Which ESG disclosures link words to action?
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Companies spend time and money writing ESG reports, which are closely scrutinised by investors. But not all environmental narratives show whether companies are actually making environmental progress. Ivan Savin finds that the relationship between words and action is nuanced. The lesson is not to dismiss sustainability reporting but to distinguish the disclosures linked to measurable environmental progress from those that are less informative.
Every year, companies publish millions of words describing their commitment to sustainability. These reports have become an essential source of information for investors, regulators, customers and employees seeking to understand how businesses are responding to environmental challenges. Yet despite the growing volume of environmental, social and governance (ESG) disclosure, one fundamental question remains surprisingly difficult to answer: when do corporate words actually correspond to corporate action?[1]
Much of the public debate has framed the issue as a simple choice between genuine sustainability and greenwashing. But this binary perspective overlooks a more important question. Rather than asking whether ESG reports can be trusted as a whole, the focus should be on which parts of these reports provide meaningful information about companies’ environmental performance.
This distinction has become increasingly important as sustainability reporting has expanded worldwide. More disclosure does not automatically produce more transparency. If every company publishes hundreds of pages of sustainability information, the challenge shifts from obtaining information to interpreting it. The real value of ESG reporting depends not only on how much companies disclose, but also on what they choose to talk about and whether those priorities are reflected in measurable environmental outcomes. This was the motivation behind the research: to move beyond the words-versus-greenwashing debate and examine when corporate sustainability narratives are actually connected to environmental action.
Beyond the greenwashing debate
To answer this question, Ivan Savin, Mateo López Carel and Eva Schlindwein analysed 1,477 ESG reports published by companies listed in the STOXX Europe 600 between 2010 and 2023. Using computational linguistics, they identified the main environmental themes companies emphasised in their reports and examined whether these themes were associated with independently measured environmental key performance indicators, including emissions, energy use and environmental innovation.[2][3]
The analysis shows that the link between corporate words and corporate action depends on what companies choose to talk about. ESG reports are not equally informative. Some sustainability narratives provide meaningful signals of environmental action, while others tell us remarkably little about whether firms are improving their environmental performance. In particular, we identified 34 major topics discussed in ESG reports. Across the 34 topics, governance received the most attention, while other themes covered environmental issues, sector-specific concerns, people and communities, finance, and public regulation; environmental topics accounted for almost one-fifth of report content. Over time, discussions of greenhouse-gas emissions, electric vehicles, renewable energy and environmental subsidies increased. The analysis then examined six environmental topics more closely: greenhouse-gas emissions, sustainable value chains, electric vehicles, renewable energy, energy sources and environmental subsidies.
Only some of these topics were consistently associated with stronger environmental performance. More specifically, companies placing greater emphasis on “ sustainable value chains ” and “renewable energy” were more likely to exhibit better environmental outcomes. By contrast, frequently discussing “greenhouse-gas emissions” or “electric vehicles” showed no statistically significant relationship with environmental performance. In other words, not all environmental narratives provide the same insight into what companies are actually doing.[4]
Why some ESG disclosures matter more than others
Why do some topics appear more informative than others? One explanation is that certain environmental initiatives, such as supply-chain management or renewable energy deployment, are closely connected to operational decisions that produce measurable outcomes. Others, including emissions reduction strategies or electrification, may unfold over longer time horizons or depend on factors that current environmental indicators do not fully capture.
These findings suggest that the relationship between corporate words and corporate action is more nuanced than commonly assumed. ESG reports contain both substantive and less informative signals. The key is not to dismiss sustainability reporting altogether, but to distinguish the disclosures that are more closely linked to measurable environmental progress from those that are less informative.
The implications extend well beyond academic research. For investors, the findings suggest that assessing ESG reports requires more than counting disclosures or relying on aggregate ESG scores. Different environmental topics carry different informational value, and understanding these differences may improve how firms’ environmental commitments are evaluated.
What this means for business
For managers, the message is equally important. Companies invest considerable resources in preparing sustainability reports, often under the assumption that more disclosure will strengthen credibility. The findings suggest otherwise. Credibility depends not only on the quantity of information provided, but also on whether the issues emphasised in ESG reports reflect areas where companies are making measurable environmental progress. Reporting should therefore be viewed not merely as a communication exercise but as an opportunity to demonstrate how corporate priorities translate into environmental outcomes.
The challenge is no longer obtaining more sustainability information, it is learning how to interpret it.
The findings also have implications for policymakers and ESG rating agencies. As sustainability reporting becomes increasingly standardised , the next challenge is not simply encouraging firms to disclose more information. Rather, it is developing approaches that help users distinguish between disclosures that provide meaningful signals of environmental performance and those that are less informative. Advances in computational linguistics offer one way to analyse large volumes of corporate reporting and identify patterns that would be difficult to detect through manual reading alone. The same approach can also be used beyond companies. It can help examine countries’ climate promises , comparing what governments say they will do with the policies they set out and, where data are available, the actions they take.[5][6]
The next frontier
The debate over ESG reporting is unlikely to disappear. But our findings suggest that it is time to ask a different question. Rather than treating sustainability reports as either credible or misleading, it is important to recognise that different parts of these reports tell readers different things. Some environmental topics appear to be more closely linked to measurable environmental progress than others.
This does not mean that topics showing no statistical association are unimportant or represent evidence of greenwashing. Environmental initiatives often require years before their effects become visible, and some are more difficult to capture using existing performance indicators. The absence of a measurable relationship should therefore be interpreted with caution rather than as proof that companies are merely talking instead of acting.
The broader lesson is that ESG reporting should be judged not only by the volume of information it contains, but by its ability to connect words with action . As sustainability reporting continues to evolve, the next frontier is unlikely to be producing more disclosures. Understanding which corporate narratives provide meaningful signals of environmental progress can help managers communicate more effectively, investors make better-informed decisions, and policymakers design reporting frameworks that reward substance over volume.
Moving from words to action is not only the challenge facing companies. It is the challenge facing everyone who seeks to understand what ESG disclosures really tell us.
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