What is ESG Reporting

July 14, 2021

Have you adopted ESG reporting in your business? For decades, the globe has been hurling fast towards self-destruction, characterized by things such as the worsening phenomena of global warming, high levels of pollution, and social injustices.

Each day, Food and Agricultural Organization (FAO) estimates that 80,000 acres of forest land is cleared, while about 100 million carbon-related deaths are expected by 2030.

The list can go on, including the loss of biological diversity and water pollution, which brings us to the big question, “Is there a way out?” One of the answers is ESG reporting. This post is a complete guide to help answer the main question, “What is ESG reporting?

 

What is ESG Reporting?

To understand how sustainability reporting works, the first step is answering the main question, “What is ESG reporting?” ESG reporting is the disclosure of correct business information about the significant environmental, economic, social and governance impacts of its operations.

It is a process that helps companies to set objectives and ways of achieving a sustainable economy. Furthermore, it pools long-term profitability with environmental care and social responsibility.

Although an emerging discipline, the concept has its roots approximately 30 years ago. The UN Conference on Environment and Development (UNICED) held in 1992 in Rio de Janeiro was the first to call for the adoption of sustainability after appreciating the importance of sustainable consumption, production, and prudent environmental management.

However, it was the World Summit on Sustainable Development (WSSD) of 2002 that put more focus on ESG sustainability reporting.

WSSD, which was held in Johannesburg, South Africa, provided the main guidelines for sustainability reporting. In the guidelines, WSSD highlighted the role of ESG reporting in integrating sustainability information into present practices.

So, if you have, say, a manufacturing enterprise, integrating sustainability might include things such as cutting down emissions, adopting energy-efficient models, corporate sustainability programs, and training staff on sustainability. All businesses, from manufacturers to service providers, have a role to play in promoting sustainability.

 

The Main Principles of ESG Corporate Sustainability Reporting

When developing the ESG reporting framework, WSSD was guided by specific principles and it is crucial to look at them carefully when exploring the answer to the question, “What is ESG reporting?”

These principles help to define the characteristics of ESG reporting and promote specific outcomes, including accuracy, transparency and reliability:

·      Balance and Neutrality

This principle is aimed at ensuring that information captured on sustainability reports is not biased. It also means that you should not focus on the positive bit only, but also include the negative aspects.

For example, did the adoption of sustainability reporting result in higher costs of operations, reduced production, and a slump in profits?

·      Accuracy and Completeness

This principle is geared towards ensuring the information provided on the sustainability report is correct and allows readers to evaluate an enterprise's effort toward sustainability correctly.

Try to be as transparent and accurate as possible when generating the report, especially when highlighting the causes and effects of a business’s actions.

·      Flexibility

When some people ask, “What is ESG reporting?" they also want to know how it works for different businesses.

This is where flexibility, as a principle, comes in. Flexibility means that enterprises are allowed to select the approaches that suit their economic environments with the goal of having more positive environmental, social, and economic impacts.

A manufacturer might opt to work cutting emissions and recycling most of the waste from his facility, while a travelling firm might have a bigger impact by supporting the conservation of endangered species. Sure, the activities are different, but they all work together to create a better future for all.

·      Building on Existing Reporting Efforts

As we have highlighted, "sustainability reporting" is an emerging concept. However, there are some businesses that have already started generating their reports, highlighting efforts to promote a better planet for all positively.

This principle builds on such reports, implying that those who had already started the reporting journey are one step ahead. All they need is to synchronize the sustainability reporting to their systems.

These principles are only a few of what informed the development of ESG reporting. Others are materiality, stakeholder responsiveness, timeliness, and practicality.

 

Benefits of ESG Reporting

Sustainability reporting, which starts with setting goals and defining how to achieve them, can have a lot of benefits to your business.

More importantly, the effects of your work will go a long way in curing the planet of the current problems facing it. Therefore, make sure to think about the benefits as you seek the answer to the question, “What is ESG reporting?” Here are some of the main advantages to anticipate:

·      Better awareness about the risks and opportunities for your enterprise.

·      Makes it easier for you to appreciate the link between the financial and non-financial performance of your enterprise.

·      Improving long-term management strategy for your company.

·      Streamlining processes and improving efficiency.

·      Mitigating the impacts of social, environmental, and governance impacts of your enterprise.

·      Building stronger relationships with stakeholders.

·      Enabling all stakeholders to understand the intrinsic value of a company, including both the tangible and intangible assets.

Who Should Adopt ESG Sustainability Reporting?

The answer to this question is simple – all. No matter the size of your enterprise, there is something that you can do to make the world a better place. This is why you should join the rest of the globe in this noble cause. Although not mandatory, some countries are adopting policies for encouraging ESG reporting in their jurisdictions. Some initiatives and standards adopted towards it include:

·      Carbon Disclosure Project (CDP).

·      Science-Based Target initiative(SBTi).

·      Task Force on Climate-related Finance Disclosure (TCFD).

With these initiatives and others, about 90% of S&P 500 companies had adopted sustainability reporting by July of 2020.

According to PwC research, about 65% of investors indicated that adopting ESG reporting was to assist them in managing risks faced by their enterprises. In another report by Bank of America, 92% of Gen Z consumers want to switch to products and services from brands that have already adopted corporate sustainability.

As ESG reporting gains traction, more companies are appreciating the importance of setting clear goals and developing strategies to make positive environmental, social and economic impacts. More governments are also joining the pool, crafting policies to encourage companies to operate sustainably.

To make ESG reporting more effective and rewarding, consider working with DiginexESG to help you understand the concept and automate the entire reporting process. ESG sustainability reporting is the way to go for a better planet for all!

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