Different patterns of ESG reporting: the sustainability disclosure index of selected European cities

Environmental, Social, and Governance (ESG) ratings represent a novel approach to evaluating an organization’s sustainability and reflecting its impact on the environment and society. The triad of ESG factors constitutes the core pillars of ESG models. Since the 1960s, the global ESG landscape has evolved from the ethical investment practices associated with socially responsible investing. Public entities, particularly local government units (LGUs), have an implicit responsibility to society, stemming from the public value of their activities [Fusco and Ricci, 2019]. Given the significant contribution of LGUs to the national economy, online sustainability disclosure by municipalities has become a topic of primary academic interest [Farneti and Siboni, 2011]. Although the literature on online sustainability disclosure in the public sector has grown [Navarro-Galera et al., 2014; Tirado-Valencia et al., 2016; Hossain, 2018; Nicolò et al., 2023], research on how these organizations disclose ESG information remains in its infancy. The sustainability reporting landscape is constantly changing, and the adoption of many ESG reporting laws and guidelines calls for research on how this has affected LGUs’ online disclosure of sustainability information. This study explores how local governments, particularly cities, use their websites to disclose ESG information in accordance with the European Union’s regulatory framework, such as the Non-Financial Reporting Directive (NFRD), the Corporate Sustainability Reporting Directive (CSRD), and the Taxonomy Regulation. The main objective of the paper is to examine the extent and patterns of online ESG disclosure practices of 15 European cities selected from the global C40 network. To this end, a manual content analysis by exploring the cities’ websites is explored. ESG disclosure is measured using ESG disclosure index based on previous research and guidelines for sustainability reporting.

This study makes several contributions to research on online sustainability disclosure. It highlights the need for robust sustainability reporting frameworks and regulations to improve local government ESG reporting practices and meet community needs. Rather than producing stand-alone ESG reports, local governments should integrate ESG factors into existing strategic documents, with particular emphasis on social responsibility metrics. Effective ESG disclosure can assist local businesses in preparing their sustainability reports and promote a culture of transparency and accountability. It is important to ensure that the ESG reporting process involves all relevant departments in local offices, is based on reliable data, and avoids greenwashing by acknowledging current levels of pollution and committing to future mitigation measures. This inclusive approach can create synergies between stakeholders, improve the flow of information, and ensure compliance with established guidelines.

This paper is structured as follows. The second section reviews the literature on sustainability reporting by local governments, followed by applying the theoretical and regulatory framework for the study in the third and fourth sections. The fifth section explains the research methodology used in this study, while the sixth section presents the results. The seventh section discusses the implications of the research. The final section concludes the paper by presenting the study’s limitations and providing suggestions for further research.

Local governments’ practice of sustainability reporting has gained momentum in recent decades, particularly after the Earth Summit in Rio de Janeiro [1992]. However, despite this growth in interest, the academic research on sustainability reporting practices by local governments remains limited. The general findings of Guthrie et al. [2010] are that “there has been neglect by scholars and others when it comes to theoretical research and in-depth investigations of sustainability practice in public services.” It is imperative to understand that sustainability reporting encompasses two distinct interpretations: (i) the act of disclosing the information and (ii) the process of implementing reporting [international or national] guidelines [Niemann and Hoppe, 2018]. These interpretations form the basis of the principal research streams that yield divergent outcomes. The quest for disclosure, which involves identifying key indicators within institutional communications, has emerged as the leading paradigm in research [Niemann and Hoppe, 2018]. An investigation into simple disclosing information reveals an appreciation for the rising compliance rates, as documented by Navarro-Galera et al. [2014] and Hossain [2018]. The modes of disclosure by local governments encompass various platforms [whether in print or digital form] and diverse documents [for instance, strategies, evaluations, and policy briefs] across differing timelines. Additionally, indicators might be employed for descriptive purposes or integrated within performance-based goals and rankings [Behn, 2003]. However, the voluntary nature and flexibility of public sector organizations with regard to existing disclosure practices mean that, in many cases, their reporting cannot be considered true sustainability reporting within a standardized ESG framework, such as the one used by companies [Williams et al., 2011; Franczak, 2019]. Multiple researchers have analyzed the reasons behind local governments’ decisions to implement sustainability reporting policies using various theoretical models (Table 1). They found that LGs (local governments) engage in ESG reporting to enhance their legitimacy [Bellringer et al., 2011; Niemann and Hoppe, 2018], communicate with internal stakeholders [Farneti and Siboni, 2011], and respond to coercive pressure from higher-level governments [Mussari and Monfardini, 2010].

This area of research primarily scrutinizes the dissemination of LGs’ sustainability information through their websites, recognizing this medium as a faster, cost-effective, and more engaging method of reaching a broader spectrum of stakeholders [examples include: [Alcaraz-Quiles et al., 2014; Navarro-Galera et al., 2014]. These investigations suggest that the publication of sustainability data by LGs remains inadequate, often deploying Global Reporting Initiative (GRI) indicators inconsistently. Brusca et al. [2016] and Cuadrado-Ballesteros et al. [2014] highlighted the impact of demographic, political, and socioeconomic factors on LGs’ sustainability transparency. Organizational size and government ownership also influence disclosure practices. The main challenges include lack of human and financial resources, addressing budget cuts [Williams et al., 2011; Giacomini et al., 2018], lack of stakeholder pressure [Royo et al., 2019], and absence of legislation mandating sustainability reporting [Giacomini et al., 2018]. While most research focuses on single-country practices, broader international comparisons still need to be made. Additionally, existing approaches are largely shaped by GRI standards and cater primarily to internal stakeholders, overlooking recent laws like the EU’s CSRD, Taxonomy Regulation, and other guidelines such as European Sustainability Reporting Standards (ESRS) or International Sustainability Standards Board (IFRS) Sustainability Disclosure Standard. There is also a call for more analysis on the reporting practices of major cities, which play a crucial role in sustainable development and achieving Sustainable Development Goals (SDGs), especially through smart cities’ role in enhancing ESG reporting standards for local businesses.

Both legitimacy and institutional theories are used in the literature to analyze local government sustainability reporting [Deegan, 2002]. Legitimacy theory highlights the link between societal expectations and organizational actions. The role of institutional theory in understanding the motivations for sustainability reporting in the public sector, particularly under external pressure, was investigated by Suchman [1995]. Deegan [2002] argued that these theories, emerging from a shared social context, offer overlapping perspectives rather than being disparate. Organizations seek to maintain their legitimacy through various strategies, including voluntary sustainability disclosures to align their activities with societal values [Suchman, 1995]. Institutional theory suggests that an organization’s actions are shaped by regulations, norms, social values, and institutional influences [Deegan, 2002]. Institutional pressures, including coercive, mimetic, and normative forces, can change organizational behavior and enhance social acceptance. This theory shares common ground with legitimacy theory in explaining sustainability reporting practices [Jamali, 2008]. It provides a framework for understanding the role of institutional pressures in shaping reporting practices, including at the local government level.

The use of these theories in public sector sustainability disclosures has gradually increased, particularly in analyzing the volume, content, and nature of the reporting. Government agencies employ legitimacy strategies to meet stakeholder demands [Niemann and Hoppe, 2018; Mussari and Monfardini, 2010]. Although adherence to the GRI is optional, public sector bodies adopting the GRI framework tend to report more extensively on sustainability issues. Qian et al. [2011] found that state-level environmental legislation encourages local governments to engage in environmental management and reporting, particularly in waste management. This study examines the impact of global and EU-specific regulations on the sustainability reporting practices of smart cities across Europe.

It is important to note that there are currently no globally recognized standards for how public sector organizations should measure and report on their contributions to sustainable development. This issue is becoming increasingly important in discussions, particularly in the context of today’s environmental and social crises. On the regulatory front, the European Union [EU] enacted Non-Financial Reporting Directive (NFRD) (Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups, 2014) and updated it in 2021, requiring all material “public interest entities” to produce and disclose annual reports on their social and environmental impacts, as noted by Niemann and Hoppe [2018]. The new CSRD, which came into force on 5 January 2023 (Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No. 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as Regards Corporate Sustainability Reporting, 2022), seeks to expand the scope and rigor of these disclosure requirements. The main changes from the NFRD to the CSRD include broadening the scope of companies covered, extending reporting to the value chain, specifying the concept of dual materiality and reporting content, integrating sustainability into the annual report, and introducing assurance and digital tagging. The CSRD, adopted in November 2022, mandates the European Commission to develop ESRS.

In June 2020, the EU introduced the Taxonomy Regulation to classify environmentally friendly economic activities, with the aim of directing capital toward sustainable growth [Regulation [EU] 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation [EU] 2019/2088, 2020]. It sets out rules for sustainable finance companies under the NFRD and CSRD by providing a framework for identifying activities that are environmentally sustainable based on six objectives, including climate change mitigation and pollution prevention. The Regulation requires companies to report on the turnover, CapEx and OpEx of their environmentally sustainable activities, thereby increasing transparency.

Nevertheless, public bodies, with the exception of state-owned companies, are generally not required to provide sustainability information. However, this scenario does not diminish the relevance of such reporting within the public sector, which provides a platform for these entities to demonstrate accountability at a global level, integrating the facets of social, environmental, and economic sustainability. A particular role in disclosing information on sustainable development falls to LGUs, which, while providing public services, have a direct relationship with citizens [Guarini et al., 2022; Bisogno et al., 2023].

While formal ESG reporting requirements will initially affect only municipal companies, local governments should collect data on sustainable practices or calculate their carbon footprint. Local governments play a variety of roles in these chains, including regulatory bodies, licensing authorities, subsidy providers, and business partners. Through these roles, there is the potential to influence local businesses, for example, by encouraging the development of more sustainable heating or energy infrastructure within the community.

A strong emphasis should be placed on the social aspect of ESG within local government responsibilities. In addition, it is crucial to integrate the criteria of the EU taxonomy into local government investment decision-making processes and public procurement when seeking repayable financing options. The imposition of ESG reporting mandates requires a re-evaluation of local government development strategies and spatial planning efforts. This reassessment should focus on creating a competitive advantage and resilience through ESG compliance.

To achieve the research objectives, the study focuses on 15 European cities (all cities from EU Member States, i.e., 15) selected from the C40 global network of nearly 100 of the world’s largest cities committed to tackling climate change [“https://www.c40.org/about-c40/,” 2024]. The narrow scope of the C40 cities ensures that the selected municipalities are engaged in sustainable development and have strong ESG practices consistent with the research goals. The decision to choose cities from EU countries was made because of the EU’s common ESG reporting regulations (discussed in the previous section), which provide a general framework for reporting practices. In addition, the focus on the major European cities in the C-40 network has several advantages. Firstly, these cities interact with a greater number of stakeholders, which leads to a higher level of responsibility, encompassing both economic and broader aspects. Secondly, large cities have greater resources – financial, human, and technological – compared to their smaller counterparts, which facilitates their participation in sustainability disclosure [Navarro-Galera et al., 2014]. Finally, officials in larger local governments tend to be better trained than those in smaller ones, which increase their capacity to innovate and integrate sustainability considerations into their decision-making and reporting processes [Navarro-Galera et al., 2014].

A detailed content analysis of the official websites of the selected cities was carried out between May and June 2024. This specific timeframe was chosen to reduce bias and ensure consistency across studies, given the frequent updates that websites undergo [Nicolò et al., 2023]. Content analysis serves as an objective, systematic, and quantitative means of analyzing the content of communications and is widely used in the field of social and environmental accounting to extract information from sustainability reports and disclosures [Hossain, 2018; Olejniczak and Bednarska-Olejniczak, 2024]. Websites are preferred due to their speed, cost-effectiveness, adaptability, and wide reach [Hossain, 2018; Nicolò et al., 2023]. Recognizing these advantages, numerous cities have started to use their websites to better engage with stakeholders on financial and non-financial issues, thereby increasing transparency and accountability.

In this study, the process of web content analysis involved several steps. The first step consisted of the definition of a coding instrument and disclosure indices. Following a deductive approach, the coding instrument was developed based on the recommended ESG disclosure metrics ESG developed by Steward Redqueen, with the support of the European Bank for Reconstruction and Development (EBRD) and the Warsaw Stock Exchange for private companies [ESG Reporting Guidelines Guide for Issuers, 2023]. This framework was used to develop the ESG disclosure index. The index is based on the comprehensive environmental disclosure metrics developed by Clarkson et al. [2008]. This methodology is consistent with previous sustainability accounting research (e.g., Larrinaga et al., 2018; Manes-Rossi et al., 2018], where the main goal was to evaluate the extent of disclosures rather than their qualitative aspects. While some criticisms of this approach are acknowledged, it is justified for three reasons: (i) the analysis does not seek to determine the absolute quality of ESG reporting but focuses on a comparative analysis of the scope of ESG disclosures in various cities; (ii) the ESG reporting practices of European cities are expected to align with existing EU regulations, which suits this category; and (iii) Clarkson et al.’s [2008] disclosure index was developed based on various sustainability pillars. As in previous studies, a score of 1 was assigned to the disclosure of ESG information and 0 to non-disclosure [Hossain, 2018]. The ESG disclosure index includes 36 items developed based on the ESRS, grouped into nine categories related to business models, environmental indicators, social indicators, and corporate governance indicators (Table 2). Thus, a city’s maximum score would be 36 if it disclosed information on all categories, while its minimum score would be 0 if it provided no information on any ESG metrics. The scores were then normalized so that each of the nine categories had an equal impact on the level of the ESG index, and the index itself ranged from 0 to 1. The second step of the analysis relied on the manual process of searching the websites of the selected cities. The manual process minimizes the potential drawbacks of identifying sentences and content with multiple senses and streamlines the interpretation of the meaning of information based on the web context [Farneti and Siboni, 2011; Nicolò et al., 2023]. During this phase, stand-alone non-financial reports and strategic plans were downloaded and reviewed to gather preliminary information and answer additional questions (Table 3).

As shown in Figure 1, the ESG disclosure index scores were highest in Scandinavian cities. This is not surprising, as Scandinavian countries have long been considered leaders in sustainability [“Rankings The Overall Performance of all 193 UN Member States,” 2023]. At the other extreme were Milan, Madrid, and Lisbon. These results are consistent with the findings of Nicolò et al. [2023], which observed that the level of online ESG reporting by Italian and Spanish cities remains low. Figure 1 also shows that the overall sustainability reporting across the nine categories was quite diverse. Among the individual ESG metrics, environmental issues had the highest level of disclosure (Table 2). Conversely, the lowest number of cities disclosed data classified as the “S” (social) component, which mainly includes occupational health and safety and human rights.

Figure 1.

ESG disclosure indices of the analyzed cities.

Source: Own calculations. ESG, Environmental, Social, and Governance.

As noted above, the highest level of disclosure was in component “E,” where some items were fully disclosed by all cities. These include environmental metrics, such as a description of climate change management, environmental policy, and diversity policy. Similarly, for some aspects of the social and governance categories, 100% of the cities disclosed information on employment policy and data protection policy. Sustainability reporting disclosures show that 13 cities provide information on energy and water. Still, less information is disclosed on emissions, with only 12 cities disclosing their greenhouse gas emissions in tons of CO₂ equivalent and only one city reporting in the category greenhouse gas emissions intensity. Emissions disclosures were mostly qualitative. Most cities stated on their websites that they were developing plans to reduce carbon emissions, but only a few had a specific target to reduce emissions by a specified date. The high frequency of ecological disclosure results from EU environmental legislation to protect the environment and biodiversity.

The majority of cities also disclosed general metrics information, which is intended to provide essential context for understanding the city’s activities and value creation model, its material ESG impacts, risks and opportunities, and how it manages them. In this component, due diligence information was the area with the least disclosure. It requires the city to report on how it identifies, prevents, mitigates, and accounts for its actual and potential negative impacts on the environment and people throughout its value chain. These impacts could be caused or contributed to by the city itself or its value chain (in which the city participates, for example, by providing municipal services to local entrepreneurs), including through its products or services and its business relationships.

In the area of governance, the most frequently disclosed issues are related to data protection policy, whistleblowing mechanism, stakeholder engagement, and anti-corruption policy. It can be assumed that the high frequency of disclosure of these indicators is due to EU legislation, which largely imposes transparency obligations in these areas. Relatively little information was disclosed on the board compositions (and in particular on the characteristics of the management board and the supervisory board in terms of qualifications and competences related to sustainability issues, their roles, and responsibilities).

As mentioned above, the least information is disclosed in component “S.” Moreover, these disclosures were the rarest in cities with lower overall ESG disclosure index scores. In the case of “S,” all cities disclosed information on employment policies. This is understandable, as cities, as public sector entities, need to have transparent employment policies. Around 100% of the cities surveyed also disclosed information on worklife balance policies, which allow for a better balance between work and private life for their employees, and reintegration policies, which allow for an undisturbed return to work after parental leave. Surprisingly, in the social area, cities were reluctant to disclose information on the equal pay index, staff turnover (in %), respect for human rights and occupational health and safety.

Looking more closely at the extent of ESG disclosure in the fifteen European C40 cities, it can be seen that most of them have presented social and environmental information under the headings “environment,” “environmental management,” “climate change,” “net zero management,” or “sustainability.” The results also show that the cities with the highest ESG disclosure index scores have a front-page link to “sustainability/environment” or “environmental management,” whereas other cities have a secondary link to “sustainability information” under “our city” information. Interestingly, all cities have a link to sustainability information on their website but under different headings. This may suggest that European cities have experienced informal institutional pressure from EU level legislation and numerous ESG reporting guidelines to publish their sustainability activities for their stakeholders. A more detailed characterization of the reporting patterns was done by answering the questions in Table 3. In the area of ESG, the cities most often publish environmental reports on climate neutrality, energy transition, circular economy, waste management policy, biodiversity, and green urban infrastructure documents. An interesting example is Berlin’s “Environmental Justice Map,” which combines data on environmental burdens with the social status of the citizens. Other examples include the “Milan Food Policy” and the “Climate Budget” (Oslo). ESG reports and disclosures are often published annually.

Generally, the more detailed the reports are, the more often they are published. In most cases, the sustainability documents and reports were not externally audited. The exception was Paris (as part of the disclosure of the carbon footprint calculation). Internal and external stakeholders played an important role in the preparation of the documents. Disclosures were most often in the form of a website description, less often as a downloadable PDF document, and visualization of data through dedicated dashboards (Amsterdam, Stockholm). The indicators included in the reports were monitored continuously, often as part of the cities’ sustainable development strategy.

This study aimed to improve the understanding of the level and patterns of online ESG reporting by comparing the behavior of 15 European cities. The European Union (EU) has adopted legislation governing sustainability disclosure by private companies, such as the CSRD, Taxonomy Regulation, and Reporting Standards (ESRS). These regulations have been recognized as globally accepted guidelines for ESG reporting. As a result, they have received considerable attention from policymakers and academics investigating whether and how public sector organizations (especially LGUs) can implement them. By analyzing online ESG reporting, the study aimed to contribute to the academic debate on the achievement of the SDGs. To this end, it examined the extent and quality of ESG disclosure by LGUs in 15 European cities. The results show that the extent of online ESG reporting by European cities remains uneven. Although some cities (particularly those in Scandinavian countries) provide some online ESG information on their official websites, some cities (particularly in Southern Europe) have yet to achieve full disclosure.

Barriers to ESG reporting in Southern Europe stem from resource constraints, cultural factors, and the complexity of adapting to regulatory frameworks. Venturelli et al. [2019] highlighted that countries such as Italy have lower compliance with non-financial reporting standards due to limited institutional support and the need for harmonized practices. La Torre et al. [2020] argued that while EU regulations such as the NFRD and CSRD aim to promote transparency and accountability, their implementation could be improved by relying on accounting-based approaches that address deeper structural and cultural issues. Collectively, these studies suggest that overcoming these barriers will require improved regulatory alignment and targeted support to strengthen institutional capacity and cultural shifts toward sustainable practices.

Unsurprisingly, all cities disclosed the most on the environmental component, such as energy use, water management, or waste management, which are major concerns for most residents and also subject to extensive EU regulation in this area. The social component of ESG was the least disclosed, with cities open on employment policies but cautious on equal pay and staff turnover. The study found considerable variation in reporting patterns, with only one city having a stand-alone sustainability report. Cities often publish online documents containing environmental information. Innovative approaches include integrating environmental and social data and setting climate budgets. Reports are typically published annually but can be more frequent and detailed depending on the sector. An important issue is the general need for external verification of these reports. Disclosure practices are most often led by environmental and spatial planning departments. Information is mostly published online, sometimes with downloadable documents and visual tools, and sustainability metrics are continuously monitored as part of broader city strategies.

The theoretical implications of the study’s findings can be explained in terms of both institutional pressure and legitimacy. The results indicate that institutional pressures from European Union legislation and participation in C40 networks are key to sustainability reporting on city websites. These institutional pressures can be explained in the following ways. Firstly, they are manifested in a strong influence on cities to comply with rules and regulations. In particular, there are no mandatory requirements for sustainability reporting in public sector organizations in the European Union. However, existing regulations can affect local government directly (through the obligation to report on ESG in municipal companies that meet certain criteria) as well as indirectly (through the participation of LGUs in value chains, which requires the disclosure of data on sustainable activities and carbon footprints, and through the need to consider the criteria of the EU taxonomy in local government investment decisions). All these factors suggest that there is pressure on European cities to provide sustainability information on their websites.

Most cities perform better on public services related to water, energy, and waste management, which are more important to citizens than other sustainability categories. The institutional pressure on local authorities to publish sustainability information on their websites has also been highlighted by Joseph et al. [2014], who argued that “higher disclosure rates by larger councils and lower disclosure rates by smaller councils are due to the latter’s ‘reduced power and perceived political interest in government policy implementation compared to larger councils.” From a legitimacy theory perspective, the results show that European cities within the C40 network also compete with each other by increasing their sustainability disclosure to meet the expectations of community stakeholders. This suggests that as cities compete for funding and seek legitimacy from the wider community, they provide more social and environmental information to stakeholders. However, it was found that most cities do not produce stand-alone sustainability reports using existing ESG guidelines.

This research has helped to fill a research gap in the literature on public sector sustainability reporting, particularly in the context of European cities, by providing a better understanding of the extent and volume of sustainability reporting disclosures. The results of this study suggest that European cities have recognized the importance of sustainability practices and are attempting to disclose sustainability information on their websites. This financing aligns with earlier research that indicates a growing trend in the online reporting of sustainability data, as organizations strive to engage with stakeholders and validate their sustainability practices. The current study focused on communicating information on the environmental metric, with a significantly lower rate of disclosure on the social component. The results show that cities undertake a range of activities to meet community expectations for disclosure. These activities are mostly qualitative, such as descriptions on websites and newsletters, rather than sustainability disclosures in stand-alone reports. Questions about what content to include and how often LGUs should disclose through sustainability reports need to be clarified, and the findings suggest that regulating reporting may improve the level and consistency of reporting across local governments.

This study has implications for policymakers in the cities surveyed and local governments in other countries, as the findings suggest that the development of a sustainability reporting framework and related regulations would improve sustainability reporting practices in local governments and further meet the needs of communities. It is not necessary to create stand-alone ESG reports, but all ESG factors should be highlighted in existing development strategies and other strategic documents created by LGUs. In this context, it would be good to review LGUs’ development plans regarding criteria resulting from ESG regulations. Particular attention should be paid to disclosing metrics from the “S” area, i.e., social responsibility, because this dimension of ESG has the most local character and is closely linked to the tasks of LGUs. ESG disclosure practices in local governments should be helpful for local entrepreneurs in preparing their sustainability reports [e.g., local governments can define social impact and set standards for “S” in the emerging ESG landscape]. It should be remembered that ESG reporting is not only the final report but, above all, the reporting process, in which not only the documents themselves are assessed but, above all, whether the activities specified in them are carried out in compliance with all the rules resulting from them (e.g., whether all employees are informed, whether they know their rights and obligations, etc.). In addition, ESG reporting involves many parties (external stakeholders, employees, residents, and regulators), which can lead to synergies. All units (departments) of the local government should be involved in the preparation of the documentation, allowing for a better flow of information (avoiding situations where these tasks are assigned only to departments dealing with environmental protection or spatial planning). ESG reports should be based on reliable data and transparent methodologies. There needs to be a paradigm shift away from greenwashing and the mindset of hiding pollution while claiming to be environmentally responsible. Instead, the focus should be on acknowledging current pollution levels and committing to actionable measures to mitigate future environmental impacts.

It is important to recognize that this paper has some limitations. One limitation of the study is its focus on only 15 of the largest cities in Europe, which may not reflect the diversity of ESG practices in smaller cities. While these cities are likely more economically developed, their experiences may differ from those in less developed areas. This selective approach limits the generalizability of findings. Future research should include a broader range of cities from various regions and economic contexts to better understand innovation financing in Europe. A key limitation of the study is its reliance on manual content analysis, which, while providing detailed insights, may introduce subjectivity into data coding. This subjectivity can lead to variability in data interpretation, as noted by Hossain [2018], affecting the consistency and replicability of findings. To mitigate this, a standardized coding tool based on established ESG reporting guidelines has been developed to increase consistency. However, the manual coding process still involves interpretive judgement. Future research could strengthen findings through the use of automated coding techniques or inter-coder reliability checks. The proposed ESG disclosure index highlights the presence of certain items but does not assess the quality or depth of the information provided. Future research should assess these dimensions to improve understanding of ESG reporting practices and their effectiveness in promoting transparency. While this study contextualizes local government ESG disclosure within the broader EU regulatory framework, it does not focus on analyzing the specific relationship between this disclosure and the introduction of directives such as the NFRD, CSRD, and the Taxonomy Regulation. Future research could undertake a more in-depth (neo)institutional analysis to investigate how local governments explicitly adjust their practices in response. In particular, the research did not take into account the views of local authorities, particularly the managers or elected leaders of local councils, to understand their motivation for providing sustainability information through their websites. While the study has reported what sustainability information European cities have disclosed, it would also be beneficial for the future development of reporting practices to uncover their motivations for why they report and how they plan their actual sustainability disclosures. This future research could further address these limitations and explore local government sustainability reporting practices.