How to Fix ESG Reporting

15 Pages Posted: 9 Aug 2021 Last revised: 11 Aug 2021

See all articles by Robert S. Kaplan

Robert S. Kaplan

Harvard Business School

Karthik Ramanna

University of Oxford - Blavatnik School of Government

Date Written: July 27, 2021


Investors, advocacy groups, academics, and the 200 CEOs of the US Business Roundtable have asked corporations to take on an added purpose beyond a narrow pursuit of shareholder value. In response, many companies now issue ESG (Environmental, Societal, and Governance) reports. These reports, however, are so broad in scope that they fail to address the unique measurement challenges within each of ESG’s constituent components. Moreover, the breadth of ESG reporting allows corporations to gloss‐over (implicit) moral tradeoffs when their actions improve one of the reported ESG metrics (such as GHG emissions from its truck fleet) but worsen performance for an unreported metric (indentured labor used to mine minerals for electric vehicles’ batteries). Many ESG reports selectively present only those non‐financial metrics favorable to them.

We propose improvements in ESG reporting by focusing on dimensions where broad societal agreement already exists about the preferred outcomes from corporate actions, such as reducing greenhouse gas (GHG) emissions and avoiding use of indentured labor in supply chains. In particular, we introduce a new and comprehensive system, based on well‐established accounting practices, for reporting and transferring GHG emissions across corporate supply and distribution chains. This system eliminates the measurement problems in the current, widely used GHG‐reporting standard, especially the feature that requires multiple counting of the same corporate emission. The new approach generates ESG data that are relevant and reliable, enabling better disclosure, governance, and auditing of corporate ESG performance.

Suggested Citation

Kaplan, Robert S. and Ramanna, Karthik, How to Fix ESG Reporting (July 27, 2021). Harvard Business School Accounting & Management Unit Working Paper No. 22-005, CeCAR Working Paper Series No. Forthcoming, Available at SSRN: or

Robert S. Kaplan (Contact Author)

Harvard Business School ( email )

Soldiers Field
Accounting & Control
Boston, MA 02163
United States
617-495-6150 (Phone)
617-496-7363 (Fax)

Karthik Ramanna

University of Oxford - Blavatnik School of Government ( email )

Radcliffe Observatory Quarter
Oxford, Oxfordshire OX2 6GG
United Kingdom

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