual financial reports; in such cases, the data were gathered from their most recently available report or current disclosure. In each case, the published information was reviewed with specific reference to 1) support of top management toward sustainability reporting, 2) sustainability issues commonly addressed in the disclosures, 3) use of the GRI framework, and 4) evidence of external assurance of the information reported.

Support of top management toward sustainability reporting.

Such support was deemed present based primarily on two factors: 1) the existence of an opening letter or statement in the report that was signed by a top officer of the company and 2) the existence of a strategic initiative within the company to guide sustainability efforts. In almost all cases of stand-alone reports, top management showed visible support of sustainability efforts by endorsing the report with an opening statement acknowledging the importance of all steps taken to improve interactions with stakeholders. Approximately 50% of companies also showed some evidence of a structured sustainability initiative, which ranged from a mission or vision statement outlining the company’s approach to a clearly laid-out framework of issues, priorities, goals, and objectives, followed by a comparison with recent performance in each area.

Sustainability issues commonly addressed in the disclosures.

Sustainability disclosures do not follow a standardized format among different companies, primarily because there are no regulatory requirements. Consequently, companies considered different issues of interest and reported them in different ways. While a few companies dedicated the entire report to the discussion of environmental impact and resource efficiency, some also discussed employee betterment or community involvement. A majority of companies addressed multiple issues, with certain issues emerging more commonly in the reports.

Approximately 83% reported on how they were dealing with their environmental impact. Frequently, such information consisted of a description of the resource conservation initiatives undertaken by the company, efforts to reduce greenhouse gas emissions, efficiency in energy consumption and promoting renewable energy, and waste reduction practices used; however, companies also placed varying levels of emphasis on different issues. About ⅓ of companies began the sustainability report with issues related to environment and conservation of resources, whereas ⅙ placed the discussion of environmental stewardship near the end of the report. The remaining companies discussed environmental impact at various locations throughout the report or disclosure. The information provided in this section varied from simply reporting on compliance efforts undertaken to meet the requirements of local, regional, or national agencies to providing a year-to-year comparison of the “goals and results” achieved in these areas. Several companies appeared to be making a sincere effort to minimize their environmental footprint while also contributing to the conservation and renewal of resources, as seen from the yearly improvement in their environmental stewardship statistics.

Companies also differed in how much and how well they reported on their carbon emissions. Approximately half reported on their carbon footprints, with some choosing to disclose minimum information without any metrics, while a few included carbon emissions metrics in a separate report. Some companies elaborately discussed their investments in reducing greenhouse gas emissions or fuel usage and described the results of such projects, whereas a few companies made only a passing reference.

Approximately 75% of companies provided information about initiatives in place to ensure employee well being. Such initiatives dealt with employee health, work satisfaction, human rights, and personal growth. More than 1⁄3 also discussed efforts to promote diversity and inclusion among the workforce, particularly with respect to race, gender, nationality, and religion. Interestingly, only 20% of these companies placed the discussion of employee-related priorities at the top of their report, with another 10% placing employee well-being as the second item.

Approximately 50% of companies also disclosed their efforts to ensure and promote safety of their employees, customers, and the local community. Employee safety typically involved providing a safe working environment that reduced mishaps and health hazards, whereas customer safety was often linked to product safety. Companies like ADT Corporation, AGL Resources, and Integrys Energy Group also made public safety one of their sustainability goals. Two companies from the financial sector took a slightly different approach to the safety of their community by emphasizing financial security for their stakeholders.

Only 15% of companies mentioned product or service quality or innovation as an important priority. Not surprisingly, all of the companies that mentioned innovation as a sustainability priority were manufacturing companies, whereas companies that emphasized quality were primarily retailers or service businesses. Given that a greater percentage of companies place importance on customer safety, the authors hope that more companies will consider product quality and innovation as a higher-level priority in the future.

Giving back to the community and philanthropy were two popular items in the reports of approximately 90% of companies. A large number of companies specifically took pride in reporting on the volunteering and other community service projects in which they were involved. Common activities included donating cash, goods, and services to charitable organizations; helping schools in the area; and volunteering time for improving local communities.

Last but not least, close to 35% of companies mentioned the use of ethical practices by their employees or suppliers or good corporate governance by management as one of their accomplishments. This disclosure was in addition to the usual corporate governance disclosures made elsewhere on the companies’ websites. Some companies, such as Hasbro, Verisign, Total System Services, and Nabors Industries, placed the discussion of ethics, compliance, and governance at the top of their reports. In the wake of recent corporate scandals, it was refreshing to note that several companies considered the observance of ethics, integrity, and good governance as top sustainability priorities.

Use of the GRI framework.

Fifty-two percent of companies that provided a standalone report used the GRI framework as a component of their overall sustainability report. Companies seem to be at different stages of following the GRI framework; some used the G3 or G3.1 guidelines, while a few adopted the G4 guidelines.

Evidence of external assurance of the information reported.

The 2013 GRI publication “The External Assurance of Sustainability Reporting” ( states that “an assured report can provide an organization’s stakeholders with a greater sense of confidence in disclosures. Among other things, it reflects the seriousness with which the reporter approaches sustainability reporting” (p. 6). Nevertheless, external assurance of sustainability information does not currently appear popular among the reporting companies. Only 14% of companies providing a stand-alone report showed limited external assurance of the data reported. In most cases, the external assurance pertained to quantitative and qualitative data regarding the environment, more specifically greenhouse gas emissions.

A few companies declared in their newly formed sustainability policies that they intended to obtain external assurance of their compliance data in the future. Thus, although voluntary sustainability reporting has been on the rise, the practice of validating sustainability data is still behind the curve. While this lack of external corroboration makes comparing information across different companies difficult, especially when those companies do not use a standardized framework such as the GRI framework, the situation also creates a market for independent consultants who can provide such external assurance services.

Discussion of the Disclosures

In examining the data collected from the sustainability or corporate social responsibility reports of the 100 smallest companies in the S&P 500, the question arises of whether most sustainability reporting is merely an attempt towards conformity with peer practices, or if there is a sincere and systematic effort to actually reduce an entity’s environmental footprint, enhance the quality of life for its workforce, provide better products and services to customers, improve the supply chain, contribute to the betterment of the community, and create an overall atmosphere of higher integrity and better corporate governance. From the data collected, it was not possible to judge if several companies’ sustainability reports were sincere, especially where 1) the company did not provide a clearly established sustainability program or policy statement, 2) the company had recently started providing sustainability information, 3) there was no year-to-year comparison of results achieved, or 4) the company did not discuss the economic impact of its sustainability initiatives.

Readers of these reports can use the information more fruitfully if they can understand the impact of sustainability activities in dollars and cents.

For example, many companies did not disclose the amount of dollars saved from year to year as a result of a decline in the number of employee accidents, increased conservation of energy and natural resources, or reduced waste disposal. Thus, the sustainability reporting seems to be more about disclosing activities than the outcomes achieved by those activities. Readers of these reports can use the information more fruitfully if they can understand the impact of sustainability activities in dollars and cents. Until then, many of these reports may remain little more than a display of corporate citizenship or a publicity campaign. In the reporting companies’ defense, the authors acknowledge that gathering and providing information about the financial impact of the sustainability performance may be difficult and cost-prohibitive. Those companies that are able to provide such details on a timely basis, however, may earn an edge over those that are not.

Why CPAs Should Be Concerned

In the near future, the need for attestation regarding sustainability performance will likely fall upon CPAs. The AICPA has already recognized the importance of sustainability disclosures and made learning resources available. At present, the AICPA website states that “accounting for sustainability involves linking sustainability initiatives to company strategy, evaluating risks and opportunities, and providing measurement, accounting and performance management skills to ensure that sustainability is embedded into the day-to-day operations of the company” (“Sustainability Accounting,” Furthermore, in its list of frequently asked questions regarding sustainability accounting and reporting, the AICPA acknowledges that CPAs, whether in private practice, industry, or government agencies, can help their clients and employers formulate a strategy for sustainability growth and development and measure, account for, and report sustainability outcomes ( As noted above, external assurance of sustainability reports is not a common practice, primarily because it is not mandatory. If and when the time arrives for a mandatory attestation of sustainability activities, CPAs will see significant opportunities for expansion.

At the international level, such global initiatives as the Carbon Disclosure Project and the GRI establish frameworks and standards to deal with the reporting of corporate sustainability. The United States has an independent organization, the Sustainability Accounting Standards Board (SASB), to establish sustainability accounting standards corporations can use to report sustainability information in a more uniform way while making it useful to stakeholders, although these practices are presently optional and still evolving on an industry-by-industry basis. Four years ago, SASB began to develop accounting standards for the disclosure of material sustainability issues in mandatory annual SEC filings in various industry sectors, and recently completed the issuance of provisional standards in 79 industries from 10 sectors. SASB also sponsors the Fundamentals for Sustainability Accounting (FSA) Credential, which “is designed for professionals who benefit from understanding the link between material sustainability information and a company’s financial performance” (“Fundamentals of Sustainability Accounting,”

The increasing emphasis on measuring and reporting sustainability and associating it with a company’s financial performance may offer new opportunities for CPAs to be recognized as “sustainability professionals” who can advise their employers and clients on how to grow in a sustainable way and how to measure sustainability performance and report it to those who want it most.

Ganesh M. Pandit, DBA, CPA (La.-nonpracticing), CMA is an associate professor of accounting and law at Adelphi University, Garden City, N.Y.
Allen J. Rubenfield, JD, CPA is a lecturer of tax and accounting at Mercer University, Atlanta, Ga.