A new study reveals that while large European companies are disclosing substantially more sustainability information than they did a decade ago, important gaps remain, particularly in reporting on value chain impacts and social issues. Researchers from LMU Munich and the University of Cologne analysed 2.9 million sustainability indicators extracted from ten years of corporate annual reports and sustainability reports. Their findings show marked improvements in transparency around climate-related disclosures, but far less consistent reporting on broader environmental and social performance. The research, published in Nature Communications, provides one of the most comprehensive assessments of corporate sustainability reporting before the introduction of the EU’s Corporate Sustainability Reporting Directive (CSRD).
The study examined around 9,000 annual and sustainability reports from the 600 largest listed European companies between 2014 and 2023, covering approximately 1.7 million pages. Although these reports were prepared under the previous reporting framework, the researchers evaluated them against the much more detailed disclosure requirements introduced by the CSRD. This retrospective approach allowed the team to assess how closely corporate reporting already aligned with today’s higher expectations for environmental, social, and governance (ESG) transparency before the stricter regulations took effect.
To process such an extensive collection of documents, the researchers employed the large language model Llama-3.1-70B-Instruct, which automatically identified and extracted 501 ESG indicators from the reports. According to Professor Thorsten Sellhorn of LMU Munich, previous research and investment analyses often depended on expensive commercial databases that applied inconsistent definitions. The AI-driven approach provides a scalable, transparent, and freely accessible method for systematically identifying what companies disclose and where reporting gaps remain when measured against current standards.
The analysis shows that corporate transparency increased substantially over the decade. On average, companies disclosed 52.4% more sustainability indicators in 2023 than in 2014. Organisations with weaker sustainability performance also narrowed the disclosure gap considerably. In 2014, companies with the lowest ESG ratings reported nearly 40% fewer sustainability indicators than the highest-performing firms, but by 2023 that difference had fallen to just 6.8%. The findings suggest that sustainability reporting practices have become more consistent across companies, even if actual sustainability performance continues to vary.
The researchers also caution that greater disclosure should not automatically be interpreted as deteriorating environmental performance. While direct greenhouse gas emissions generally declined, reported indirect emissions from corporate value chains increased more than fivefold. Co-author Victor Wagner explains that this apparent increase largely reflects companies measuring and reporting a wider range of indirect emissions rather than producing substantially more emissions. The study therefore highlights the importance of distinguishing between improved data availability and genuine changes in environmental performance when evaluating corporate sustainability progress.
Social reporting presents a similarly mixed picture. The proportion of women in senior management increased by 9.2 percentage points during the study period, demonstrating progress in gender representation. However, the gap between executive compensation and median employee pay expanded more than twelvefold, indicating that advances have not been evenly distributed across all social dimensions. To encourage further research and accountability, the team has released both its dataset and analytical code through the Sustainability Reporting Navigator open science initiative, providing policymakers, investors, regulators, NGOs, and the public with free access to a comprehensive resource for comparing corporate sustainability reporting.
More information: Kerstin Forster et al, Assessing corporate sustainability with large language models: evidence from Europe, Nature Communications. DOI: 10.1038/s41467-026-75160-z
Journal information: Nature Communications Provided by Ludwig-Maximilians-Universität München