Companies today are facing an increasing demand for transparency on socially responsible and sustainable business practices. They are answerable to their numerous stakeholders, such as consumers, workers, investors and non-governmental organisations (NGOs) that want to assess an organisation’s impact on the world. Environmental, Social and Governance (ESG) sustainability reporting can offer valuable insights and help generate long-term value for stakeholders. It can considerably affect a company’s financial metrics and better inform investment decisions.
What is ESG Sustainability Reporting?
ESG reporting involves disclosing information spanning the organisation’s operations in three domains: environmental, social and business governance. It gives an overview of the company’s influence in these three domains for stakeholders.
The performance evaluation across the ESG factors includes qualitative and quantitative disclosures and helps with investment screening. ESG reporting metrics help investors sidestep businesses that might pose a greater monetary risk because of their environmental impact or other social or governmental practices.
How Lack of ESG Reporting Can Impact Businesses
ESG risks demand more attention from Chief Financial Officers (CFOs) because more and more investors and stakeholders have started attributing value to ESGs. This is impelling businesses to disclose their sustainability efforts via more structured and consistent ESG reporting. Businesses that are not doing anything about ESG risks may get caught unprepared as these pre-financial threats become critical to corporate strategy.
For example, a beverage business may lose water access because of a local water shortage or it may even lose its operating license in neighbouring communities. Likewise, if a tech business doesn’t listen to its seasoned labour force, workforce turnover may rise and the business may lose its competitive edge. Moreover, a corporation manufacturing consumer products may face damage to its reputation and customer backlash if it violates human rights in its supply chain.
Why is ESG Sustainability Reporting Important?
ESG risks aren’t just a risk of doing business. It’s significant to understand the business choices being made and how those choices or knowledge of those choices could affect your long-term fiscal performance. Utilising sustainable risk management tools is more than just adherence to legal and consumer consciousness. It has the potential to unlock hidden value for businesses.
That’s why companies should encourage the adoption of sustainable business practices and report ESG metrics transparently to show how they sustain value over time. By reporting ESG metrics, companies can get the following benefits:
- They can confidently seize a competitive advantage.
- They can enjoy higher returns on their investments, reduced risks and better resiliency during a crisis.
- They can ensure transparency in operations, encouraging concerned investors to consider them as potential investments.
- They can get access to capital markets while securing their license to operate.
How to Get Started
There’s no definite ESG reporting template. However, we can share with you some best practices to help you with ESG sustainability reporting:
- Align your entire company and internal teams around ESG priorities.
- Create an in-house team to generate a reporting framework that includes ESG problems, goals, performance metrics and reporting standards.
- Develop a plan on how to disclose sustainability efforts.
- Collaborate with ESG solutions experts who can offer the resources and insights to fulfil reporting requirements that adhere to stakeholders and industry standards.
- Focus on effective disclosures that are specific to your industry.
Leading organisations are improving their governance and management of sustainability risks, while at the same time looking to connect with a new generation of consumers and shareholders. Companies can use risk management to not only protect value but to power performance.
Our new risk management platform ethiXbase GreenLITE delivers a powerful ESG and sustainability risk management solution that will automatically audit 100% of your supply chain. It combines robust technology and data analytics to support companies and third-party entities across the globe to build and maintain sustainable business practices. We are committed to promoting sustainable and lasting change, propelling the world forward towards a more sustainable future.