The CAQ looked at ESG reports, company websites, completed CDP Climate Change Questionnaires, and third-party assurance or verification reports for 2021 period end data from S&P 500 companies to understand what they disclosed about ESG reporting standards and frameworks, greenhouse gas (GHG) emissions, assurance or verification over the ESG information, and net zero or carbon neutral commitments. This analysis does not contemplate information disclosed by companies in other documents or SEC filings.
Some notes about what we found:
The CAQ examined how many S&P 500 companies referenced four commonly used ESG reporting standards and frameworks – Sustainability Accounting Standards Board (SASB) Standards, Global Reporting Initiative (GRI) Standards, Task Force on Climate-Related Financial Disclosures (TCFD) Recommendations and the Integrated Reporting Framework.
S&P 500 companies used these frameworks and standards to varying degrees. Some companies fully adopted a framework or standard, some partially adopted, and others used the framework or standard as a reference when determining what information to include in their ESG reporting.
In 2021 there was an increase in the use of all four standards and frameworks. SASB, GRI and TCFD remained the most frequently mentioned reporting frameworks or standards. We noted the greatest increase in the number of S&P 500 companies referencing the TCFD Framework - 66 more companies chose to reference the TCFD framework in 2021, a 20 percent increase from 2020.
Most S&P 500 companies referenced at least one ESG reporting framework or standard. In 2021, we observed the greatest change in companies referencing three standards and frameworks to help construct their reporting, that number increased from roughly 230 companies in 2020 to 290 in 2021 – i.e., more companies referenced more standards and frameworks in their 2021 reporting. Some companies did not reference any of these standards or frameworks.
of S&P 500 companies reported ESG-related information
The CAQ observed that 320 S&P 500 companies disclosed receiving some form of assurance or verification over certain of their ESG metrics in 2021, representing a 13% increase from the 282 companies in 2020. Sixty-five percent of the companies that reported ESG information obtained assurance over certain of that information.
of reporting companies obtained assurance over some ESG information
Of the companies that obtained assurance, 60 obtained assurance from public company auditors and 268 obtained assurance from other providers. The percentage of companies that obtained assurance and engaged public company auditors to perform their assurance engagements increased slightly from 15% in 2020 to 18% in 2021. In some instances, companies used both a public company auditor and other providers. Overall, we observed an upward trend in the number of companies that obtained assurance or verification.
of companies that obtained assurance from a public company auditor, used the same firm that performed their financial statement audit
Scope of Assurance: The specific disclosures that S&P 500 companies sought assurance over, from public company auditors, varied. Some companies obtained assurance over select metrics related to greenhouse gas (GHG) emissions and others sought assurance over a wider range of ESG metrics. We used the following categories to describe the scope of assurance:
In 2021, companies increased the scope of information subject to assurance - shifting from mostly seeking assurance over only GHG emissions to mostly obtaining assurance over GHG+, meaning GHG emissions and 1-3 other ESG metrics (e.g., water, energy, waste metrics).
Consistent with companies increasing the scope of information subject to assurance, we noted an increase in companies subjecting multiple ESG topics to assurance and a decrease in companies subjecting only GHG emissions metrics to assurance.
Assurance Standards: We reviewed the attestation reports from US public company auditors who performed assurance engagements over certain S&P 500 companies’ ESG metrics. We observed that US public company auditors used the American Institute of Certified Public Accountants (AICPA) Attestation Standards (including AT-C section 105 Concepts Common to All Attestation Engagements, AT-C section 205 Assertion-Based Examination Engagements and AT-C section 210 Review Engagements) to perform their assurance engagements. Non-US based public company auditors, used the International Standard on Assurance Engagements 3000 (Revised) Assurance Engagements other than Audits or Reviews of Historical Financial Information (ISAE 3000). In one instance, a US public company auditor used both the AICPA attestation standards and ISAE 3000 to perform their assurance engagement.
Level of Assurance: In 2021, we observed that companies that obtained assurance from public company auditors continued to mostly opt for limited assurance engagements. Despite an increase in total assurance engagements performed by public company auditors, we noted a slight decrease in the number of reasonable assurance engagements performed by public company auditors.
Scope of Assurance/Verification: In 2021, we noted an increase in the scope of information that was subject to assurance or verification by other providers. The number of S&P 500 companies subjecting more than GHG emissions to assurance or verification from other providers (i.e., non-accounting firms) increased by 50 and companies subjecting only GHG emissions to assurance or verification from other providers decreased by 27. We noticed a similar but more pronounced trend in the increased scope of information subject to assurance by public company auditors.
Assurance/Verification Standards: The CAQ examined how many times S&P 500 companies referenced the following assurance/verification standards commonly used by other providers:
In 2021, we noted increases in references to each of the standards. The most common assurance standard referenced by other providers continued to be ISO 14064-3: Greenhouse gases — Part 3: Specification with guidance for the verification and validation of greenhouse gas statements. We noted the greatest increase in references to ISAE 3000 standards with 41 more references to those standards - a fifty-four percent increase from the prior year. Regarding use of ISAE 3000, we observed that:
We also noted references to a variety of other verification standards or protocols beyond those listed above (or in the chart below), the most common of which was the Environmental Resources Trust (ERT) Tier II Corporate GHG Verification Guideline.
Assurance/Verification Terminology: The CAQ observed that the other providers who were not public company auditors also used terminology such as reasonable and limited assurance in their verification reports. Additionally, other providers used the terms moderate and high assurance. In 2021, companies continued to primarily opt for limited assurance engagements.
Scope of GHG Emissions Assurance/Verification: In 2021, 44 more S&P 500 companies subjected their GHG emissions to assurance or verification than in 2020. The CAQ observed that of the 320 companies that obtained assurance in 2021, 318 obtained assurance over their GHG emissions.
Of those companies that assured their GHG emissions:
Extent of Reporting of GHG Scope 3 Emissions Categories: In 2021, the three most reported Scope 3 emissions categories were:
Compared with 2020, Purchased Good and Services entered the top three, replacing Employee Commuting which dropped to the fourth most reported category in 2021.
The table below reflects the extent to which companies reported the fifteen different Scope 3 emissions categories indicated in the GHG Protocol. The information in the table is presented in the order of the most reported category to the least reported category based on 2021 data.
Extent of Assurance of GHG Scope 3 Emissions Categories: In 2021, the three most assured Scope 3 emissions categories were:
The three most assured Scope 3 categories for 2021 were the same as those noted in 2020.
The table below reflects the extent to which companies assured the fifteen different Scope 3 emissions categories indicated in the GHG Protocol. The information in the table is presented in the order of the most assured category to the least assured category based on 2021 data.
The CAQ observed that companies obtained assurance over a variety of other ESG topics including water, energy, waste, employee health and safety, human capital disclosures and others. In 2021, we observed an increase in the number of companies that subjected each of these topics to assurance.
The CAQ looked at whether companies disclosed carbon neutral or net-zero commitments and observed that:
In the CAQs analysis of 2021 S&P 500 10-K filings we observed that 120 companies disclosed net-zero or carbon neutral commitments within the 10-K filing.
Some of this analysis was powered by CDP Data.
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