The disclosure of corporate sustainability through integrated reporting and the inclusion of environmental, social, and governance (ESG) criteria as part of sustainable finance are topical concerns in mainstream academic studies, economic practice, and international policy. This study examined European companies’ ESG performance and reporting, and the impact of reporting on financial performance.
The Environmental, Social and Governance (ESG) performances of 1165 European companies were considered by applying the Kohonen neural network for clustering purposes at three main levels: 1.) ESG overall level, including country and sectoral perspectives; 2.) ESG thematic level; 3.) ESG four-folded innovative level (stakeholder, perspective, management level and focus views). To contribute to a comprehensive European perspective, a large sample of companies were employed: all ESG reporting corporations registered in Thomson Reuters EIKON/Refinitiv database that are simultaneously headquartered in European countries/territories and listed on European stock exchanges at the beginning of January 2019.
Insights & Implications
— ESG influence transcends industry and national boundaries; companies do not necessarily apply an ESG model specific to their industry or country.
— These companies are influenced instead by their competitors or best practice examples.
— As a company’s ESG performance grows, so too does that company’s ESG reported controversies.
— The higher attention on sustainability performances of the leading companies in the field may be due to high ESG controversies that they need to counteract or high pressures from stakeholders.
— Median social and median environmental performances were found to be statistically higher than the median governance performance across the surveyed companies.
— Large European companies were found to focus on—both in practice and in reporting patterns—the environmental and social issues.
— Services-oriented economic sectors perform better or have lower negative impact than production-oriented sectors in what concerns environmental issues.
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