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As investors and regulatory policies intensify efforts towards encouraging the disclosure of environmental, social, and governance (ESG) data, companies are faced with unprecedented decisions. Although changing, the current ESG reporting landscape is missing agreed-upon standards, culminating in inconsistent, incomparable, and unreliable reports. This brings us to the main question, “How do you implement ESG reporting correctly?”
Although challenging, the truth about ESG reporting is that the approach you take is what makes it simple or complex. In this post, we highlight some simple yet highly effective tips that you can use to make ESG sustainability porting work.
One of the investors and managers’ mistakes in their ESG reporting efforts is starting with the report itself. In the end, you will need to create a report, but the efforts do not come from the report. Rather, they emanate from the strategy that you adopt. Therefore, it is a good idea to start with a stakeholder materiality assessment.
During the assessment, you should engage with stakeholders to establish what is more important to them and methods of aligning them to the business strategy. With this information, you can now define the metrics targets and goals for ESG reporting. At this point, you will find different reporting frameworks, such as the Carbon Disclosure Project (CDP) and Global Reporting Initiative (GRI), very helpful.
Before jumping to step two, it will be good to start by thinking about where the information will be reported. For example, will you have a stand-alone ESG report, SEC filing only, or a Task Force on Climate-Related Financial Disclosures report?
This step should follow the first one and is very crucial in defining the success to be achieved at the end of the process. At this stage, you need to carefully look at the current processes and procedures to establish if there are any control gaps. This is where you should consider technology to enhance your operating efficiencies and effectiveness. To realize the maximum benefits of ESG sustainability reporting, it will be a good idea to adopt the Right sustainability management software. The software can help you to focus on quality data, implying that the information on the report will ultimately be accurate and verifiable.
This stage is also very important because stakeholders are interested in seeing how your company will implement THE controls identified in the previous stages. To make it more straightforward, you need to determine how to connect the ESG issues with financial reporting. For example, where do you need different policies? You might want to consider things such as the use of raw materials, equipping staff with the right knowledge, and acquiring new machinery.
Sustain and Assurance
Once you commence gathering ESG data, you need to ensure it is monitored progressively. This might include using automated controls and testing all year round to ensure the information is accurate. For example, if you installed new machinery, what is the new carbon emission rate? How does it compare to the previous machinery?
Ultimately, the data you have will need to be presented in a way that captures the audit trail. For example, the amazing results of the emission reduction have to be anchored in the targets and measures installed in step two and three. Note that providing this trail and assurance is now moving from a voluntary focus to a regulatory mode as governments seek to encourage correct ESG reporting strategies. For example, the European Union has proposed assurance (call it verifiability of data) to be included in its laws for company sustainability.
As you can see, ESG sustainability reporting is getting to the next phase where no company wants to be left behind because of demand from stakeholders. Therefore, do not get distracted by others who are doing it incorrectly. Instead, you should follow the steps we have highlighted in this post to enjoy the benefits of sustainability reporting.