Relentless progress towards a global convergence of ESG reporting standards means that companies should be aware of the ESG reporting dos and don’ts. Moreover, disclosing ESG performance is no longer a competitive advantage, but an investment strategy. Thus, having a clear picture of how to approach the process is essential to implementing effective, ethical ESG reporting practices.
What is ESG reporting?
ESG reporting is the disclosure of environmental, social and governance data. In other words, it provides qualitative and quantitative information about how a company manages its impact on the environment, its effect on the community and the accountability of its leaders. Thus, stakeholders can align their investments with their values and avoid companies that disregard environmental damage, neglect social matters, or are corrupt.
ESG reporting delves into:
- how a company manages its environmental impact, covering aspects such as carbon emissions, resource usage and sustainability initiatives.
- how a company engages with the community, showcasing initiatives that contribute positively to societal well-being.
- the governance structure, emphasizing the accountability of company leaders and their commitment to ethical business practice.
- how a company’s overall impact contributes to its image as a socially responsible and ethically conscious entity.
Dos of ESG reporting
In addition to implementing suitable ESG reporting tools, keep the following in mind to guarantee a seamless strategy that complies with ESG reporting requirements:
- Create a dedicated team for the ESG reporting process.
- Choose the right ESG framework to structure how the report and its information will be communicated.
- Set your ESG reporting goals and make sure that your targets are measurable.
- Identify stakeholders to align the company’s goals with their expectations.
- Ensure transparency to foster trust among stakeholders, providing investors with information to assess risks and opportunities.
- Review, update and improve every year.
Don’ts of ESG reporting
These are some of the main ESG reporting practices that you should avoid:
- Greenwashing, which means overstating what you are doing or attempting to appear committed to ESG without taking any action.
- Greenhushing or the deceptive practice of deliberately withholding information regarding a company’s green initiatives for fear of reputational risk.
- Neglecting third-party verification.
- Disregarding trends since achieving a strong ESG strategy involves successfully navigating new regulatory frameworks, disclosure requirements, stakeholder activism and transparency expectations.
- Inconsistent and isolated ESG reports.
ESG reporting software
Cross-department collaboration to compile, analyze and report financial and non-financial data is one of the main challenges of ESG reporting. In this regard, the right ESG reporting software guarantees a single source of truth to plan and update your strategy, showing investors and regulators that you take it seriously. An ESG reporting solution should cover the entire process, ensuring streamlined compliance, flexibility and reliability, as well as including the following functions:
- Collect, reconcile and store from multiple sources in a single system.
- User-friendly ESG reporting platform that can be accessed by all stakeholders involved in the process.
- Integrated ESG reporting.
- Enable reporting for local management and audit.
- Control over complete audit trails, data lineage and transparency.
- Keep up with changing frameworks and the latest ESG reporting standards.
The following 5 tips can help you choose the right ESG reporting software for your corporate performance management strategy.