The Dual Role of Sustainability Report Readability: ESG Performance Implications and the Obfuscation Hypothesis

Investors and rating agencies use sustainability reports, yet their linguistic complexity may either conceal unfavourable information or reflect specialised disclosure. This study examines the associations among sustainability report readability, environmental, social, and governance (ESG) scores, and financial performance, and tests whether these asso-ciations are consistent with the obfuscation hypothesis. The sample comprises 101 Eu-ropean companies from the Consumer Goods (n = 56) and Food and Beverage (n = 45) sectors for 2024. Five readability indices were aggregated through principal component analysis, and ESG scores were obtained from the London Stock Exchange Group (LSEG). Ordinary least squares regressions with robust standard errors, sector-specific estimations, and mediation analysis were applied. Contrary to expectations, greater textual complexity was positively associated with ESG scores, particularly in the social and governance pillars, whereas firm size was the strongest determinant of ESG scores. Lower return on equity and higher leverage were associated with less readable reports, but these asso-ciations were sensitive to model specification and limited to the Consumer Goods sector. Report length and sector affiliation were the most consistent determinants of complexity, and readability did not mediate the relationship between financial performance and ESG scores. The results suggest that textual complexity reflects the technical density of dis-closure rather than deliberate obfuscation.