How To Add Further Clarity To Your ESG Reporting
As ESG has gained more public attention, investors, regulators, and other stakeholders have been pushing companies to increase their transparency around their sustainability efforts. From their campaigns to their disclosures, various groups are involved in this shift. It is now possible that the role of the chief financial officer (CFO) will change dramatically as this movement progresses.
In some places, ESG is met with a lot of resistance, however, other countries have been steadily embracing this and have been working to add clarity to ESG reporting. After all, keeping track of, reporting on, and understanding the significance of numbers has historically been difficult.
Fortunately, in this part of ESG, regulators, with the EU Corporate Sustainability Reporting Directive (CSRD), and investors, are spearheading this push. This will speed up the pace of reporting standards and education among the general public. That said, disclosures are still challenging, and standards will take time to be implemented and understood.
For your own ESG reporting, here are some things to keep in mind when looking to add clarity.
Shop For Tools
Because ESG reporting will become mandatory in some areas, organisations are investing in various technologies to help. These tools collect, analyse, manage, and report information from across large organisations. This effectively creates an entirely new industry as more companies join in to offer these services. A shortlist for 2023 is available here.
While corporate tools are sophisticated and tailored-made for complex organisations, more general tools for SMEs will appear in coming years. Existing tools might face changes as well. Existing accounting and reporting systems will be tested to ensure compliance, which might mean making modifications to those systems.
Work with the tool that fits your organisation size and complexity. Keep it simple. This will help you maintain clear reporting objectives and consistency.
Use Materiality Maps For Visualization
There are several actions businesses can take right now to ensure reporting has more clarity. The first method is to use materiality maps. What these maps represent is a way to show which ESG topics matter most to a company’s performance and strategy. Those topics would be based solely on materiality, along with stakeholder interests and priorities.
Similar to how you would create a customer profile, this essentially incorporates what the company and the people who engage with it expect the company to care about and do. This map depicts what will add the most value to the company in terms of ESG.
MSCI provides an excellent overview of how an industry map is structured.
Anchor To UN’s SDGs
The United Nations released a series of Sustainable Development Goals to work on throughout this decade. In it, there are 17 universal, comprehensive goals that can serve as starting points for what agendas and priorities companies can take through 2030.
Because of how significant these are, reporting on these issues now and into the future will focus on these aspects. For further clarity, focus on the key areas where these SDGs connect to what the business is currently doing.
Time ESG Reporting With Financial Reporting
Better yet, release one report that covers both topics in tandem. Investors are now starting to become interested in both of these topics, and it can be disorienting for them if both reports are out of sync in terms of timing. With ESG overall being more important, getting the timing right will be crucial now and into the future.
Follow Other Reliable Recommendations
There are several reliable reporting standards created by various entities. Some examples are the Carbon Disclosure Project, the Dow Jones Sustainability Indices, and the Sustainability Accounting Standards Board. These are excellent resources for developing your reporting standards.
The Task Force on Climate-related Financial Disclosures also offers established recommendations. ESG reporting consistency is crucial when it comes to clarity, and relying on trusted and well-established sources is a good way to go.
Explain How ESG Is Part Of The Business
Anything new in the world presents both risks and opportunities for businesses. Change is the only constant, yet necessary for development and growth.
What will help in the future is for companies to explain how venturing into ESG and adopting certain values will help shape the company moving forward. By understanding the possible risks of the project and what there is to be gained from it, people can better understand the impact and change that this could bring. Bookmark our Featured Articles or follow our LinkedIn to keep up on ESG insights.