Through environmental, social, and governance (ESG) reporting, companies are able to show their transparency and commitment to satisfying sustainability goals while addressing areas for improvement. However, you may wonder how ESG compliance works and how your company can create an appropriate ESG report. Below, we’ll cover the steps toward ESG reporting, how you can maximize ESG reporting solutions, and more, so keep reading.
ESG Reporting and Its Benefits
ESG reporting involves documents that companies or organizations publish regarding environmental, social, and governance risks, impacts, opportunities, and future plans. First, the environment aspect includes subjects about climate change, pollution, energy efficiency, electronic waste management, and carbon emissions.
The social element includes human rights, data privacy, diversity, health, and customer satisfaction. Meanwhile, governance refers to matters involving business ethics, transparency on taxes, board diversity, whistleblower programs, corruption, audit committee, and more.
You’ll need these ESG reports to engage various stakeholders, including investors, partners, and customers, and build stronger relations with them. If the company is not transparent enough, stakeholders won’t have the confidence to invest as they know the financial risk is high.
Moreover, ESG reporting helps make your brand more appealing to consumers. For instance, around 62% of Gen Z customers would want to purchase from sustainable brands. Moreover, 73% of them are ready to shell out up to 10% higher when it comes to sustainable products. Ultimately, ESG reporting can help boost your sales, especially since you’re able to attract more stakeholders and improve your brand image.
ESG reports also allow you to hire and retain highly competent employees. In fact, companies that are dedicated to adhering to ESG standards are 25% more attractive to university students and young professionals.
Having solid ESG reporting solutions lets you save on operational expenses too. From using energy-saving lighting systems to choosing tools and equipment that help reduce carbon footprint, you can reduce the company’s operational expenses.
Steps To Creating an ESG Report
Unsure of how or where to start with your ESG reporting? Here are some practical steps that can help you toward effective implementation and reap the benefits of ESG reporting:
Develop an ESG Strategy
Currently, various reports on emissions coming from the retail, office, and other service buildings are increasing. Thus, you should start by establishing a clear and effective ESG strategy. This will also help you promote further improvements in the future.
First, you need to plan. Identify the objectives. Assess the current system of your company or organization. Establish interim goals for review. Then, devise ways to materialize the goals.
The second step is doing, which means carrying out your plan while following a structured management framework. Afterward, you need to check. This includes tracking and measuring the actual outcomes compared to your set objectives. The last step is acting, wherein you need to address what was missed and create better plans to get the desired results.
ESG Solution Overview
The image above illustrates how Qubix can help clients to implement an ESG reporting platform, which is critical to the implementation and monitoring of an ESG initiative.
Define Criteria and Goals
In connection to establishing your ESG strategy, you should be able to answer questions like why you wish to make ESG disclosures. Do you aim to strengthen the public image of your organization? Do you want to catch the attention of new investors? Do you intend to address employee concerns regarding various social issues? While you can have several goals, make sure they match the strategies and priorities of your organization.
Moreover, don’t forget to go back to these goals as you perform each part of the ESG report. Doing so will help you arrive at sound decisions. Losing sight of your goals will make you carry out unnecessary things and miss the opportunity of connecting with the right stakeholders.
Determine Your ESG Report’s Target Audience
Apart from clearly establishing your goals, you have to identify the specific stakeholders that will be interested in your ESG disclosures. Think about why they’ll be inclined to review your ESG report. Are your stakeholders' customers who plan on getting affiliated with a brand that shares their core values? Are they investors who make sure they’re aware of the risks, benefits, and possible results before entrusting you with their money?
Is your company suffering from a bad reputation and misconceptions among the public that you want to correct? Do you want to address issues that concern unions of employees or community members worried about certain environmental risks? Whoever your target audiences are, consider them during the entire ESG reporting process.
Choose Your Reporting Framework
Given the presence of different ESG frameworks, guidelines, and standards, you need to decide which framework you’ll use. For instance, the International Standards Organization (ISO) is topic-specific. Meanwhile, Global Reporting Initiative (GRI) is not industry-specific. It allows organizations to report relevant impacts on the environment, economy, and society. Moreover, GRI disclosures accommodate a wide range of stakeholders. Globally, they’re the most commonly adopted ESG reporting standards.
Other ESG frameworks like Task Force on Climate-related Financial Disclosures (TCFD), are climate change–specific. Then, the Sustainability Accounting Standards (SASB) Standards are often used by public companies. These are meant to provide information that shows cost-effectiveness and decision usefulness.
Choosing the right framework depends on the reporting needs of your company or organization, including the things you wish to report, and who your audience is. Thus, perform the necessary research. It’s also best to ask for expert advice from a consultant that specializes in the same industry you’re in.
Collect Reliable Data
After identifying your goals, target audience, and ESG reporting framework, you can start collecting data. They need to be both reliable and relevant to the things you want to report and the stakeholders. Consider whether you have to secure a new data management system or software. Utilizing effective ESG reporting solutions and tools can help you ensure validity and reliability. They also make the ESG reporting process smoother for you through automated data capture, easy comparisons of emissions, and more.
ESG Data Collection
The image above shows how complex the data collection process can be. Our solution can automate the collection and transformation of data with complete traceability saving you thousands of hours of data collection and manipulation.
Note, however, that ESG disclosures need not be number-based all the time. In most instances, ESG reports contain narratives regarding your organization’s plans, actions, and strategies to address environmental, social, and governance matters.
Think of Your ESG Report’s Accessibility
Apart from ensuring ESG compliance, it’s crucial to decide how you’ll make your ESG disclosures available to your stakeholders. For instance, will you create an engaging dashboard on your company’s official website? Will it be an attractive standalone report? Or, will it serve as a supplementary document to your financial report?
Depending on your chosen stakeholders, you’ll know how and where you can disseminate such relevant information. You’ll also know what graphics to use, what resources are necessary, what narrative works, and how much time is needed to complete the work.
Identify the Timeline of ESG Disclosures
To help demonstrate transparency and reliability, determine how often you have to make the report. It’s easy to tell if your ESG disclosures are linked to financial materiality and are part of your regulatory filings. Otherwise, the period could be per quarter, calendar year-end, or fiscal year-end.
Releasing accurate data regularly without delays helps increase stakeholders’ confidence in your brand or organization. The data should also be updated. In case you don’t have a lot of resources, you can start with a smaller amount of data, and develop them every year. While several companies release their ESG disclosures on a yearly basis, there’s no fixed rule. Just make sure your timeline matches your goals and the expectations of your stakeholders.
Releasing successful ESG disclosures is a continuous process. After creating and making your ESG reporting accessible to stakeholders, provide updates in the next reports. Doing so highlights the dedication of your brand or organization to keep improving and staying transparent.
Moreover, it pays to review your process of assessing the material topics. The ESG reporting process might not be as smooth-sailing the first time, but continuously doing it can help you present more impactful and reliable reports. You can also build a system that’s more manageable and efficient for everyone in the organization.
From attracting more stakeholders, acquiring and retaining talented employees, increasing sales and investments, to boosting brand image, ESG reporting allows your company to grow while helping address various environmental, social, and governance issues.
To help release a successful ESG report, establish your goals, ESG strategy, and target audience. Then, study the different ESG frameworks to pick the right one for your industry, and ensure transparency and credibility of data. Don’t forget to update and show improvements, too.
Our ESG Reporting Hub may be a helpful resource as you start your ESG journey. If you want to learn more about ESG and how can it be streamlined for your business, please contact us or book a demo to see our solution in action.