Do Sustainability External Audits Affect ESG Performance? International Evidence

Recently, concerns about the credibility of sustainability reporting have intensified due to widespread practices of environmental, social, and governance (ESG)-washing and greenwashing, raising doubts about the reliability of firms’ disclosed ESG information. External assurance of sustainability reports has emerged as a critical mechanism to improve transparency and mitigate opportunistic reporting practices by providing independent verification of non-financial disclosures. Motivated by these concerns, this study aims to investigate the effects of CSR external audits on ESG performance. Using a panel of 3,930 firm-year observations for 393 listed non-financial firms in the S&P 1200 from 2015–2024, we conducted our estimations using OLS, the fixed-effects model with two-way clustering, and dynamic lagged specifications. The empirical results indicate that CSR external audits positively influence overall ESG performance, as well as the social and governance pillars; however, the association with environmental performance is not statistically significant.