A common refrain we hear in the sustainability world is about the challenges related to data — in particular, the lack of consistency, comparability and completeness. This topic came up repeatedly at the recent Climate Week NYC, for example. 

Each year, S&P Global Sustainable1 takes steps to address these challenges by assessing environmental impacts across key areas of performance for more than 17,000 companies. These areas of impact include greenhouse gas (GHG) emissions, air pollution, water use, waste disposal, and other land and water pollutants. In this annual research cycle, company environmental impact disclosures are reviewed for completeness and robustness, and then adjusted or excluded as necessary. 

As we covered in the last blog in this series, we then fill gaps in the data through modeling techniques that are informed by data on company production, operational data, and company revenue generation by business activity. This process results in a complete and comparable corporate environmental impact dataset that can be utilized to inform decision-making.

During the last environmental reporting cycle, we uncovered and adjusted errors and inconsistencies in 47% of company disclosure through our annual research engagement. Our analysts engaged personally with companies to correct 5,009 reporting errors in 3,060 company disclosures.

We found that 2,756 or 16% of companies in our universe made errors in Scope 1 data disclosure requiring an adjustment by S&P Global Sustainable1. And 2,253 or 13% of companies made errors in Scope 2 in the 2021 financial year. Having more errors in Scope 1 is significant because this is the largest area of carbon exposure for many companies. Our analysis found that 11% of companies disclosed partial data that we deemed insufficient for use, instead using our modeling approach to fill the gaps.

To review the accuracy of current corporate disclosure of Scope 1 emissions (the direct emissions that come from a company’s operations), S&P Global Sustainable1 assessed the different types of errors uncovered by our analysts.

Table 1: Common reasons for errors and inconsistencies in corporate environmental performance disclosure

As shown in Table 1, corporate environmental performance disclosure is not always accurate or complete. The largest error category shown is “Disclosure is partial” and almost one third of these companies disclosed data for the first time in the latest analysis year. This demonstrates that while disclosure is increasing, there is a lack of awareness among companies starting out on their sustainability disclosure journey regarding the correct calculation methodology. This presents difficulties for financial institutions and companies seeking to compare the environmental performance of different portfolios or supply chain companies in a standardized way.

To determine where the challenge was greatest, we assessed the quality of GHG disclosure across 11 major indices. On average, 73% of companies reported disclosure that was of sufficient quality. Companies in the Dow Jones Sustainability World Index (DJSI) had the highest disclosure quality, with more than 90% reporting GHG data that required no adjustments. By comparison, in the S&P Global Broad Market Index (BMI), 68% of Scope 1 or Scope 2 data was either not disclosed or required an adjustment by S&P Global Sustainable1. That figure was even higher, at 76%, for the S&P Global Emerging Plus BMI. As we have highlighted in previous blogs in this series (What S&P Global Sustainable1 data tells us about the landscape for climate disclosure, Filling data gaps in environmental performance disclosure), these indices are the most environmentally intensive on average of all the market benchmarks we assessed.