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Introduction
Corporate social responsibility (CSR) has been under greater scrutiny recently as more companies realize that their environmental efforts, ethical labor practices, and corporate governance are of increasing concern to various stakeholders and therefore affect business success. According to a KPMG (2011) corporate sustainability report, more firms are measuring and reporting sustainability performance, and there is a greater need for consistent measurement and analysis of sustainability metrics for disclosure purposes.
Bloomberg Environmental-Social-Governance (ESG) disclosure scores apply a multi-dimensional construct, based on about 120 quantitative and qualitative measures, to rate companies on their Environmental ("E"), Social ("S"), and Governance ("G") policies and practices using publicly available data, annual and sustainability reports, direct communication, press releases, third-party research, and news items. The three ESG scores (each ranging from 0 indicating no disclosure to 100 demonstrating complete disclosure) are then combined into a single score (ranging from 0 to 100) using a proprietary method. ESG scores and ratings of companies are updated by Bloomberg annually. Examples of metrics that contribute to a company's ESG score include greenhouse gas (GHG) emissions, electricity usage, waste discarded, ISO 14000 environmental certification, policies against child labor, anti-bribery ethics policies, size of the board of directors, percentage of women on the board of directors, and average age of board members, to name a few. The more information disclosed by the company, the higher the disclosure score; however, this metric does not measure performance, but rather level of commitment to transparency and accountability.
Specifically, this paper sheds light on the state of transparency among S&P 500 companies by analyzing their ESG scores and considers how various factors affect their levels of ESG disclosure. The following research questions are addressed:RQ1.
Are firms more transparent in reporting certain ESG metrics?
RQ2.Is transparency in ESG reporting more prevalent in specific industry sectors?
RQ3.Is transparency in ESG reporting related to firm size as measured by market capitalization?
RQ4.How is level of transparency affected by various governance practices?
Assessing the strengths and shortcomings of companies' ESG disclosure scores should prove to be beneficial not only to various stakeholders but to investors as well. As reported in a study by Ernst and Young and Boston College Center for Corporate Citizenship (EY, 2013, p. 3), "Sustainability disclosure...