The Pressure to Report

These days, businesses are no longer just accountable to their customers or a single owner. Everyone, from shareholders to clients to the larger community, are demanding transparency and accountability. It’s not enough to simply make a great product or offer a quality service, companies need to show they’re operating ethically and sustainably. To meet this requirement, many businesses are implementing Environmental, Social, Governance (ESG) reporting programs. These programs help relay the details of everything from a company’s carbon footprint to its metrics around diversity and inclusion, to its corporate governance and decision-making. Putting all that information together can be a daunting task, requiring input from multiple departments, locations, and sources.

In this article, we talk about what ESG reporting is, why it’s important, and how to report on ESG in a way that doesn’t divert unnecessary resources away from a company’s regular operations.

What is ESG Reporting?

ESG reporting involves reporting across three key areas: environment, social, and governance.

Environment

ESG reporting involves reporting across three key areas: environment, social, and governance. Environment While companies may have some information on their direct emissions, also known as Scope 1 emissions, such as burning natural gas to heat the building or using pollution control technology to reduce wastewater discharges, ESG frameworks also require reporting on what is called “Scope 2” and “Scope 3” emissions. These are indirect emissions from sources like purchased electricity, as well as emissions from the larger supply and value chain. Showing you have all your environmental ducks in a row has moved beyond legal compliance. Stakeholders want to see that businesses are taking the initiative to reduce their environmental impact.

Social

Social reporting in ESG allows companies to disclose how they foster people for growth and success, and how those successes ripple out to the larger community.

Governance

Governance reporting looks at an organization’s internal operations and decision-making. It considers operational controls and procedures, how companies educate themselves on regulatory changes, and what they need to do to maintain legal compliance.

Why Do ESG Reporting?

ESG reporting is currently voluntary in most jurisdictions, but many companies have implemented ESG reporting frameworks for a variety of reasons, including:

To meet client or vendor ESG requirements.

Since ESG reporting standards ask companies to disclose information on their operational impact, including their supply chain, upstream or downstream companies may implement their own ESG programs to fulfil these demands.

To manage risk.

While companies always want to highlight their successes, a proactive ESG program can help identify risk areas and opportunities for improvement, which are then highlighted in subsequent years’ reports.

To court new investors.

Companies looking to grow through new investment need to show they’re a good bet. A complete ESG reporting program, including several years of verifiable data, shows potential investors the company is committed to environmental responsibility, an equitable workplace, and transparent decision-making from the top down.

To meet industry standards and expectations.

This includes energy, automotive & transport, manufacturing, hospitality, services, financial services, government, and technology sectors. Reporting within and across industries can help companies benchmark performance.

To prepare for upcoming and potential regulations.

Governments like Canada, the USA, and the EU have already released plans to implement mandatory climate disclosure requirements, and more are sure to follow as we approach the 2050 deadline for reducing global emissions.

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Image credit: iStock.com/Happy Kikky