Trust is good, due diligence is better
Can corporate ESG disclosures be trusted blindly? Hardly. Sustainability reports, climate strategies and ESG ratings provide valuable indicators for sustainable investing. On their own, however, they are rarely sufficient to reliably assess a company's actual sustainability performance, the extent to which sustainability is embedded in its strategy, and its potential future impact.
Text: Stephan Hirschi
The OECD Responsible Business Outlook 2026 confirms this scepticism. Many companies now communicate commitments to responsible business conduct. At the same time, a significant implementation gap remains: reporting focuses more frequently on policies, management systems and governance responsibilities than on concrete measures to prevent adverse impacts or promote positive contributions. Disclosure is therefore a starting point, but not yet proof of impact.
More transparency, greater responsibility
This distinction is also gaining legal significance. Swiss unfair competition law (UWG) and EU Directive 2024/825 (EmpCo), aimed at empowering consumers for the green transition, are increasing the pressure on companies to substantiate environmental and sustainability claims clearly, objectively and in a verifiable manner. Where claims are not scientifically robust, are overly general, or are misleading, the risk of greenwashing arises.
The investor’s dilemma
For investors, this creates a practical dilemma. The volume of ESG data continues to grow, yet its quality, comparability and reliability remain inconsistent. While reporting standards are being adopted more widely, data collection, assurance processes and methodological boundaries are still far from uniform. Moreover, sustainable investing is not a uniformly defined concept. Depending on the strategy pursued, such as best-in-class, exclusion, engagement or impact investing, both the information requirements and the relevance of the same ESG data can differ considerably.
From data to impact
What matters, therefore, is not only what a company discloses, but also whether the information aligns with the investment rationale. A sustainability report will often show which policies are in place, how processes are managed, and how inputs and outputs are evolving. It says less about whether these measures are being implemented effectively, whether they are transforming the business model, or whether they are driving innovation and transition. Investors must therefore combine a retrospective or current view of a company with an assessment of its future resilience and capacity to create sustainable value.
Net zero as a litmus test
This is particularly evident in the case of net zero roadmaps. Their mere existence is not enough. They become credible only when they are based on a comprehensive baseline, are scientifically robust, take technological and regulatory scenarios into account, include concrete measures across multiple time horizons, are embedded in strategy and governance, and are supported by budgets and investment planning. Without these elements, a target remains more of a pledge than a credible and actionable transition plan.
Transparency is not without value
At the same time, it would be wrong to dismiss ESG disclosures altogether. A study on private equity shows that more extensive voluntary ESG disclosures are, on average, associated with stronger environmental, social and governance outcomes among portfolio companies. Transparency can therefore go hand in hand with genuine action. However, this evidence does not eliminate the need for case-by-case assessment, nor can it be readily extrapolated to other asset classes or individual companies.
Context becomes a core competence
In an age of information overload, it is no longer the volume of available data that matters most, but the ability to interpret it. AI-powered analytics can process vast amounts of data and reveal meaningful patterns. However, assessing sustainability remains a specialist task: it requires an understanding of business models, supply chains, governance structures, regulation, risks and societal impacts. Developing these capabilities calls for holistic education and training.
Conclusion
For responsible investment decisions, it is therefore not enough to read ESG reports or ratings in isolation. What is needed is a due diligence process that brings together published information, real-world impacts, independent verification, financial implications and a company’s long-term strategy. Only then is it possible to distinguish between sustainability that is credibly embedded in the business and sustainability that is simply communicated well.
Sources
Abraham, J., Olbert, M., & Vasvari, F. (2024). ESG disclosures in the private equity industry. Journal of Accounting Research, 62(5), 1611-1660.
OECD (2026). OECD Responsible Business Outlook 2026. https://www.oecd.org/en/publications/oecd-responsible-business-outlook-2026_2b15370f-en.html
Gerner-Beuerle, C., Gomtsian, S., & Schuster, E. (2026). ESG Ratings and the French Duty of Vigilance Law. European Corporate Governance Institute-Law Working Paper, (946).