By Helene Melby Brodersen, Head of ESG strategy at EcoOnline
Headline after headline in recent weeks has outlined a sorry tale of climate crisis in the UK and beyond, from record-breaking high temperatures to flash flooding.
With people becoming more attuned to the climate crisis, thanks to these events, there is significant pressure on businesses to report on how they impact the world around them.
One of the most popular frameworks for sustainability measures and strategies is Environmental, Social, and Governance (ESG). ESG is, by definition, a way of judging a company by things other than its financial performance. For example, its policies relating to the environment and employee wellbeing.
The need for corporations to communicate their long-term ESG commitments, openly and honestly, is ever growing as UK government regulations and legislation becomes stricter and stakeholder expectations grow. Investors, clients, and employees all want to know the company’s values and how serious it is about tackling environmental and social challenges.
As the demand for clear and transparent disclosure on long-term climate strategies grows, corporate ESG reporting is rising up the c-suite agenda. Organisations that are future-focused and proactive recognise how crucial it is to integrate ESG considerations into their business strategy.
Furthermore, knowing that more than a third of UK adults report experiencing workplace discrimination, the business case for diversity, equity and inclusion (DE&I) is stronger than ever. With people becoming more attuned to the climate crisis and the workforce prioritising company values in their employment decisions, there is significant pressure on businesses to report on how they impact the world around them.
Ultimately, it pays to be more responsive and candid, especially if businesses want to keep customers and stakeholders happy. Fundamentally, organisations with robust ESG approaches will enjoy increased investment returns, higher talent retention, lowered risks, and improved crisis resilience.
All talk, no action
Alarmingly, research conducted by EcoOnline in June 2022 found that out of a survey of 124 UK businesses, 42 per cent admitted their business currently is without an ESG reporting system. Despite this, 67 per cent flagged environmental activity as a high priority for their organisation, highlighting a disconnect between recognising ESG’s importance and the ability to analyse progress.
The study calls attention to a concerning lack of clarity surrounding the execution and effectiveness of ESG strategies. As businesses face increasing pressure from external factors, with a growing public expectation to address global climate change and social challenges, those who don’t make the investment now are putting themselves at financial, regulatory and reputational risk.
Strive for improvement, not perfection
With so many varying ESG reporting standards, and an increasing number of national and global policies and regulations, there is a substantial knowledge gap between ESG information and reporting.
The good news is that sustainability reporting is about continuous improvement and not perfection. Another essential thing to remember is that organisations do not have to track, monitor, and report every metric within the ESG framework.
EcoOnline recently released its sustainability report, and based upon this, have created a best practice list for the ABCs of corporate ESG reporting:
- Start with the “why”. Understanding what is most material for your business in the first instance will help you to identify which metrics and indicators are most relevant and vital for your organisation
- Involve relevant departments and collect your existing data on environmental impact, employee engagement, and compliance processes. Chances are that you already have a lot of data which can be valuable input towards sustainability strategy and goals
- Build internal knowledge and engagement. Although sustainability seems to be on everyone’s lips, you need to be aware of and work to close the gap between your colleagues’ understanding of the different terms and topics under the umbrella of ESG
Connecting the dots through one platform
Companies need to implement digital management software to provide ESG reporting that is more valuable and effective. This will aid a better understanding of how reporting frameworks can be modified and tailored to flexible ESG targets and selectively chosen in accordance with those most appropriate for the particular size, sector and complexity of the organisation.
Going forward, software solutions can help businesses to feel more confident in the integrity of underlying data sources used for ESG metrics, which in turn will inspire confidence in stakeholders and customers alike in the commitment to new targets. As the public become more conscious of greenwashing, it is imperative that ESG reporting is awarded enough significance.
2 A survey conducted in June 2022 by EcoOnline amongst 124 businesses