5 Best Practices to Establish Solid ESG Reporting Standards
Detailed ESG reporting is no longer an option or a “best efforts” activity for companies. ESG reporting standards are the nucleus of your sustainability strategy. Furthermore, it’s something investors, stakeholders, employees, and communities are watching very closely. These standards refer to the guidelines and requirements for disclosing information on environmental, social, and governance aspects of an organization’s operations.
ESG reporting standards are also very different from frameworks. ESG reporting frameworks provide guidelines for ESG reporting, while standards give the specific tools and requirements to follow through on those principles. In other words, standards translate frameworks into action by not only defining the “what” but also “how” the reporting will be executed.
Companies must leverage both frameworks and standards together to ensure their reports make sense as individual documents when being compared. However, this article will dive into ESG reporting standards specifically, providing you with best practices to help you build your strategy for a more sustainable future.
ESG Reporting Standards: 5 Best Practices
1. ESG Dream Team
Establishing ESG reporting standards cannot be done in a silo. Your company must build a cross-functional ESG team to identify all aspects of your plan. Compliance, regulations, stakeholder expectations, and the general evolution of global ESG practices are just a few elements that must be monitored and kept up to date regularly. Leverage the skills of your safety, IT, leadership, and HR teams to build your ESG dream team.
2. Pick an ESG Framework, or Two
ESG frameworks exist to guide your ESG reporting standards. Here are three key organizations to explore:
International Financial Reporting Standards (IFRS): Developed by the International Sustainability Standards Board, the goal is to create a set of disclosure standards that can be used globally to report ESG data to investors.
Task Force on Climate-related Financial Disclosures (TCFD): Companies should use the TCFD’s guidelines for voluntary climate-related financial disclosures to inform investors about the risks and opportunities posed by climate change.
Climate Disclosure Standards Board (CDSB): to ensure inclusion of ESG reporting in mainstream corporate reports such as annual reports, reports to the community, etc. At one point, the CDSB framework was being used by 374 companies in 32 countries before its consolidation into the IFRS Foundation in 2022.
3. Focus on Key Metrics
You must have a clear understanding of the ESG metrics you need to track and report to stakeholders. Your ESG Dream Team needs to analyze stakeholder expectations, local and international regulations (such as the new Canadian Child Labor rules), and compliance with client expectations. It’s also important to have a clear understanding of what is important to your employees. Having a strong ESG practice goes a long way for employee retention.
Once you establish the key metrics you can track and analyze, ensure they align with overall corporate ESG goals. Make sure they’re measurable and attainable, then find ways to improve your metrics every year.
4. Determine Reporting Formats
Your ESG reporting standards should indicate the format you use when presenting ESG metrics and disclosures. This may include data categories, the level of detail for each metric (think Scope 1, 2, and 3 emissions, for example), and how the information is presented. To ensure consistency, establish a reporting methodology you can use year over year.
5. Leverage Technology
For your ESG dream team to do their best work, they need an innovative software platform to help them gather data, analyze it, and generate reports. Partner with a company that prioritizes ESG and has its finger on the pulse of emerging global frameworks and regulations.
Partner with an ESG Expert to Help You Put These Best Practices into Action
ESG reporting standards are essential for companies to enhance their sustainability reporting and meet the increasing demand for transparent and standardized ESG disclosures.
By following the best practices outlined here and finding the right solutions provider, you will be well on your way to establishing a strong and sustainable ESG practice. Allow us to work with you to configure a solution that fits with the growing needs of your business.
Contact us today to learn more.