Evaluating the Intra-Industry Comparability of Sustainability Reports: The Case of the Oil and Gas Industry

Abstract

Environmental, social, and governance (ESG) data are in high demand in financial markets. However, the ESG data provided by companies do not allow for use in the investment decision-making process. The main limiting point for this is a lack of comparability across companies. This paper analyzes the problem of comparability with the aim to evaluate the intra-industry comparability of sustainability reports, framing the analysis on Global Reporting Initiative (GRI) Standards and discussing the results with the support of legitimacy and stakeholder theories. Drawing upon stakeholder and legitimacy theories, as well as financial and sustainability accounting concepts, we propose a theoretical framework of comparability and a methodology to evaluate the level of comparability on a sector-specific basis. The methodological approach adopted in this study is broadly qualitative, with the use of a multiple-stages model. Based on the example of one industry, we discovered that, despite comparability being mostly relevant to the listed companies from the oil and gas sector, the sustainability reports of these companies are still not comparable. Our findings reveal that, despite the availability of a large amount of ESG data and the existence of sustainability frameworks, the problem of comparability is still relevant even for companies that are theoretically most inclined to be comparable.

Introducing fundamental accountability principles in sustainability reporting assessment: A cross‐sectoral analysis from the Greek business sector

“…Similarly, Cardoni et al. (2019) identified less evidence of the comparability principle for a very small number of the sampled firms. Specifically, only 39% of the sampled firms achieved the principle of comparability and mainly those reports based on the GRI guidelines.…”

Green Gaps: Firm ESG Disclosure and Financial Institutions’ Reporting Requirements

“…In addition, "data aggregators usually have limited access that limits the availability of the data. Moreover, data aggregators limit the company in representing the information according to particular indicators" ( [5], p. 9). As a result, there is an opportunity for researchers to assess firm disclosure independently rather than rely on ratings.…”

“…The voluntary nature of ESG disclosure creates large variation between firms and raises concerns as to whether firms will make substantive progress on improving environmental performance given the lack of consequences for poor performance [5]. However, this view ignores the significant impact financial institutions can have on firms in the form of restricted access to capital and investment [5]. We address this gap in the extant literature using a content analysis of Alberta oil and gas company sustainability reports and financial institution requirements.…”

“…The current regulatory environment in Canada has left ESG disclosure as a non-financial disclosure not required by law. The voluntary nature of ESG disclosure creates large variation between firms and raises concerns as to whether firms will make substantive progress on improving environmental performance given the lack of consequences for poor performance [5]. However, this view ignores the significant impact financial institutions can have on firms in the form of restricted access to capital and investment [5].…”

“…The literature on sustainability reporting, and more recently ESG, points to deficiencies in consistency and comparability of information. While frameworks like the Global Reporting Initiative (GRI) and now the Sustainability Accounting Standards Board (SASB) aim to provide guidelines, their adoption and successful implementation vary [5].…”