How could your business benefit from ESG reporting?

How could your business benefit from ESG reporting?

ESG Reporting

ESG ( Environmental, Social and Governance) reporting is rising in significance as stakeholders and consumers require greater transparency.

ESG reporting refers to the disclosure of information relating to risks, performance and opportunities regarding environmental, social and governance issues.

Companies are being implored to share their data on these topics and explain their strategy for improving on these markers. 

According to a 2022 Gartner report:

“Social responsibility and environmental, social and governance (ESG) feature on the corporate agenda for about one in five organisations, the most in a decade.”

In this article, we’re looking at what ESG is and ways in which businesses can meet their ESG requirements.

ESG reporting in greater depth

ESG reporting refers to the economic, social and environmental performance of a business. Non-financial factors are increasingly important to investors and consumers alike, and by reporting on these vital markers businesses can provide evidence that they are moving in the right direction.

Sustainability performance information is often presented within an annual report that is sent out to key stakeholders, or they might feature in a stand-alone report, sustainability report, triple bottom line report, or an environmental or social impact report.

As the Gartner study comments; “It is one of the key methods in which companies demonstrate, and are being judged on, their commitment to corporate responsibility.”

What are the benefits of reporting on ESG data?

It’s easy for businesses to think that they don’t need to publish ESG reports, however there are a multitude of benefits for companies of all sizes.

Benefits of publishing an ESG report include:

  • Informing non-shareholder stakeholders (such as employees and customers) about the societal and environmental impacts of a company’s performance and the strategies in place or being developed to improve such impacts
  • Assisting shareholders, investors and the market to determine how well companies are dealing with material non-financial and financial risks
  • Enabling companies to:
    • identify areas of operational or management improvement;
    • identify and better manage their non-financial risks;
    • identify new markets or business opportunities;
    • benchmark their performance against their competitors;
    • improve their reputation; and
    • attract, recruit and retain high calibre staff.
  • Satisfying investor expectations for increasingly transparent reporting.

What can businesses do to keep up?

ESG reporting is an increasingly in demand practice which allows businesses to assess and illustrate to stakeholders how well it is executing on strategic sustainability objectives. 

An effective method for  familiarising your business with ESG reporting is to build a solid understanding of internationally promoted and reviewed  reporting standards. One great example is the GRI, Global Reporting Standards. The GRI reporting system provides a modular set of universal standards across a range of sustainability topics, granting businesses insight into what should be reported on, and how.

Once you have the data on hand, you may consider:

  • Educating your organisation on sustainability-related risks and opportunities and what they mean for the company.
  • Establishing a board-led governance structure that brings both finance and sustainability reporting to the boardroom table when making commitments, decisions and reporting on sustainability-related issues.
  • Engaging with current process owners and understanding how information is being defined, captured and reported, and where there are control gaps.
  • Expanding your systems, processes and controls to create efficiencies and move certain aspects of the data collection and calculation process into existing or new systems and processes.

ESG reporting in the Private Sector

Extensive research conducted by the Governance & Accountability Institute has examined 1246 organisations across 35 GRI-defined business sectors to distinguish what sustainability indicators were most common. 

These act as a useful starting point for discussion and planning around sector-specific materiality.

For example, in the Private Sector, the top sustainability indicators utilised within this sector ranked in the following descending order of importance:

  • Customer Privacy
  • Anti-Competitive Behaviour
  • Training and Education
  • Non-Discrimination
  • Socioeconomic Compliance
  • Environmental Compliance
  • Marketing and Labelling
  • Diversity and Equal Opportunity
  • Economic Performance
  • Freedom of Association and Collective Bargaining
  • Anti-Corruption

Now let’s take a closer look at how the above form individual performance indicators that can be utilised for measurable reporting.

Three (3) Common Examples Of ESG Reporting Areas 

To give further insight into what kinds of data might be included in your ESG report, we’re unpacking 3 of the key areas.

1. Customer privacy

Businesses need to report on how they handle customer privacy, and cases in which regulations may have been breached.

The reporting organisation should report the following information: 

  • Total number of substantiated complaints received concerning breaches of customer privacy, categorised by: 
  • Complaints received from outside parties and substantiated by the organisation; 
  • Complaints from regulatory bodies. 
  • Total number of identified leaks, thefts, or losses of customer data. 
  • If the organisation has not identified any substantiated complaints, a brief statement of this fact is sufficient.

2. Anti-competitive behaviour

Businesses also need to disclose whether they have had any legal actions for anti-competitive behaviour, antitrust, and monopoly practices and their outcomes.

This can give insight into company values and problem resolution, which can be key indicators for investors and stakeholders.

The reporting organisation should report the following information:

  • Number of legal actions pending or completed during the reporting period regarding anti-competitive behaviour and violations of antitrust and monopoly legislation in which the organisation has been identified as a participant.
  • Main outcomes of completed legal actions, including any decisions or judgments.

3. Diversity and equal opportunity 

Diversity and equal opportunity data is one of the main social indicators. It refers to how businesses manages discrimination and vulnerable groups. 

These markers cover the fundamental principles and rights at work, employment and employment relationships.

The reporting organisation should report the following information: 

  • Percentage of individuals within the organisation’s governance bodies in each of the following diversity categories:
  • Age group: under 30 years old, 30-50 years old, over 50 years old;
  • Other indicators of diversity where relevant (such as minority or vulnerable groups).
  • Percentage of employees per employee category in each of the following diversity categories:
  1. gender;
  2. age group: under 30 years old, 30-50 years old, over 50 years old;
  3. other indicators of diversity where relevant (such as minority or vulnerable groups).

Comprehensive ESG reporting for your business

Increasingly, investors, lenders, employees and consumers will use the transparency given by an ESG report as a measure of success. Traditional markers like profit and turnover are still important, but ESG is rising in significance year on year. 

For modern consumers, companies who aren’t reporting on these ESG markers can seem suspicious and less reputable.

Likewise, investors and lenders will use ESG reports to assess a firm’s risk exposure and determine their possible future financial performance. 

Without this vital data, many lenders are reluctant to back a venture so even if you’re a small business, it’s good to get into the habit of reporting on ESG data.

Notes

This article covers the basics in ESG reporting, using data taken from InfoCentric’s comprehensive report on ESG Reporting. 

To read the report in full, or find out more about our services, contact us.

Sources

  • ESG Sustainability Reporting, InfoCentric, 2022
  • Gartner sustainable business, 2022 
  • Green Business Bureau, accessed 2022
  • Global reporting standards, accessed 2022
  • UN Global Compact Management Model, accessed 2022