Assessing the Sustainability Reporting Transparency and Engagement of European Energy Companies

Abstract

Energy companies are facing increasing pressure from institutional and industry stakeholders to prioritize their responsibility to the environment and society, including providing accurate, reliable, and comprehensive reports on their sustainability practices. Three metrics were developed in this study: the average sustainability reporting score and two sustainability performance reporting indices based on two different performance measurement methodologies. These were designed to assess the effect of mandatory non-financial disclosure on sustainability reporting and the level of transparency and engagement of energy companies. The study also examined the relationship between the level of sustainability reporting and sustainability performance in the period of 2016–2019 by correlating these metrics. The analysis sheds light on the effectiveness of non-financial disclosure regulations in promoting sustainability practices in the energy industry. The results revealed no difference in metric scores prior to, or even following, the adoption of Directive 2014/95/EU. Energy companies performed better in terms of sustainability when more indicators were reported. Their primary focus was on the economic aspect of sustainability, particularly corruption. They gave less importance to the environmental aspect, mainly reporting on emissions. The social aspect received the least attention, although indicators for employee education and training were mentioned most frequently. The analysis showed that the metrics are statistically significantly correlated and complement each other, highlighting the need to consider a variety of metrics when assessing sustainability performance in the energy industry.

Keywords

• non-financial disclosure
• energy industry
• sustainability reporting index
• sustainability performance
• Directive 2014/95/EU