As environmental, social, and governance (ESG) reporting becomes the global norm, corporations are investing heavily in sustainability data systems. Ninety percent of Russell 1000 companies published ESG reports in 2022—up from just 60 percent in 2018. This surge reflects growing stakeholder demand for transparency from investors, regulators, and consumers alike. 

But beyond signaling corporate responsibility, could ESG disclosure improve companies’ financial reporting efficiency? New research by Kogod School of Business professors Dina El Mahdy, Yinqi Zhang, and Christina Synn provides evidence that it could. 

Their study, “ESG Disclosure and the Timeliness of Earnings Announcements and Audit Reports,” in Auditing: A Journal of Practice & Theory, examines whether firms that disclose more ESG data also deliver financial information to investors more efficiently. 

A New Angle on ESG and Financial Performance 

Earnings announcements are among the most critical financial disclosures companies provide. Investors and capital markets rely on them to assess firm performance, influencing stock prices and investment decisions. However, audit delays or slow reporting can limit the usefulness of this information. 

“We find evidence that firms that disclose more ESG metrics also announce their earnings sooner and experience shorter audit delays,” Zhang and Synn explain. “By enhancing the internal information environment, systems for ESG reporting have potential spillover effects for financial reporting and auditing.” 

Using a dataset of 14,622 firm-year observations from Russell 3000 companies between 2007 and 2022, the researchers measured ESG disclosure using Bloomberg’s ESG database. Their results reveal that greater ESG transparency is significantly associated with more timely earnings announcements and shorter audit delays. 

How ESG Systems Strengthen Financial Reporting 

The researchers identify two key mechanisms potentially linking ESG disclosure to reporting timeliness: 

• Improved internal information systems. 
  The same data systems that track environmental and social metrics could also enhance the accuracy and accessibility of financial data. “New systems installed to collect and ensure the quality of ESG data may enrich firms’ internal information environment,” Synn notes. 
• Earlier recognition of internal control issues. 
  Firms with stronger ESG reporting are more likely to issue early warnings of internal control deficiencies—signals that auditors and management use to prevent year-end bottlenecks and delays. 

These patterns suggest that ESG reporting doesn’t just help firms meet sustainability goals—it may also strengthen the infrastructure that underpins financial report efficiency. “Availability of non-financial ESG information can also improve the quality of information for managers to evaluate these activities on financial statements,” Zhang adds. 

Evidence from the Data 

Zhang and Synn’s analysis controls for firm size, governance structure, and auditor characteristics to isolate the relationship between ESG disclosure and reporting timeliness. The results remain robust even when using alternative ESG indices and adjusting for potential industry effects. 

They also find that the link between ESG disclosure and audit timeliness becomes stronger after the release of the Sustainability Accounting Standards Board (SASB) standards, which help companies report the most financially material ESG topics for their industries. In addition, the researchers find the association is stronger for firms in industries with more SASB ESG disclosure items that directly impact the income statement. 

Why Timeliness Matters 

Timely reporting has long been regarded as a hallmark of financial reporting quality. Prior research links faster earnings announcements with stronger market reactions, lower costs of capital, and better firm performance. 

Zhang and Synn’s findings suggest that ESG investments—sometimes seen as compliance costs—may yield measurable reporting efficiency gains. “CFOs and controllers may increasingly view ESG initiatives not merely as regulatory obligations but as potential drivers of reporting efficiency,” they argue. 

By investing in robust ESG data systems, companies not only strengthen sustainability credibility but also could create operational advantages that enhance decision-making, audit readiness, and market trust. 

Implications for Business and Policy 

The study’s implications extend beyond corporate boardrooms. For auditors, the findings highlight opportunities to engage more strategically in ESG assurance as sustainability data becomes increasingly material to financial statements. 

For standard-setters and regulators, the research offers empirical evidence of the association between ESG and financial reporting. Efforts by the International Sustainability Standards Board (ISSB) and the U.S. Securities and Exchange Commission (SEC) to improve ESG disclosure quality may also strengthen financial reporting timeliness and reliability. 

“ESG systems may strengthen internal information quality and improve audit preparedness,” Zhang and Synn write. “Our findings provide evidence supportive of positive externalities to taking a more proactive role in ESG reporting.” 

The Bigger Picture 

As sustainability and finance continue to converge, studies like this demonstrate how environmental and social responsibility can translate into concrete business value. The authors' research illustrates that the benefits of ESG reporting may extend beyond simple compliance. ESG is no longer just a moral imperative—it may increasingly become a measure of management quality and organizational and reporting efficiency.