For about two decades, companies have been under intense pressure to adopt environmental, social, governance (ESG) reporting after evidence showed it can be material to performance. The unique thing about ESG reporting is that it is stakeholder-driven. Customers, partners, employees, investors, and partners are all demanding more comprehensive disclosures from businesses.
Despite the efforts, ESG reporting is largely voluntary. However, we are now moving towards the mandatory reporting phase where governments make it part of their policies. These efforts have started bearing results, with over 90% of S&P 500 brands publishing annual reports for stakeholders to read about their sustainability efforts. If you are a manager or entrepreneur and your company is yet to start ESG reporting, it is advisable to start the process right away. In this post, we highlight the main benefits of ESG sustainability reporting. We will also outline the leading principles that should guide your ESG sustainability reporting.
What is ESG Sustainability Reporting?
Before looking at the principles to guide your ESG reporting process, let’s get back to the starting point and establish what it is. ESG sustainability reporting is a comprehensive process that focuses on disclosing a company’s information in three areas: environmental, social, and governance. It culminates with the creation of a sustainability report that stakeholders can read to make the right decision about the company. For example, investors want to know if the company uses the best practices and has adopted long-term strategies that can drive success before buying stocks.
While the goal of ESG reporting is providing information to stakeholders, you need to appreciate the long-term target of addressing the planet’s problems, such as global warming. Therefore, do not simply target winning stakeholders but to also make sustainability part of the company’s core operations. Remember to harmonize long-term goals with short-term objectives to achieve the expected ESG goals.
Benefits of ESG Sustainability Reporting
- Helping to cut down the cost of operations.
- Strengthens company engagement with its stakeholders.
- Satisfaction from helping the world to address global warming and other challenges facing it.
- Very useful in building a stronger brand.
- Makes compliance with various laws easy.
- An excellent ingredient for growing sales and profitability of your business.
- You make a bigger impact on the society
Top Six Principles of ESG Reporting
To help companies adopt sustainability in their operations, the United Nations has advocated for a principle-based approach to the way people do business. So, here are the main principles of ESG sustainability reporting that you need to know:
- Businesses should respect and support the protection of human rights in their operations. In ESG sustainability reporting, this should be extended to the entire supply chain.
- Materiality. This principle is aimed at ensuring that only the reporting topics with the greatest impacts on sustainability are focused on.
- Every organization should uphold freedom of association and allow employees to work together for collective bargaining.
- The design and operation of a business should always take a precautionary approach to environmental challenges. Particularly, your company should avoid undertakings whose impacts are unclear. Then, every part of the company’s operations should be directed at helping to make the environment friendly and healthy for all.
- The information that is captured on ESG reports should be clear and verifiable. This is very important to avoid your company’s report getting labeled greenwashed.
- Continuity of sustainability efforts. When starting ESG sustainability reporting, your efforts should be built on previous achievements that the company had adopted. This means that the cumulative effects of ESG sustainability reporting on the planet in the subsequent years will be huge. For example, most companies are aiming to hit zero emissions by 2050.
ESG sustainability reporting appears to be the ultimate tool that all have been waiting for. More companies are now reporting their efforts and stakeholders are finding it easier to determine the companies of choice. As you focus on the principles that we have outlined in this post, make sure to acquire the right ESG sustainability reporting software for your company. Diginex.com has some of the best programs in the industry and you can also work with their professionals to reap more from ESG reporting.