These days, businesses are no longer answerable only to their customers or a single owner.
Everyone, from shareholders to clients to the larger community, demands transparency and accountability.
It’s not enough to simply make a great product or offer a quality service. Companies need to show they’re operating ethically and sustainably.
To meet this requirement, many businesses are implementing Environmental, Social and Governance (or ESG) reporting programs. These programs help relay the details of everything from a company’s carbon footprint, to its metrics around diversity and inclusion, to its corporate governance and decision making.
Putting all that information together can be a daunting task, requiring input from multiple departments, locations and sources.
In this article we talk about what ESG reporting is, why it’s important and how to report on ESG in a way that doesn’t take unnecessary resources from your company’s operations.
What is ESG Reporting?
The first thing to know is what ESG reporting entails. ESG reporting involves reporting across three key areas: environment, social and governance.
The Environmental component of ESG reporting often includes metrics around:
- Energy efficiency
- Climate change
- Carbon emissions
- Air and water quality
- Waste management
While companies may have some information on their direct emissions and releases, such as burning natural gas to heat the building or using pollution control technology to reduce wastewater discharges, ESG reporting frameworks also require reporting on what are called “Scope 2 and Scope 3” emissions. These are indirect emissions from sources like purchased electricity as well as emissions from the larger company supply chain.
Showing you have all your environmental ducks in a row has moved beyond legal compliance. Investors want to see that businesses are taking the initiative to reduce their environmental impact.
Social reporting in ESG means companies disclose how they foster people for growth and success, and how those successes ripple out to the larger community.
In completing their social ESG report, companies often document:
- Gender inclusivity
- Employee engagement
- Data protection and privacy
- Customer satisfaction
- Community relations
- Human rights
- Labor standards
The governance report looks at the reporting company’s internal operations and decision making. It considers operational controls and procedures, how companies educate themselves on regulatory changes and what they need to do to maintain legal compliance.
In an ESG report, the governance component often includes:
- Leadership and board composition
- Executive compensation
- Auditing procedures
- Shareholder rights
- Ethics, bribery and corruption policies
- Lobbying and political contributions
Why Do ESG Reporting?
ESG reporting is voluntary in most jurisdictions, but many companies have implemented ESG reporting frameworks for a variety of reasons, including:
- To meet client ESG requirements. Since ESG reporting standards ask companies to provide information on the impact of their operations, including the impacts of their supply chain, to be able to provide this information, many of those upstream companies must implement their own ESG programs.
- To manage risk. While companies always want to highlight their successes, a proactive ESG program can help identify risk areas and opportunities for improvement, which are then highlighted in subsequent years’ reports.
- To court new investors. Companies looking to grow through new investment need to show they’re a good bet. A complete ESG reporting program, including several years of verifiable data, shows potential investors the company is committed to environmental responsibility, an equitable workplace and transparent decision making from the top down.
Companies across all industry sectors complete ESG reports. This includes energy, automotive & transport, manufacturing, hospitality, services, financial services, government and technology sectors.
Are There ESG Reporting Standards?
Companies looking to implement an ESG reporting framework can follow a number of ESG standards. This can lead to some confusion, since reporting is voluntary and following different standards may result in metrics being reported differently.
Historically, the most common ESG reporting standards are:
- The Global Reporting Initiative (GRI)
- The Value Reporting Foundation (VRF)*
- Climate Disclosure Standards Board (CDSB)
*Many companies already reporting ESG may also be familiar with the Sustainability Accounting Standards Board (SASB). This standard was one of the major ESG standards, and merged with the International Integrated Reporting Council (IIRC) in June 2021 to form Value Foundation Reporting.
In short, ESG reporting standards have been a bit of an alphabet soup.
But following the recent 2021 UN Climate Change Conference (COP26), the International Financial Reporting Standards’ (IFRS) announced the creation of the International Sustainability Standards Board (ISSB).
The ISSB consolidates reporting requirements from the VFR and CDSB, and it is likely that further standardization will continue in the future.
How to Report on ESG?
How to do ESG reporting varies from company to company and standard to standard.
As we’ve covered above, there are many aspects of a business’s operations that need to be investigated and documented. Ultimately, the final format is up to the reporting company, but needs to meet standard requirements.
Collecting ESG data is not a simple undertaking.
Companies need to compile utility information, environmental reports, as well as documentation on staff representation and decision making.
Further complicating reporting, many companies need to pull data from multiple locations and even from up and down their supply chain. Information will come from purchasing, finance, HR, IT and senior leadership.
Oftentimes, in an organization, there isn’t a natural fit for a single department or individual to spearhead ESG reporting efforts, and the reportable information can be very sensitive and not something that can be passed through multiple hands.
Yet, ESG reports need to be made publicly available in order to comply with ESG reporting standards. They need to be presented in a way that investors can follow and see the value the reporting company is providing. And ESG reports need to be updated regularly in order to document changes and improvements.
Where Can I Find Examples of ESG Reporting?
Finding ESG report examples is as simple as a quick Google search.
Because these reports need to be made publicly available, you can easily find examples for companies in your jurisdiction or from similar industries without much trouble.
However, looking for ESG report examples has some limitations.
It can show you ways that different companies have laid out the information in their report, but what it doesn’t show is the work that went into preparing the report. In the background, there was usually a lot of number crunching and wordsmithing that a published ESG report may not show.
Simplify Your ESG Reporting
ESG reporting requires a lot of information from all levels of your organization. Many companies will outsource this work, but it can still be time consuming and expensive to manage consultants who will rely on your staff to pull the necessary data points for them.
FigBytes is the first fully integrated SaaS platform that bridges existing data systems, corporate ESG strategies, and internationally recognized sustainability standards. It integrates data and helps streamline all aspects of ESG reporting including:
- Climate Accounting
- Corporate Social Responsibility
- Diversity, Equity & Inclusion
- Water Stewardship
- Portfolio Management
The result is a dynamic reporting tool with results that can be shared with employees or the public. As a cloud-based solution, it requires no on-site hardware, and can be customized to your operations. FigBytes easily populates reports with the information you need, and saves employees time, since once the integrations are in place, reporting can be updated automatically.
Your ESG reporting requirements can feel complex, but they don’t have to be. FigBytes is designed to work for reporting companies across multiple sectors, including financial services, energy, automotive & transport, manufacturing, technology, services and government.
If you’re just getting started building your ESG program, or if your company has been at it for a number of years but is looking for a simpler way to manage your data, contact us today to see how FigBytes can make ESG reporting easier.