OPINION | Why size matters when it comes to improving ESG disclosure | Business

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ESG disclosure is improving. But research suggests ESG disclosure tends to be higher in larger JSE-listed companies and companies that use the big four audit firms, say Savannah Thomson, Suzette Viviers and Lee-Ann Steenkamp. | News24_Business

, Nicole Martens from the Old Mutual Investment Group criticised South African asset managers for creating the pretence of good practice without any evidence of actual, effective stewardship. She did, however, acknowledge that asset managers' efforts to improve the environmental, social and governance performance of investee companies take time.

Several international scholars have noted that companies using large audit firms such as PricewaterhouseCoopers, Deloitte & Touché, Ernst & Young and KPMG generally have better ESG disclosures. One reason offered is that large audit firms amassed more ESG-related assurance skills earlier than their smaller counterparts. The availability of resources is a key element in providing quality assurance.

Companies operating in the health care and consumer staples sectors had the highest average ESG scores over the 11-year research period . Companies in these two sectors are in close proximity to the end-consumer. As such, they might be more attuned to stakeholders' needs for comprehensive ESG reporting.

The provision of non-audit services by an external auditor is, of course, a controversial topic. The auditor's independence from the client might be brought into question. After all, independence is the hallmark of the audit profession. Audit firms, both large and small, should remain vigilant not to compromise their independence when rendering non-audit services to clients.

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_Business ESGs are made for consultants and other rent-seekers. Bad for companies, bad for society, bad for the economy, and bad for the environment. But great for consultants:

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