Analysis of Sustainability Reports for Top 20 Companies in the S&P 500 Index

Abstract

An increasing number of companies are voluntarily issuing sustainability reports as investors are putting more emphasis on the sustainability and the environmental, social and governance (ESG) ratings of the companies in their investment decisions. We analyze the sustainability reports from the top 20 companies in the S&P 500. We find that these reports differ significantly based on their length and their word and number count. We also apply Benford’s law to the numbers reported in sustainability reports. We examine the distributions of the first and the second digits of the numbers and find that there is a rounding of numbers especially with the second digit in the reports. We also find that the distributions of the first and second digits significantly deviate from the expected distribution according to Benford’s law. Our results support the current push from regulators for the standardization of sustainability reports to provide better ESG information to investors.