ESG reporting stands for environmental, social, and governance reporting. It is a set of criteria. It was created to help investors rate certain company’s ethical standards.
ESG performance reporting is now highly considered. If you’re a new business owner, we’ve got you covered on what is ESG and why it is crucial to your business’ success.
What Is ESG Reporting?
ESG reporting is a specific disclosure of company data focused on three aspects of business performance. This data focuses on environmental initiatives, social responsibility, and governance.
Environmental initiatives focus on short and long-term environmental impact. Topics will vary by industry. In general, the topics to focus on are climate change, carbon emissions, biodiversity, pollution, and waste management.
Social responsibility analyzes people relations. Both internal and external. An investor will look at everything from customer satisfaction to data protection.
Governance focuses on company leadership. Infrastructures such as board diversity are explored.
These reports help investors screen companies. Some companies choose to integrate this data into their annual reports.
Since ESG is more widespread, it is important to realize investors have certain expectations when looking through reports. Below we’ll discuss important ESG reporting frameworks.
While ESG reporting doesn’t have mandated criteria, the influx of reports has created unspoken rules. There are many ESG experts today. They can help you create a cohesive report.
Some companies will benefit from a separate ESG report while others will benefit from a comprehensive company report. Below are tips and strategies commonly used in ESG reports:
- Identify the shareholders invested in and impacted by your company
- Highlight the sustainability issues in your industry. Discuss your company’s initiatives to improve them
- Include trackable performance metrics
- Explain how your ESG efforts align with your business strategy
- Scan the industry for emerging ESG issues. Discuss what might affect your stakeholders and create a strategy to tackle those issues
An ESG report should focus on a company’s environmental, social, and governance opportunities and threats. These should be connected with company-wide value creation. Discuss your short-term, five-year, and ten-year plans.
Why Is ESG Reporting Essential?
It is a myth that companies need to sacrifice ethics for money. It is clear from past company’s ESG troubles that chasing cash doesn’t always mean more money.
BP’s 2010 oil spill caused billions of dollars in losses. The environmental impacts were detrimental. Many shareholders left the company.
Today, companies are now realizing that being sustainable isn’t just better for the planet. It is also better for their bottom line. Investors are realizing this too.
This realization is what’s stimulating the release of ESG reporting from thousands of companies. Brainstorm what environmental, social, and governance issues matter most to your company.
From there, work with a financial advisor. Together, create metrics that you can track to measure your company’s impact.
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