The FCA now requires companies to disclose how they consider ESG risks and opportunities in their decision-making processes, as well as a prohibition on false or misleading ESG claims. Not only that, they also plan to establish a new ESG disclosure standard, which will require companies to provide consistent and comparable information on their ESG performance and risks. That’s why, if you want to be taken seriously, it’s time to brush up on your reporting skills.
But fear not, we’ve broken down how to demonstrate competence in your ESG reporting into 4 painless steps, any company could adopt. So grab a coffee, sit back, and let’s become ESG reporting professionals together. And for those who love a TL;DR, here are the 4 steps you can follow to demonstrate competence.
- Establish clear ESG goals and targets
- Collect reliable and relevant ESG data
- Ensure consistency and comparability in your ESG reporting
- Engage stakeholders (e.g. investors, customers, civil society) & update regularly on ESG progress
Now, let’s delve a little deeper.
Step 1: Establish Clear ESG Goals & Targets
Just like any successful report, whether it’s marketing, financial or ESG, it all starts with your goals and targets. But you can’t just promise “our office is going to start recycling more”; your goals need to be clear, achievable, and in line with the FCA’s new rules. To do this effectively, it’s important to follow a process, which might include:
- Conducting a materiality assessment to identify the ESG issues that are most relevant to your company and its stakeholders.
- Setting specific, measurable, and time-bound targets for each issue, based on your company’s current performance and industry best practices.
- Prioritising your targets based on their importance and feasibility, and integrating them into your broader business strategy.
- Establishing a system for tracking and reporting on your progress towards your targets, and regularly reviewing and updating them as needed.
By setting specific targets for each of these issues, such as reducing emissions by 25% by 2025 or achieving gender parity in leadership roles by 2030, you can demonstrate your commitment to ESG and attract investors and customers who value sustainability and social responsibility.
Step 2: Collect Reliable & Relevant ESG Data
Search for the data, but be careful where you go looking. If it’s not reliable to the ESG issues most relevant to your company, you’ll be in trouble. To ensure you get reputable data, there are three key actions you can take:
Research data sources
Evaluate data quality
Assess the reliability and accuracy of the data by reviewing the methodology used to collect and analyse the data.
Analyse the data
Interpret the data to determine how your company is performing in relation to ESG factors. Use the data to identify areas for improvement and set goals for future performance.
Step 3: Ensure Consistency & Comparability in your ESG Reporting
This part requires a bit more explanation because of its importance. Maintaining consistency and comparability is vital to demonstrate evident competence in your ESG reporting. That’s why we’ve provided specific examples for each part of the following process.
1. Define your ESG framework
Your ESG framework should include the sustainability issues that are most relevant to your business, the metrics you will use to measure performance, and the reporting standards you will follow.
For example, let’s say you are a manufacturer of consumer goods. Your ESG framework might include sustainability issues such as reducing greenhouse gas emissions, minimising waste, and ensuring ethical labour practices. You might measure performance using metrics such as carbon footprint, waste generated, and employee turnover. And you might follow reporting standards such as the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB).
2. Develop a reporting methodology
Once you’ve defined your ESG framework, developing a methodology for reporting on these issues is important. This should include clear guidelines on how data will be collected, analysed, and reported.
3. Implement quality control measures
This can include regular audits of data to ensure accuracy and completeness, as well as training for employees who are responsible for collecting and reporting data.
Audit areas would include Governance, Innovation, Technology, Customers, Operations and People.
For example, you might conduct a quarterly audit of all sustainability data collected from manufacturing facilities to ensure that it meets your reporting standards. You might also provide training for all employees who are responsible for collecting data on labour practices to ensure they understand the reporting requirements.
Step 4: Engage With Stakeholders
One specific example of how to engage with stakeholders is to use an ESG dashboard (Digitopia for example). This tool can help you track your progress towards your goals and targets, and provide real-time updates to stakeholders. You can also use the dashboard to generate reports and visualisations, which can be shared with stakeholders to demonstrate your commitment to ESG reporting.
In addition to using a dashboard, it’s important to communicate your ESG progress through regular updates and outreach efforts. This can include email newsletters, social media posts, and webinars. By keeping stakeholders informed and engaged, you can build strong relationships and demonstrate your competence in ESG reporting.
While you follow all of our proposed steps, make sure to brush up on the potential legal and reputational risks of inaccurate or misleading ESG information, as well as the potential benefits of demonstrating strong ESG performance, such as improved access to capital and reduced regulatory risk.
How Chesamel Can Support
We’re excited to be partnering with CGI to strengthen our ESG and CSR strategic focus. The Corporate Governance Institute offers education and certification in corporate governance and ESG to aspiring and existing directors around the world. Whether you’re looking to enhance your career as a director, develop practical knowledge insights, or learn how to demonstrate competence in your ESG reporting, our partnership will provide you with everything you need to succeed in ESG and CSR.
Find out more: https://bit.ly/45Y7pWN