ESG reporting is the disclosure of data explaining a business’s impact on the world and its added value in the following three areas: Environmental, Social, and Governance. ESG reporting is often integrated into the annual reporting of a business. ESG can be further broken down as follows:
- Environment: Climate change, carbon emissions, air, and water quality, biodiversity, deforestation, energy and water efficiency, and waste management
- Social: customer satisfaction, data protection, and privacy, gender and diversity, employee engagement, community relations, human rights, and supply chain management
- Governance: Board independence, audit committee structure, bribery and corruption, executive compensation, shareholder structure, political contributions, and whistleblower programs.
ESG can seem overwhelming, and several reporting options and approaches are available to organizations.
So why would an organization disclose its reports in the first place?
If your organization is dedicating time, resources, and personnel to reporting one or more frameworks, it’s important to know why they are important in the first place. Here are three common reasons why companies consider ESG disclosures:
1. To attract investors. Research sights, 65% of investors said their motive for considering ESG issues was to help manage investment risk. ESG Investing gives a non-financial factor for investors to research as a part of their investment analysis process to identify risk and growth.
2. To comply with new regulations. Countries worldwide are increasing regulations regarding corporate ESG reporting. Many companies voluntarily provide their ESG data, even when this is not mandatory, as it reinforces their business strategy and purpose.
3. To streamline your operations. Developing an ESG framework is not an easy task. It’s likely those involved will learn much about their company and its operations when doing so. These insights may help improve cross-departmental communication, identify new opportunities for increasing efficiencies, and repair out-of-date operations.
Third-party frameworks
When it comes to global alignment and standardization, ESG is without. Many institutions are involved in joint efforts to set global standards on corporate sustainability reporting and frameworks. These frameworks are gaining popularity around the globe:
- GRESB Assessments generates the following ESG benchmarks for Real Estate and Infrastructure industries: Real Estate Benchmark, Real Estate Development Benchmark, Infrastructure Fund Benchmark, and Infrastructure Asset Benchmark.
- Carbon Disclosure Project (CDP) runs the global disclosure system for investors, companies, cities, states, and regions to manage their environmental impacts on corporate and city behavior.
- The United Nations Principles for Responsible Investment (UNPRI) is an international organization that promotes the incorporation of environmental, social, and corporate governance factors (ESG) into investment decision-making.
- Sustainability Accounting Standards Board (SASB) connects industry-specific businesses and investors on the financial impacts of sustainability around the globe.
If you need to attract investors, comply with new regulations, or streamline your operations read more about achieving sustainability metrics in The Future of Environmental Metrics.
