ESG reporting is a complex and evolving process, no matter the size of an organisation or business. The exponential growth of ESG requirements and the importance of ‘sustainability’ means that the development of accurate and impactful ESG reports is ever-so crucial. The European Union’s recent adoption of key laws to ensure they can reach their 2030 climate targets, and the influence of the Corporate Sustainability Reporting Directive (CSRD) on over 10,000 foreign companies means that ESG reporting will continue to define the long-term success of companies and organisations of all sizes around the world.
Not only does ESG and sustainability reporting allow for transparency surrounding the environmental impact of an organisation, but this report also acts as a key lever for conversations to be initiated with key stakeholders. Furthermore, annual ESG reporting sets a baseline for organisations to measure changes against the future, whilst simultaneously allowing organisations to identify actions that could be taken to improve their ESG performance. Such ESG engagement has been found by Harvard to increase sales through improving customer loyalty and satisfaction.
In order to efficiently prepare an annual ESG report which meets international standards, and the demands of both internal and external stakeholders, organisations must ensure the following steps are closely considered:
1. Determine the scope of the report
Firstly, companies need to determine the contents of the report through evaluating the nature of ESG topics that are most relevant to the organisation, its stakeholders and reporting requirements. A materiality assessment is a useful tool which can be used to better understand which topics align with the ESG and sustainability strategy of an organisation, along with the topics required to ensure the development of an impactful report. Furthermore, industry benchmarking may be utilised as a tool to understand which topics, key performance indicators and reporting frameworks are most commonly used within the relevant industry and market of an organisation. Companies can utilise such information to ensure they can provide relevant data relating to their management and performance on ESG topics.
2. Pursue alignment with reporting standards
Whilst not obligatory, following third-party ESG reporting standards and frameworks is a key step that should be taken to ensure accuracy and efficiency within the preparation process. Frameworks, such as those developed by the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB), provide useful guidance on reporting material across a range of industries. Furthermore, these standards utilise robust and systematic disclosure processes that assist in making reports more accurate and comparable, thus increasing the value of these reports to the internal and external stakeholders of companies.
3. Develop a comprehensive report outline
Following the assessment of which ESG issues will be included within the report and which reporting framework is most relevant, the next step is to develop a report outline. This outline should give a clear and sequential overview of the key elements which are to be included within the report. The outline may be structured around the key themes which are to be disclosed within the report, or it may follow the key pillars of the organisation's ESG strategy. Companies may then choose to develop a data inventory. A data inventory is built off the basis of the report outline and serves as a repository for all relevant ESG data that is to be included within the report, whilst also ensuring there are no gaps in data.
4. Collect and evaluate data
Once an outline of the report has been developed, data and content pertaining to relevant ESG topics within the report should be collected. Sustainability officers and financial officers should work in collaboration whilst liaising with internal stakeholders and data owners to ensure the efficient collection of data used to reflect upon the ESG strategy of an organisation. To ensure quality and accuracy within key data points and metrics, the use of internal audits and external assurers is fundamental.
5. Prepare and design the report
Once all the required information has been gathered throughout the collection process; the content and narrative of the report should be drafted. The content of the report should clearly communicate the organisation’s approach to their sustainability and ESG strategy, policies, management, and performance on key issues. Furthermore, internal stakeholders should be engaged (e.g. marketing or legal) to acquire approval across key areas such as content, language and tone of voice. Once the final draft of the report has been approved, it is essential that an internal marketing team or external graphic designer is assigned to ensure the report contains meaningful graphics (e.g. charts, graphs or tables) and is visually appealing to ensure the report is easy to draw insights from.
6. Publish, reflect upon and improve ESG performance
Finally, once the final report is ready to be published - various communication channels, such as the company website, press releases and social media, should be leveraged to ensure all key stakeholders can easily access the ESG report. Following the publication of the report; organisations should debrief with their key stakeholders to reflect upon any gaps within their ESG strategy and reporting, areas where they can improve, and what commitments should be made moving forward.
Companies that wish to deliver impactful and transparent reports must therefore not only align their resources towards ESG reporting, they must incorporate sustainability as a central focus within their wider supply chain and operations. Effective and aligned reporting allows companies to set emission reduction targets, reduce their emissions through tailored plans, and communicate their progress. All this whilst undergoing continuous improvement and significantly contributing to several strategic performance measures - such as;
- Cost savings: Mitigating the effects of climate change through ensuring compliance with ESG regulations helps companies cut costs.
- Risk reduction: ESG and sustainability reporting allows organisations to gain a comprehensive understanding of their operations; thus ensuring environmental, social and financial risks can be minimised.
- Enhanced efficiency: The information-gathering related processes involved with reporting means companies will be able to enhance their decision making abilities, and thus their operational efficiency.
- Increased access to capital: With Oxford University finding that more than 80% of mainstream investors now consider ESG information when making investment decisions, transparency is increasingly important among both internal and external stakeholders. Therefore, ensuring the alignment of internal governance will be key to increasing the ease at which companies can access financial capital.
- Improved brand image: As found by Nielsen, sustainable product sales have grown by nearly 20% since 2014. Accordingly, consumers are evidently looking to support companies that are acting towards a more sustainable business model. As such, aligned ESG reporting is a negotiable for businesses wishing to bolster their reputation.
- Innovation: Defining areas of strength and weaknesses is key to unlocking opportunities for innovation.
Accordingly, the aforementioned guide should be closely considered at an organisational level to ensure that ESG reports are prepared and delivered in an efficient and effective manner. Utilising these steps as a guide and seeking continuous improvement within the areas of ESG and sustainability will allow companies to ascertain a competitive advantage through ensuring they are compliant with relevant regulations.
It is never too early to start preparing for the upcoming reporting period. Book a demo of Plan A’s trusted sustainability solution today.