How To Report On ESG
For Companies & Why It Is Important

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It’s not enough to just say you’re doing something; reporting on your efforts is a critical step in reaping the benefits of any due diligence. This applies especially to your Environmental, Social and Corporate Governance (ESG) program: you may be working in accordance with ESG best practices, standards and frameworks, but you must report on your ESG activities to prove to third-party stakeholders like investors and customers that you’re doing what you’re saying you’re doing.

This guide dives into how to report on ESG, explaining why ESG reporting is important, how companies typically report on ESG, ESG reporting FAQs, who is responsible for ESG, reporting, what are the pillars of ESG and what should be included in an ESG report.

What is ESG Reporting?

ESG reporting refers to the process of a company disclosing their data related to three distinct areas: environmental, social and corporate governance. Promoting an ESG reporting policy can also have a positive impact on company’s reputation, customer base, and financial performance. ESG reports can be used by companies to assess their performance, target improvements, and achieve their goals. They give a company the opportunity to report how they manage their business ethically, sustainably, and responsibly.

Additionally, corporate ESG data reporting provides a snapshot of a business’s ESG impact to show to investors, customers and other key stakeholders. This helps with strategy and enables a business to provide information about where the company stands on sustainability.

Why is ESG Reporting Important?

ESG reporting and sustainability is important to a corporation because it’s never enough to simply say you’re doing something; you must prove that you’re doing it in order to reap the benefits.

Analysis shows ESG reporting helps companies become more competitive, increases stakeholder support, and boosts company growth.

Investors look at companies’ ESG reporting to determine if they are an organization that upholds strong values, is prepared for future challenges like climate change, and is dedicated to continually improving.

In fact, research shows that nearly half of all millennial millionaires make their investments based on ESG factors.

This statistic will likely grow as the years go on, as there is a natural propensity amongst millennials to invest responsibly (twice as much as older generations). More key stakeholders in leadership positions today also care greatly about non-financial value creation. In fact, 81% of millennials want to learn more about responsible investing.

ESG reporting is also now a financial mandate. In March of 2021, the SEC provided an enforcement warning to organizations that they needed to back up their ESG related disclosures with stronger evidence.

Similarly to SOX, regulatory bodies are requiring that companies must attest to the material accuracy of their ESG statements.

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How do Companies Report on ESG?

Companies tend to turn to widely respected standards and frameworks in environmental, social, and governance disciplines and report on their alignment with their best practices.

These ESG frameworks provide guidance on what to report on and how to report on it. It also is helpful for consumers and investors to reference these public reports in their evaluation of companies against each other. These standards also help stakeholders aggregate and audit ESG reports.

Some examples of ESG reporting standards include:

Companies may make their ESG reports accessible via their website, and sometimes their reports can be accessed on the standard or framework’s website.

Making your ESG efforts and strategy publicly available widens the reach to other stakeholders who can become aware of your ESG practices and ESG information. This allows more people to view your company reports, financial statements, and see exactly how well your business model and ESG strategy are performing.

Who is responsible for ESG reporting?

Typically, boards lead the way on ESG. But it is up to the entire organization to gather the information needed to produce the reports while acting in accordance with the ESG policies set forth for them. Many companies have entire departments of leaders dedicated to carrying out their ESG program. Job titles include VP of ESG Sustainability, ESG Controls Manager, ESG Director, or Sustainability Manager.

What are the pillars of ESG?

The pillars of ESG refer to the implications of each letter in the acronym. “ESG” stands for Environmental, Social, and Corporate Governance. These are the features that are used to measure the sustainability and ethical impact of an investment. Investors that are socially responsible use these 3 sets of criteria when screening for potential new investments.

The environmental pillar refers to how a company’s behavior is impacting the environment. How heavily do they rely on fossil fuels? What are their pollution levels? What is their carbon footprint? Did they recently launch a program to restore the planet, through planting trees or cleaning up waste? This pillar is especially important for companies in the utility, chemical, or energy sectors.

The social pillar considers a company’s behavior regarding issues like employee equality, diversity, health and wellness, product safety, training and development, animal testing, and other social and human rights issues.

The governance pillar speaks to the way in which a company operates internally. Good governance means fostering transparency and upholding a strong value system, and avoiding things like fraud and corruption.

What should be included in an ESG report?

A report that discloses ESG activities typically includes both qualitative and quantitative metrics about the company’s programs.

ESG reporting may include metrics like key performance indicators (KPIs), and other metrics including:

  • Their percentage of environmental impact reduction
  • How many lives they improved the health and wellbeing of
  • What percentage of their products were made via sustainable sourcing
  • How much they reduced waste in their production process
  • Employee satisfaction survey results regarding fairness in the workplace
  • Vendor spending with diverse suppliers, including minority, veteran, disabled, and women-owned businesses.

The metrics used are outlined by the ESG framework they are reporting on their alignment with. These frameworks provide shared language so that companies can report on ESG standards in a way that can be verified and understood by all stakeholders.

Related Post: What Is ESG?

LogicManager’s ESG Reporting Software

ESG is only successful when it’s incorporated into every area of the business. This is one of the reasons why Enterprise Risk Management is crucial to implement before gathering ESG data to report on. Not only does ERM promote good governance, but it also helps significantly with streamlining the reporting process.

At LogicManager, we talk about using ERM to build what’s called an “ESG bow tie.” This method provides a seamless process for gathering, centralizing and producing strong ESG reports. Learn how to build an ESG bow tie at your organization by reading our blog post here.

LogicManager also offers out-of-the-box solution packages to satisfy all your ESG reporting needs:

  • Save time and resources using our taxonomy-driven AI tools. Simply identify a relevant law, standard or framework and LogicManager will automatically identify ways in which you’re already in compliance.
  • Automate the ESG disclosure management and sustainability reporting processes to ensure that your organization is on track with standards like the CDP, CDSB, GRI, SBTi, TCFD, PRI, and WEF Stakeholder Capitalism Metrics.
  • Our Policy Portal makes it easy to view all of the policies you have in one place that are supporting your alignment with any ESG framework.
  • Leverage our Risk Maturity Model (RMM) for a way of actually measuring how strong your enterprise risk management program is, and therefore how strong your ESG program is.
  • Gain access to risk assessment templates, tasks to conduct those risk assessments, and mechanisms to formalize your policies and track them systemically.
  • Our testing and metrics collection capabilities automatically prompt for the necessary monitoring needed on an ongoing basis (and then automatically generate the evidence that you are doing what you say you are doing).
  • Collect control evidence and documentation as you work within LogicManager’s taxonomy, building an audit trail along the way.

In Summary: How To Report On ESG

To conclude, knowing how to report on ESG can seem daunting at first. However, with the right guidance and tools it can be done effectively and is a key part of modern corporate reporting.

Maintaining your company’s transparency in the world of the see-through economy is imperative. Creating a reporting framework for your organization and their ESG performance can ensure that your business strategy is sustainable in all areas. Proven sustainability reporting frameworks can also ensure that your company is able to satisfy stakeholder demands when it comes to publicly reporting on sustainable performance and financial performance.

It’s not enough to just say you’re doing something; reporting on your efforts is a critical step in reaping the benefits of any due diligence. This applies especially to your Environmental, Social and Corporate Governance (ESG) program: you may be working in accordance with ESG best practices, standards and frameworks, but you must report on your ESG activities to prove to third-party stakeholders like investors and customers that you’re doing what you’re saying you’re doing.

Curious to see how LogicManager can help you start building an ESG reporting program today? Schedule a free, customized demo at the link below!