Investors just issued a wake-up call for executives

How are today’s investors feeling about ESG reporting? Not great, according to PwC’s 2022 Global Investor Survey. An eye-popping 87% of respondents believe that corporate disclosures contain unsupported sustainability claims, or greenwashing. One investor we interviewed for the research put it this way: “I wonder whether companies are just drawing pictures about the UN’s Sustainable Development Goals to make it look good or they are sincerely taking actions toward them?” Another said, “The more a company talks about sustainability in a vague way and the less information I walk away with, the bigger the red flag gets from my perspective.” Given the pervasive lack of trust, it’s no surprise that investors are placing less value on company sustainability disclosures relative to other information available to them. 

What can C-suite leaders do to close this immense trust gap? For one thing, they can report sustainability performance with the same rigour and data quality they apply to financial performance. This may require bringing sustainability and finance teams together to review data sources, a move that can make sustainability reporting more meaningful by placing it in a financial context while also breaking down data silos. Companies should also strive to incorporate effective systems, controls and oversight into their reporting process to make it trustworthy and less susceptible to greenwashing. Arguably most important of all, they need to integrate sustainability factors into core business strategy and decisions—about capital allocation, investment, and other activities involved in strategic execution. The fact is, sustainability outcomes have become too important to investors for companies to treat them as mere add-ons.