European financial firms in the lead regarding GRI reporting
The global reporting initiative was founded in 1997. It is a platform which defines a standard for sustainability reporting and is the go-to standard for firms of any size to use when doing such reporting. The reports are available through the GRI website and give standardized insight into sustainability efforts among the world's largest firms, but also SMEs. It is therefore interesting to have a look at the reporting trends. Here, we want to discuss two seemingly obvious trends:
The lead by large financial corporations globally, and
why European financial firms are a decade ahead of U.S. firms in this regard.
The rise of the European sustainability effort within the financial sector
By looking at Figure 1, one can see that the rise of GRI reporting by EU financial firms is roughly 5 years ahead of their counterparts in the US. One possible explanation of this would be that there are simply more firms within this sector in the EU.
However, when looking at the numbers, we can see that large firms (with more than 500 employees) count roughly 20,000 in the U.S.  while large European firms (defined by the EU as firms with more than 250 employees) count merely 16,000.
According to GRI, Large firms have more than 250 employees and EUR 43 m turnover . This means that U.S. firms with more than 250 employees will surely pass 20,000 by far. Now, we don’t have exact numbers on the amount of financial institutions from all continents, so again we could simply have a much higher amount of financial institutions within the EU. But looking at the numbers of large corporations, this seems unlikely.
The absolute number of large firms is therefore not the answer to the lagging of U.S. financial firms regarding GRI reporting.
Figure 1. GRI reports from the financial sector shown by continent.
We can see on Figure 2 that large firms are the ones that lead the way regarding GRI reporting globally while SME’s are trailing behind both large firms and MNEs (Multinational Enterprises). Again, we might have fewer SMEs in absolute numbers for all locations, but that alone should perhaps not explain the huge difference in reporting.
Figure 2. Number of GRI reports by firm size.
But where and why?
By looking at Figure 3, we see a color coded map of Europe. The intensity of green indicates the amount of GRI reports by firms within the financial sector. We can see that the countries leading are the UK (including Northern Ireland), France, Switzerland, Germany and Spain (44, 29, 27, 24 and 23 reports published in 2016 respectively).
We can therefore see that financial institutions in Western Europe are industry leading when it comes to sustainability reporting. Eastern Europe seems to be lagging behind, but this can perhaps be attributed to historical reasons and when the countries joined the European Union.
Our numbers are of course not relative, but absolute, making any comparison between countries of different size difficult. It may even be so that as countries get larger, the more GRI reports are produced from their financial institutions. Let's have a look at Figure 4.
Here we have plotted the population of countries against the number of GRI reports produced by their financial institutions (excluding the statistical outlier of India because of their very high population, and China because of no data was available on their GRI performance).
We see that the scatter is all over the place, so we are either missing some key variable here (likely), or that population in itself does not necessarily predict the number of GRI reports by nations.
We think it is the regulatory environment. The regulatory environment in the EU is rather demanding of firms, and is getting ever more demanding where large firms are now required to disclose non-financial information such as environmental and sustainability performance.
The regulatory environment in the U.S. on the other hand can not be expected to follow the EU, and we should therefore not expect financial firms across the Atlantic to pursue sustainability reporting because of regulatory reasons.
The United States will still follow
We, however, think that the global financial market is realizing the benefits of disclosing sustainability efforts. Not only because investors and other financial firms are doing so, but also because the global market is changing. Sustainable Bonds are for example now a big focus among NASDAQ, providing investors with an opportunity to invest in bonds where the funds are used for environmentally benign projects.
So even though the U.S. financial sector is lagging behind the European one regarding sustainability reporting, possibly because of a forgiving regulatory framework, we should hopefully see them catching up in the next few years.
Figure 3. GRI reports published by the financial sector in EU countries in 2016.
Figure 4. The (lack of) relationship between population and GRI reporting.
 Statistics of U.S. Businesses Employment and Payroll Summary: 2012 https://www.census.gov/content/dam/Census/library/publications/2015/econ/g12-susb.pdf
 OECD Enterprises by business size (2017)
 GRI Sustainability Disclosure Database Data Legend https://www.globalreporting.org/SiteCollectionDocuments/GRI-Data-Legend-Sustainability-Disclosure-Database-Profiling.pdf