July 18, 2022
In the current economic climate, corporate responsibility, sustainable business practices, and eco-friendly strategies are fast becoming essential. However, it’s one thing for an organization to make bold claims about incorporating sustainability into their business practices, greening their product development, processes, and operations, and working towards a net zero strategy. It’s another for them to conclusively prove it.
This is where environmental, social, and governance (ESG) reporting comes in. In this article, we’ll explain what ESP reporting is, why it’s so important for businesses, and how to create a robust ESG report.
ESG reporting is the comprehensive disclosure of environmental, social, and governmental data. As is typical of any disclosure report, the aim of an ESG is to make clear a company’s sustainability and social responsibilities while enhancing investor transparency and rousing other companies to do the same.
An ESG report is an effective way for a company to come clean with investors, clients, and industry peers about what their short and long-term goals are regarding environmental and social impact on the planet, as well as demonstrating a genuine desire for improvement.
Without an ESG report, any company can tout a strong sustainability ethos and make empty promises about their future without being held responsible for their actualization.
As ESG reports become more mainstream, companies will be obligated to not only develop strong social and environmental strategies but also to commit to them wholeheartedly.
A typical ESG report includes both quantitative and qualitative data pertaining to its three main key points: environment, social, and governance.
What is this company doing to support the environment? The environmental section of an ESG report will ask this question, and then look at the following points of interest:
What is this company doing to uplift communities and improve lives? The social section of an ESG report looks at the relationship between a corporation and the social impact it has on the world.
The governance aspect of an ESG report takes a look at what an organization is doing to ensure its investments remain sustainable and steps being taken to prevent (and manage) corruption.
Investors, clients, people and the planet deserve to know what to expect from companies going forward. There are many reasons why ESG reports matter, but there are three main ones that spearhead the growing initiative.
In order to effectively combat climate change and prevent corporations from abusing precious resources, measures like an ESG report can push companies in a more sustainable direction.
To receive ESG compliance, a company must be scored by a third party on its ESG-related efforts. Once a comprehensive strategy has been put together, an assigned third party will grade it based on its risk exposure and ability to meet ESG requirements. The basic steps are:
Some of the approved third parties viable for performing an official ESG strategy assessment include:
In addition to these listed here, there are many other third parties who can provide the same service. In terms of the metrics that will determine your score, that depends on the nature, industry, and scale of your business.
However, the ratings assigned by third parties will center on the three elements ESG stands for environmental, social, and governance. They will be looking for tangible, actionable proof that your company is aware of these important topics and including them in its long-term business strategy.
It’s more important now more than ever for organizations to have comprehensive ESG policies in place. Navigating the regulations and compliance scores can be challenging but there are places you can turn to for advice, structure, and guidance within each element of environmental, social and governance issues.
SINAI is a US technology company focused on optimizing how organizations monitor, analyze the risks of, and reduce carbon emissions. Our leading enterprise software helps companies wanting to develop long-term decarbonization strategies.
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