2 March 2023
ESG: simplifying reporting
Environmental, social and governance (ESG) initiatives are growing. With an EU mandate, you need to know how to get reporting right.
What is ESG?
Environmental, social and governance covers the non-financial risks and opportunities within a company's activities. It has taken Corporate Social Responsibility a step further in what organisations need to measure and report on as part of their initiatives.
There is a growing expectation for organisations to provide a wider, more inclusive view of business performance that incorporates the context around decisions and considerations around sustainability and employees.
What is ESG reporting?
Trying to measure and report on ESG is still a new concept, and without being mandated there is no set standard to follow. However there are some common themes to include in each area:
Environmental - emissions, pollution, recycling efforts, water usage, transport links, electric car charging points, supply chain and supplier activities
Social - local community support and engagement, the learning and development of employees, diversity and accessibility, health and safety
Governance - executive remuneration, board diversity, corporate behaviour, shareholder rights
Whilst ESG reporting as a who is not yet mandatory, there are some elements which are, such as reporting on greenhouse emissions.
There are guidelines, targets and measures for ESG through the Sustainable Finance Disclosure Regulation (SFDR) of information which must be disclosed. This includes reporting on the adverse impact of investment decisions on sustainability factors, considering sustainability (ESG) risk in investment processes and the provision of sustainability information for financial products. This regulation aims to reduce greenwashing.
As a business-wide initiative, it is up to the board or senior leadership team to take ownership of ESG and the communication of its importance.
However, when it comes to the data and interpretation, reporting responsibilities have fallen into the finance team's remit. ESG reporting varies significantly from the standard financial reports, as they often include non-financial details and narrative.
Mark Jenkins, Chief Financial Officer at MHR said: "Having the ability to identify, record and analyse trends is key before any business can set an agenda. This will allow an organisation to determine any risks, financial or otherwise that are critical to business operations."
Who should report and who shouldn't?
There are no guidelines around the sizes of organisations expected to report on sustainability and ESG initiatives although it's more likely to happen in larger organisations. What is clear is that reporting is growing. Recent research by Vuelio has found that 31% of organisations already have an ESG policy, with an additional 41% considering it.
The increase in organisations marketing their green initiatives shows the public interest in improve sustainability and ethical practices for organisations, which for those who manage this effectively can positively impact the bottom line.