Understanding an organisation’s metrics in relation to environment, social, and corporate governance – referred to simply as ESG – is now one of the hottest topics in business today, and it affects everyone, whether they work in public or private organisations. The benefits of ESG reporting are huge, and every organisation will be affected. In Part 2, we go even deeper into the advantages.
If business priorities from 2000 until 2020 were dominated by Digital Transformation, from 2020 it’s ESG which will have centre stage in the boardroom – Gartner 2021
Which major automotive brand faces a decade of being remembered for corporate cheating, and which upstart brand is perceived as being astutely aware of society, and the need for the brand to ‘do good’? Volkswagen has lost the race to Tesla, and in due course may well change its name as a result.
Volkswagen released a press release on 30 April 2021, stating that it was to rename its U.S. operations to “Voltswagen of America,” emphasizing the German automaker’s electric vehicle efforts. Swiftly retracted, they tried to bury this news by claiming it was an April Fools joke. Unsurprisingly, given their recent breaches of public trust, few people believe them.
To have a detailed ESG report and scorecard creates a competitive advantage when so many of your competitors are stumbling along. Yes, Volkswagen had an ESG report too, but the difference is that yours will be honest.
Publish your ESG rating even if it’s not required. Have it stated proudly on your website, and offer it in support of any bids for work. Create a glossy ‘green’ brochure, and highlight that your claims are substantiated. This is the route to winning.
When discussing the value of quality ESG reporting, it’s a mantra to emphasise that it’s a ‘Value Add’ process, and not a cost. The examples are legion, and wanting to cite something more substantive than reducing energy costs by transitioning to electric vehicles, what about re-engineering an entire process so vehicles aren’t required?
That’s precisely what Xerox concessionaire Advanced UK, London, did with their helpdesk serving 1,000+ clients with their office printing needs. They queried why they had so many on-site support calls when the ‘intelligent printers’ could report their status remotely.
Over the course of two years, they developed a software app which they installed on client’s office printers, and progressively added features such that Advanced UK’s helpdesk could effect repairs before anyone at the client’s offices realised there was a problem.
The cost savings of this initiative continue to be profound: nearly 60% fewer engineer car-miles driven, happier clients, greatly increased servicing capacity, and circa 18,000lbs of CO2 released into the atmosphere annually.
When one digs below the surface of any organisation with high staff turnover, there tends to be common trends. Very often one discovers a management deaf to the needs of their staff, or a culture of intolerance, a lack of implementation of equal rights, and other failings too.
How you treat your employees, and how their voices are able to be heard, are embedded into ESG reporting. It makes no difference if the culprit is the bullying Managing Partner of a law firm or a laddish culture in the staff canteen, it takes more than policies to sail a ship: it needs a captain with leadership skills, and the systems in place to stamp out the huge costs of recruiting afresh and re-training.
Risk is a vast topic, and its implications to any enterprise are profound. Risk management falls under the heading of good governance, and within that heading we can consider disaster recovery and business continuity as two major themes, let alone anti-corruption, anti-bribery, regulatory compliance etc.
As you progress through your ESG reporting, a good advisor will highlight your business continuity planning as a significant piece of evidentiary work which will satisfy many components of the core ESG frameworks and the standards within.
Understanding your risks requires you explore all aspects of your operations, and that you look for the gaps. It might be that your accounts payable operations have too few controls, or it’s your payroll system which has no checks on expense claims. The more in-depth your reporting becomes, as it should over time, the stronger your internal procedures become and the lower the threats which could injure your organisation.
In his book, ‘Create your Business Plan for the Digital Age’, Humperdinck Jackman highlighted how any start-up seeking Angel investment or Venture Capital was doomed to remaining empty handed if the business wasn’t SEIS Qualified. SEIS is the Small Enterprise Investment Scheme, and it’s a ‘must have’ for fund raising.
As of COP26, and with the prospect of the UK approaching its own Sustainability Reporting Directive, lets add ESG reporting to that dynamic. It makes sense. If you’re going to buy into a business, you want to protect that investment: skeletons in the closet are most unwelcome.
With ESG reporting, you can dissect the answers and reveal the degree of ‘fluff’ behind the management-speak and glossy brochures. Such Non-financial Reporting (NFR) is still open to dishonesty, but one in a report, a competent auditor can reveal he substance.
Concluding our 12 benefits of ESG reporting, there’s the topic of regulatory compliance. Given that this too is a topic almost without limitation, let’s consider a universally applicable compliance theme: data protection and privacy.
Under the ESG GRI reporting framework, you’ll discover Standard 418 ‘Privacy’. The essence is that the standard seeks to quantify the total number of substantiated complaints received concerning breaches of customer privacy, as well as the number of identified leaks, thefts, or losses of customer data.
To complete this standard, one must also offer evidence of your organisation’s commitment to privacy. Logically, the first point of call will be your internal privacy policy and your external-facing privacy notice. ESG reporting now proves its value. Your consultant will ask how you police the policy. After all, a policy without a process is just so much wasted ink.
Without labouring the point, there’s often a gulf between compliance ‘on paper’ and compliance in practise. Yet we are in an increasingly auditable world, and the window of error is narrowing fast. With ever more governmental system going digital, and supplier’s and customers following suit, we have to be on our game instantly. The message is clear, that documented, audited, processes close the regulatory gaps to reduce the chance of those gaps leading to financial penalties.
Leads the daily operations at ESG PRO, he specialises in matters of corporate governance. Humperdinck hails from Bermuda, has twice sailed the Atlantic solo, and recently devoted a few years to fighting poachers in Kenya. Writing about business matters, he’s a published author, and his articles have been published in The Times, The Telegraph and various business journals.
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