Using Media Coverage for ESG Due Diligence

Growing Demand for ESG Assurance

In January 2025, two climate-related bills were introduced in the New York State Senate. The “Climate Corporate Data Accountability Act” would require entities doing business in New York with revenues over $1 billion (including subsidiaries and related entities) to disclose their Scope 1, 2, and 3 greenhouse gas (GHG) emissions and obtain assurance over such disclosure (https://www.nysenate.gov/legislation/bills/2025/S3456). The “Climate-Related Financial Risk Reporting” bill would require entities doing business in New York with revenues over $500 million to prepare a climate-related financial risk report (https://www.nysenate.gov/legislation/bills/2025/S3697/amendment/A). This potential legislation follows in the steps of California which requires the same threshold for companies doing business in the state to report GHG emissions beginning in 2026 and a climate-related financial risk report initially slated for 2026 but currently facing legal challenges (https://kpmg.com/us/en/frv/reference-library/2026/california-climate-laws.html). These potential new rules create opportunities for CPA firms to pitch their expertise to new clients for climate-related advisory or assurance engagements.

The Challenge of Unreliable Data

Performing the necessary risk assessment procedures for ESG assurance services can pose a myriad of challenges due to the voluntary nature of current corporate sustainability disclosures. In this article, ESG due diligence refers to the investigative procedures CPAs can undertake to inform their client acceptance and risk assessment processes for ESG-related engagements. This involves evaluating a company’s ESG-related risks, controversies, and stakeholder sentiment, which often supplements traditional procedures. For example, environmental data often lacks consistency from year to year, comparability is difficult to measure, and reporting is often selective (B. Korca, E. Costa, and L. Bouten, “Disentangling the Concept of Comparability in Sustainability Reporting,” Sustainability Accounting, Management and Policy Journal, vol. 14, no. 4, July 2023, pp. 815–851; R. S. Kaplan and K. Ramanna, “How to Fix ESG Reporting,” Harvard Business School Accounting & Management Unit, Working Paper 22-005, July 2021, https://tinyurl.com/2ehz7u2b). Third-party ratings on ESG metrics are often used to avoid concerns about data collected from company-provided reports, yet even these ratings are based on opaque methodologies or suffer from a high degree of disagreement among providers (R. Toplensky, “Why ESG Ratings Are all over the Map,” The Wall Street Journal, Aug. 17, 2023, https://www.wsj.com/finance/investing/esg-ratings-f569f60e; D. Christensen, G. Serafeim, and A. Sikochi, “Why Is Corporate Virtue in the Eye of the Beholder? The Case of ESG Ratings,” The Accounting Review, vol. 97, no. 1, January 2022, pp. 147-175; F. Berg, J. Köelbel, and R. Rigobon, “Aggregate Confusion: The Divergence of ESG Ratings,” Review of Finance, vol. 26, no. 6, May 23, 2022, pp. 1315–1344).

The landscape is shifting, however: The recent introduction of global standards, such as the IFRS Sustainability Disclosure Standards, aim to improve the consistency and reliability of corporate ESG reporting, particularly when coupled with third-party assurance (E. Esposito and T. Niemotko, “Sustainability Reporting and the Greenwashing Challenge,” The CPA Journal, July/August 2024; E. Esposito, “California Provides a Welcoming Environment for the Evolution of International Climate Disclosures,” The CPA Journal, May/June 2025).

An “Outside-In” Perspective: Using Media Data

Amid these complexities, CPAs can use ESG-related media coverage as a supplementary data source to inform their risk assessment. A media analysis provides a comparative marker for other ESG ratings (F. He, X. Guo, and P. Yue, “Media Coverage and Corporate ESG Performance: Evidence from China,” International Review of Financial Analysis, vol. 91, January 2024) and allows for a more continuous surveillance of ESG issues relevant to companies in a highly dynamic risk environment. While parsing through global and local news sources to find this information can be an arduous task, there exist unique data sources which can track ESG incidents reported in the media. Companies that track media mentions of ESG issues include RepRisk, Sustainalytics, MSCI, FactSet, Refinitiv, and LexisNexis, among others. Exhibit 1 summarizes these databases.

RepRisk, for example, focuses on ESG and business-conduct risks and provides daily updated data derived from an array of public sources including: media, NGOs, government bodies, and regulators (RepRisk. RepRisk methodology overview, n.d. https://www.reprisk.com/insights/resources/methodology). A key aspect of its methodology is the exclusion of company self-disclosures, aiming instead for an “outside-in” perspective. RepRisk analyzes incidents based on three parameters including: 1) severity (i.e., consequences, extent, cause); 2) reach of the information source (i.e., local, national, global); and 3) novelty (i.e., newness) of the reported issues. It tracks 28 core ESG issues (e.g., GHG emissions, forced labor, tax evasion) with 80 topic tags (e.g., human trafficking, greenwashing, and energy management). From 2021-2023, RepRisk identified 3,404 unique negative media mentions in international, national, and local news outlets regarding environmental issues for US companies. Exhibit 2 shows the top six environmental issues identified during this timeframe. As shown, impacts on ecosystems, local pollution, and GHG emissions represent 83% of the environmental topics flagged as problematic for US companies.

Implications for Engagement and Risk

Using this type of ESG media data, academic researchers have uncovered interesting findings related to assurance engagements and companies’ negative ESG reputations. Negative ESG reputations are associated with increased audit effort and a resulting increase in audit quality, as well as an increase in auditor resignation and audit fees (B. Asante-Appiah, “Does the Severity of a Client’s Negative Environmental, Social and Governance Reputation Affect Audit Effort and Audit Quality?” Journal of Accounting and Public Policy, vol. 39, no. 3, May 2020, pp. 1–22; J. Burke, R. Hoitash, and U. Hoitash, “Auditor Response to Negative Media Coverage of Client Environmental, Social, and Governance Practices,” Accounting Horizonsu vol. 33 no.3, September 2019, pp. 1–23). For financial institutions, customer deposits and bank lending activities are negatively impacted by the poor environmental reputations of banks following negative climate incidents reported in the media (D. Choi, Y. Gam, and H. Shin, “Environmental Reputation and Bank Liquidity: Evidence from Climate Transition,” Journal of Business Finance & Accounting, vol. 50, no. 7–8, November 2022, pp. 1274–1304). Thus, the information gathered through ESG media analysis serves as a key input for practitioners’ formal risk assessment procedures, directly influencing engagement acceptance and fee setting. Relatedly, companies with a “tainted reputation” due to heightened ESG media exposure pursue more non-audit services than companies without a tainted reputation (B. Asante-Appiah and T. Lambert, “The Role of the External Auditor in Managing Environmental, Social, and Governance (ESG) Reputation Risk,” Review of Accounting Studies, vol. 28, August 2022, pp. 2589–2641). CPAs can use information about negative ESG media mentions to market their advisory and consulting services.

Negative ESG media data has also proven useful in studies on firm value, tax avoidance, and corporate culture (P. Cousins, M. Dutordoir, B. Lawson, and J. Neto, “Shareholder Wealth Effects of Modern Slavery Regulation,” Management Science, vol. 66, no. 11, May 2020, pp. 5265-5289; L. Menicacci and L. Simoni, “Negative Media Coverage of ESG Issues and Corporate Tax Avoidance,” Sustainability Accounting, Management and Policy Journal, vol. 15, no. 7, December 2024, pp. 1–33; J. Graham, J. Grennan, C. Harvey, and S. Rajgopal, “Corporate Culture: Evidence from the Field,” Journal of Financial Economics, vol. 146, no. 2, November 2022, pp. 552–593). A different study found that companies with severe environmental incidents reported in the media tend to subsequently increase their investment in green practices (A. Darendeli, K. Law, and M. Shen, “Green New Hiring,” Review of Accounting Studies, vol. 27, no. 3, August 2022, pp. 986–1037). Other research has used media mentions for instances of greenwashing, a practice in which companies falsely claim to be environmentally friendly (K. Hummel and C. Schlick, “The Relationship Between Sustainability Performance and Sustainability Disclosure—Reconciling Voluntary Disclosure Theory and Legitimacy Theory,” Journal of Accounting and Public Policy, vol. 35, no. 5, September 2016, pp. 455–476).

Maintaining Professional Skepticism

While the providers shown in Exhibit 1 typically integrate multiple data sources into their respective platforms to provide a convenient and holistic view of ESG risk, CPAs should still exercise skepticism and professional judgment when using these services. Specifically, while the information provided can be a useful initial filter to identify and prioritize potentially material ESG issues, CPAs should still work to understand the underlying methodologies used and, where necessary, corroborate this information with independent analysis or other data sources. Furthermore, if the underlying data sources or analytical methodologies from different providers share similar flaws (e.g., over-reliance on certain types of media, similar sentiment analysis algorithms, or common gaps in regional coverage), there is a chance that the aggregated view might inadvertently reinforce underlying biases rather than providing a truly independent, multi-source validation. In other words, a thorough understanding of the provenance and specific methodology of each data component remains essential.

Evaluating a company’s performance and risks related to ESG issues is no longer a niche part of due diligence, but a fundamental imperative for businesses and the professionals who advise and assure them. Media coverage, in all its diverse forms, has emerged as an indispensable, albeit complex, source of information for this process. It offers a real-time, outside-in perspective on corporate ESG performance, controversies, and stakeholder sentiment that often precedes or supplements formal company disclosures. This article reminds CPAs in the field of the importance of incorporating an external, media-informed perspective into their ESG-related due diligence and risk assessment efforts. In doing so, it provides a brief overview of ESG media databases accounting professionals can use to facilitate risk analyses to aid in a variety of potential service offerings. Furthermore, given ESG’s expanding role in financial markets and growing concerns about corporate greenwashing, this article provides timely insight and practical suggestions for stakeholders interested in reconciling corporate disclosures to actual behavior. Finally, as public accounting firms expand their ESG advising and assurance services, this article highlights additional information that firms can consider before attaching their names to client-prepared climate-related disclosures.