Let’s start at the beginning. ESG reporting is the act of creating a document that provides transparency on environmental, social, and governance risks and opportunities. This document should provide information to stakeholders about the company’s adherence to sustainability goals and how they can identify opportunities for improvement. ESG reports are becoming more popular as investors focus their attention on companies’ environmental performance in addition to financial statements.
A company’s act of reporting its ESG efforts is a way for it to create a blueprint of its commitment to sustainability goals. In the process, it will also identify areas for improvement which may help improve company standings among consumers. The report should contain relevant data such as comparisons against benchmarks, management commentary, and future plans which will be discussed below. The purpose of this article is to discuss everything you need to know about making an ESG report including what it entails, how it should be formatted, and what information it should contain.
- What is an ESG Report?
- The 6 Benefits of Making an ESG Report
- How to Make an ESG Report
- The 6 Steps to Make an ESG Report
- ESG Reporting as a Tool for Companies
- Getting Started with Global Reporting Initiative
What is an ESG Report?
ESG reporting should not inhibit the company from achieving its mission, vision, or goals as stated in its business plan. The reporting process should be integrated into daily workflows as opposed to an additional task that takes up an enormous amount of time. If employees are spending too much time completing ESG reports, it is counterproductive to the company’s success. Similarly, companies should not try to do too much when reporting on ESG issues. It is important for companies to take into consideration that they are not experts in all areas of sustainability especially if they are outside of their industry. For example, if a technology company were to report on greenhouse gas emissions or waste management practices, it would be misleading since these topics fall under the purview of environmental science and engineering experts.
ESG reporting should also not replace other reporting such as financial or sustainability reports that may be required by government agencies. It is important to keep in mind what these reports are trying to communicate and whether they would serve the same purpose if they were included in an ESG report.
Finally, companies should not expect ESG reporting to lead to immediate changes in the behaviors of their stakeholders. It is a slow process that requires buy-in from all levels of employees. The goal should be to have an open dialogue on ESG issues so that people are aware of what they can do to improve practices within the company and work towards sustainability goals.
The 6 Benefits of Making an ESG Report
ESG reporting has several benefits for companies:
- First, it can help visualize the degree to which they are adhering to sustainability goals.
- Second, it can help identify opportunities for improvement.
- Third, it fosters engagement from a variety of stakeholders which can lead to stronger relationships and better communication.
- Fourth, it encourages accountability over time as the company is held accountable for its previous progress reports.
- Fifth, it helps provide transparency to all parties involved with the company’s value-creation process.
- Finally, it can impact consumers, employees, and investors.
Who are the Stakeholders?
Stakeholders are individuals who have a vested interest in the company. Stakeholders include government officials, employees of the company, shareholders, banks that loan money to the company, customers buying products or services from the company, suppliers of materials for the company, unions representing employees, community members affected by environmental hazards, and more. They also include groups such as environmental non-governmental organizations (NGOs) and charities, civil groups, local communities, and organizations.
How to Make an ESG Report
ESG reporting should completely align with the company’s business plan and goals in order for it to be viewed as a useful tool. This approach helps companies easily communicate their sustainability goals, which aids in making connections with investors and employees.
To get started, companies will want to look at existing reports to see how other companies have taken this approach. For example, the Global Reporting Initiative is a leading nonprofit organization that helps companies set guidelines for ESG reporting. The GRI provides free tools and resources designed to help companies create a quality sustainability report that is useful for investors, employees, customers, and others.
As part of the GRI disclosure framework, companies are encouraged to report on current issues that are relevant to the company. For example, companies should report on whether they have any plans for future investments in renewable energy generation or waste management facilities. This approach helps demonstrate a commitment to long-term sustainability while also providing transparency.
Different Reports for Different Audiences
The information in an ESG report should be easy to understand and available in a format that is relevant and useful for each audience. Investors want to see detailed financial data, while employees need access to ESG information that relates to their daily operations.
Companies can create multiple reports depending on the needs of their stakeholders. For example, one comprehensive report which includes all of the most important metrics and data. This approach is useful because it allows companies to provide a more holistic view of their sustainability efforts but can be difficult to manage if multiple stakeholders need to access the report. In this case, companies should consider providing different reports for each audience.
Finally, ESG reporting should cover both current and future performance by including relevant trends and metrics. Without an element of future planning, ESG reports can become outdated and irrelevant for stakeholders. To avoid this, companies should include data on long-term goals in an attempt to demonstrate commitment to sustainability.
The 6 Steps to Make an ESG Report
There are several steps to take in order to make an ESG report:
- First, gather information from the company’s leadership on what they consider exists within their sphere of influence and identify the company’s value chain.
- Second, identify and categorize risks and opportunities that could affect the performance of the company along its value chain.
- Third, write a report outlining these risks and opportunities to communicate them to stakeholders.
- Fourth, decide how frequently reports will be made.
- Fifth, make the follow-up process manageable for employees by figuring out what information needs to be collected and by whom.
- Sixth, make an action plan for how these risks and opportunities will be dealt with at the company.
What Information Must Be Included in an ESG Report?
ESG reports should include information on environmental performance such as energy use, greenhouse gas emissions, water usage, waste generated, material used, and waste management.
They should also include information on social aspects such as labor practices, human rights impacts, community engagement, diversity efforts from suppliers, and any other issues related to the company’s interactions with society.
Lastly, reports should include information on governance such as compliance, board structure including diversity of race or gender of the board members, political contributions, policies related to the environment and society, and any other issues regarding how the company interacts with government.
ESG Reporting as a Tool for Companies
ESG reporting is an opportunity for companies to communicate sustainability goals to stakeholders in order to understand their business from a holistic perspective. By communicating these goals, it helps foster relationships with investors and stakeholders. The idea is that as a company works, (a work in progress), towards its goals, it can be held accountable to these goals and improve over time. The end goal is to contribute to the company’s long-term success.
ESG reporting is also a tool for companies who want to attract talent from outside their industry. It is a way for companies to showcase their efforts in environmental and social responsibility, which is becoming increasingly important when recruiting new employees.
Finally, ESG reporting is a way for companies to communicate how their efforts and goals fit into a larger scope of social and environmental issues facing society. The end goal is to be sustainable.
Getting Started with Global Reporting Initiative
There are many ways in which companies can get started with ESG reporting. Many use their annual sustainability or corporate social responsibility reports as a starting point for adding ESG data to these reports.
Other companies choose to create an entirely new report that is used only for the purpose of ESG reporting. This approach has the benefit of giving employees dedicated time and space to focus solely on ESG issues.
Regardless of which approach a company takes, the goal should be to create an article that is relevant and useful for its intended audience. For example, if a company decides to add ESG information to its annual sustainability report, it will want to make sure the data and content are relevant and useful for its stakeholders.
In Summary of Sustainability Accounting Standards Board
When deciding on the frequency of the reports, companies should look at what information is most relevant for each purpose. For example, if employee engagement is important, making an ESG report available quarterly may be most effective. However, if stakeholder engagement with the report is more important, making it available monthly or annually may work better.
Once a company has decided what information will be included in the ESG report, it needs to decide who is responsible for collecting this data and how frequently that person needs to update the article.
Lastly, companies will need to decide how they want to communicate this information. For example, do they want their ESG report available on their primary corporate website or through an external portal such as Global Reporting Initiative?
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Caveats and Disclaimers and climate-related financial disclosures
We have covered many topics in this article for businesses, including ESG for entrepreneurs, and want to be clear that any reference to, or mention of the United Nations, climate-related financial disclosures, world economic forum, focus, or governance in the context of this article is purely for informational purposes and not to be misconstrued with investment advice or personal opinion. Thank you for reading, We hope that you found this article useful in your quest to understand ESG.
Research & Curation
Dean Emerick is a curator on sustainability issues with ESG The Report, an online resource for SMEs and Investment professionals focusing on ESG principles. Their primary goal is to help middle-market companies automate Impact Reporting with ESG Software. Leveraging the power of AI, machine learning, and AWS to transition to a sustainable business model. Serving clients in the United States, Canada, UK, Europe, and the global community. If you want to get started, don’t forget to Get the Checklist! ✅