What Can ESG Reporting Do For My Business?
In addition to guest posting on the UpCity blog, BrandExtract is featured as one of the Top Marketing Consultants in the United States. Check out their profile!
Environmental, social, and governance (ESG) reporting is quickly becoming the new reporting standard as investors, consumers and regulators begin to expect more information on sustainability from companies in the wake of climate change. It allows brands to express commitment to social and environmental responsibility, while also managing risk and identifying opportunities for sustainable development in a company’s value chain.
As ESG reporting becomes more widespread, companies should familiarize themselves with ESG fundamentals, and consider what role ESG should play in their business practices.
What is ESG Reporting?
ESG reporting responds to a growing desire for information on climate risk and performance on social issues. This framework extends beyond the traditional financial report to include the company’s environmental impact and social concerns. It typically involves an annual report that analyzes a company’s risk across ESG dimensions and uses that data to identify future sustainable business opportunities.
ESG is not only a type of report but also a lens through which companies may manage risk. Companies that collect more data on themselves can perform better because they have a clearer picture of where there is a risk. If a company knows where the risk is, they can address it to ensure better ROIs and investment decisions. As the adage goes, “what gets measured gets managed.”
What Does ESG include?
The core components of ESG reporting standards are right there in the title: environmental, social, and governance topics that are relevant to a given company. But the specific measures of these benchmarks can differ widely depending on the industry and scope of involvement. Here are just a few examples of the countless measures to consider within each segment of ESG:
Environmental
Carbon emission levels
Greenhouse gas emissions
Air quality
Energy efficiency
Waste disposal
Ecological impact
Social
Employee diversity and inclusion
Worker safety
Compensation and benefits
Human rights issues
Communities impacted by business
Governance
Compliance and ethics
Investor relations
Board and committee policies
Reporting processes
Cybersecurity
While many reduce ESG criteria down to environmental concerns, it’s important to address all three components to capture a more complete picture of potential risks that a company faces.
Again, the exact dimensions are going to look different for a pipeline company than they would for a food manufacturer. Major reporting standards, such as GRI and SASB, can provide a baseline framework by which to report. But evaluating the ESG frameworks of industry peers will help determine which specific measures should be included in a report.
What Does an ESG Report Look Like?
In many cases, companies publish their ESG reports in a single document, sometimes in both print and PDF formats. While the format varies depending on the company, many follow a similar structure to the traditional annual report.
ESG reports typically include a letter from the president or chairman of the company to introduce the report, followed by an overview or roadmap to highlight key takeaways. The main body of the document then covers all the necessary ESG information measured by the company, reporting key results accordingly. Lastly, an index in the back end of the report provides more detailed information and data broken out by frameworks.
However, there is no reason why ESG reports should be limited to a single document. In fact, ESG report websites such as Crestwood Equity Partners’ 2020 report can be much more effective at communicating the information to a wider audience. A few of the benefits include:
Easier searchability, resulting in increased visibility
More accessible features, such as screen-reader compatibility, that adheres to WCAG guidelines and allows the report to reach a broader audience
Multiple languages to make the report consumable
A more cost-efficient and environmentally-friendly medium than a print report
Video and animated charts to better tell the story
Raw data downloads for investors in preferred file formats of choice
Communicating an ESG report via a website allows for an optimal communication process. A report that isn’t broadly visible and accessible prevents companies from leveraging all their valuable data to their advantage.
Hear From Industry Experts
Read the latest tips, research, best practices, and insights from our community of expert B2B service providers.
Why is ESG Reporting Important?
As BlackRock CEO Larry Fink wrote in his 2020 letter to CEOs, “Climate risk is investment risk.” By measuring that risk, companies can manage it, and find opportunities for new revenue streams in the process.
ESG reporting also provides opportunities to build up brand integrity. In a 2019 Clutch study, 71% of respondents said environmentally friendly business practices are one of a company’s most important attributes. Transparently reporting ESG data builds a positive reputation among consumers and investors alike by aligning brand values with public expectations.
Although ESG reporting is currently optional in the U.S., the E.U. has already enacted mandatory sustainability reporting guidelines. The SEC has also been developing sustainability reporting recommendations for over a year, and it will likely only be a matter of time before they are mandatory.
Therefore, the correct time to start reporting is yesterday. Companies should report ESG data and metrics before they have, to hit the ground running with an ESG strategy that benefits investors, key stakeholders, and long-term growth alike.
Even for companies that may not see an urgent need to do ESG reporting, it can provide numerous competitive advantages for their business strategy. Major supply chains, such as those of Walmart and Salesforce, have already implemented sustainability requirements for suppliers. Collecting and reporting ESG data will help to ensure businesses meet such requirements and continue to participate in major value chains.
ESG reporting identifies areas of the business model that can be streamlined, allowing for innovative solutions to reduce financial risks, combat sustainability issues, and increase revenue. By continuing to evaluate and report these measures, companies can ensure stable business performance that meets public expectations.
About the author
Jonathan Fisher
Over his 30+ years as a strategic consultant, Jonathan Fisher has worked with a wide variety of brands and collaborated with all levels and departments of those organizations. As a partner and co-founder of Houston-based brand experience firm BrandExtract and its division ESG Reporting Partners, he is integral to shaping the firm’s methodology and strategic direction. Having designed and developed hundreds of annual reports and dozens of ESG, sustainability, and climate reports, Jonathan's background in branding and storytelling proves invaluable when it comes to understanding an organization's customer-relevant promise and how that is measured against the expectations of the market.
