ESG reporting has the core objective of enabling interested third parties to gain a perspective on an organisation’s impact across the three topics of Environment, Social, and Governance. Its impact may be used to guide investment, and to quantify the firm’s desirability as a component of one’s supply chain.
However, ESG reporting is no longer merely a tool for investment fund managers. Since 2005, it has matured into a methodology which enables the smallest SME, not-for-profit organisations, and public bodies alike to demonstrate their own characteristics in a measured manner.
Your ESG report may be seen as a way of establishing your organisation’s honesty, integrity, and transparency. What is the reality of how you impact the environment –which is far more than carbon emissions – and how is your organisation run? Does it contribute positively to the community, and does it deliver on promises to be a quality employer? In short, is your organisation a benefit to society?
With hundreds of ESG Frameworks, and considerable variations according to the scale of your organisation, there are several common denominators which typify a legitimate, quality, ESG report:
Your ESG report should be a stand-alone document which helps the reader understand the organisation, its management, and its impact. References for further reading are acceptable, but that data should merely be supplemental;
It is entirely unacceptable to not answer questions or provide data required by the reporting framework. Very few corporations produce reports which meet the mandatory requirements of the most common frameworks, which may be interpreted as being misleading since only an expert can spot such omissions;
There are several permitted reasons for not providing data. These include such themes as there being lack of relevance, no data available, or a subject being out of scope. However, when reviewing an ESG report, a clear warning sign of risk is reading ‘not applicable’ or ‘_______’;
As any politician can demonstrate, bad news can be repackaged. Resist the temptation within your ESG report because openness – transparency – must be its hallmark. If your declarations appear to have been written by a lawyer, then you’ve almost certainly missed the mark. It’s noted that specific accounting statements are necessarily complex, but these must be the exceptions and not the rule.
Governance is the most overlooked aspect of ESG, and yet it’s the most fundamental component. Good governance requires proper disclosure, and this demands a management team which ‘walks the talk’. Think of it as ‘the people-factor’: how you treat your employees and you customers? What of society as a whole? Ask Volkswagen!
Clarity is a key feature of your ESG report, and it must be remembered that concepts such as ‘frameworks’, ‘stakeholders’, and ‘maturity curve’ are alien to many readers. Unfortunately, ESG has spawned 100’s of topic-specific acronyms, but where narratives statements are offered, strive to write clearly to the widest audience.
The internet is awash with the ESG reports of global brands whose ESG reports are comprised of two hundred ESG questions to which more than half have no answer: there’s just a hyperlink to external data. This is unacceptable, and a fundamental breach of various frameworks, such as the Global Reporting Initiative.
Everything within your ESG report should be evidentiary based. Whatever the statement, ask: ‘Could we prove this if challenged?’ and ‘has this been documented?’. Within the EU and UK Sustainable Reporting Directives, expect legislation which puts the organisation and its officers are risk if false or misleading statements are made.
Take a look at various corporate reports and you’ll discover they incorporate extensive marketing pieces. Now see the model example produced by Xerox https://www.xerox.com/en-us/about/corporate-social-responsibility and note how every statement is supported. Don’t be caught out by permitting your marketing team to introduce exaggerations and beware of management teams too!
Your ESG reporting period will tend to coincide with your annual financial reports, but there’s no reason not to issue revisions as may be desired. Unlike so many of the ISO standards, your ESG report isn’t intended to sit on the shelf to be dusted off every three years. It’s all about continuous improvement and disclosure. Celebrate your updates!
At ESG PRO, we work with clients across Asia, the USA, and Europe. We believe the real need is to assist organisations who don’t have the resources of the global conglomerates because they’re finding a lack of affordable and effective resource.
There are vast numbers of small and medium-sized business as well as organisations which are in the not-for-profit sector, public bodies (such as schools), and other institutions whose efforts to improve can deliver significant improvements for society.
Undertaking ESG reporting makes every organisation stronger and more competitive. It’s as pertinent to a small law firm, builder, or school as it is to a ‘brand name’.
Since the majority of organisations have not yet begun their ESG reporting, we steer our clients through the tried and tested Global Reporting Institute (GRI) framework so there a solid foundation.
With the GRI complete, the next logical step is to incorporate the Sustainability Accounting Standards Board (SASB) framework, because this introduces industry-specific components.
From there, there are many choices. The key is to get the basics right first, and to formulate a strategy.
What’s clear is that those corporations with a stronger ESG position are outperforming those without a clear strategy.
The correct emphasis for ESG is continuous improvement. Nob organisation is perfect. And it’s because of this that we take our clients through to a formal ESG rating: an industry specific index which reflects where they are on their overall ESG journey.
Since ESG consulting is about guiding organisations as to how to have a positive impact upon the people they employ, the environment, and upon society as a whole, no one should fear a bad rating unless they truly do have some awful governance!
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.
I hope you enjoy reading this article.
Wherever you are on your ESG reporting journey you should talk to us!.
Swipe-up for help!