In 2015, amidst mounting evidence of a quickly changing climate, the world came together to sign the Paris Agreement, a commitment to reaching net zero. Since then, governments across the globe have begun implementing non-financial reporting requirements—some as robust as their financial reporting counterparts—to hold nations and corporations accountable for their carbon emissions.
Rewind to a decade ago, when we had just started developing sustainability reporting software. We never could have imagined that what started out as an uber-niche solution for only the most progressive companies would one day become a critical tool for any business that wants to operate responsibly.
In the past year alone, we’ve been receiving more and more questions from companies that want to begin reporting but aren’t sure where to start. So we put together this quick-start guide based on some of the things we’ve learned over the years.
ESG reporting, or sustainability reporting, is the process of issuing a report about your organization’s environmental, social and governance-related (ESG) performance.
The process helps companies not only be more transparent and accountable with their investors, the public and their other stakeholders, but also find ways to measure their impact on people and the planet so they can improve it.
Because the ESG reporting process involves many moving parts, asking the right questions before you start can help you avoid some common pitfalls down the road.
Here are 7 questions you should ask yourself when planning out your sustainability reporting strategy:
No two companies are alike, and the same goes for their stakeholders. Your readers include stakeholders within your organization, such as:
They could include a combination of any of the following groups outside your organization:
Because each of these groups can have widely different needs, concerns and interests, finding out who you’re reporting to and what they care about will help you determine the ESG issues and performance indicators you need to cover in your reports. This is known as determining your company’s materiality.
Your organization’s materiality is a combination of ESG-related factors that present the biggest risks and opportunities to your organization’s success and that are the most important to your stakeholders. The SASB Materiality Finder is a helpful starting point to find topics that are material to your industry.
You’ll especially want to explore your double materiality, which takes into account not only risks to your organization, but also your organization’s potential negative impact on people and the planet.
Your chosen sustainability champion can lead the process of determining what metrics your stakeholders—like your board of directors or a standard-setting organization—want to see.
Companies that don’t have a team member with experience in materiality typically hire an external consultant to conduct a thorough materiality assessment. The results of the exercise will help you hone in on the topics your organization needs to focus on.
Conducting a materiality assessment, paired with guidance from senior leadership, can also help you create a reporting boundary or project scope—that is, determine what data should be prioritized during your first reporting cycle and what can be tackled later on.
A specialist can also help you set up calculation methodologies related to complex, multi-faceted metrics, like greenhouse gas emissions. Once you’ve determined your methodology, our specialists can help you spot any gaps and adapt your calculations to our cloud-based sustainability reporting platform.
Reporting frameworks can help you with your data collection and reporting process by providing not only structure, guidance and specific performance indicators for your reports, but also a way to benchmark your performance against that of similar businesses.
Many factors will influence which frameworks your organization chooses, including how complex the questionnaires are or how relevant they are to your industry.
Some of the most common ESG frameworks and standards we’ve seen businesses adopt include:
Specific industries may also have their respective frameworks, like the Global Real Estate Sustainability Benchmark (GRESB) for the real estate industry or the Initiative for Responsible Mining Assurance (IRMA) for the mining industry, among many others.
If this is your first time venturing into the world of ESG reporting, our sustainability specialists recommend starting with a framework that includes industry-specific questions, like SASB Standards.
Depending on the region and industry your business operates in and your business’s size, you might be legally required to disclose your carbon emissions and other ESG factors.
Current and upcoming regulations include:
By determining which regulators are part of your stakeholders, you can hone in on additional ESG topics your organization needs to monitor and include in its reports.
Sustainability reporting is all about measuring your impact so you can improve it. And to measure your impact, you need data—environmental, social and governance-related data, to be exact.
In some cases, the metrics you want to measure will define how you collect data; other times, it’s the quantitative and qualitative sustainability data you have on hand that will inform the first types of KPIs you can track.
Keeping that in mind, one of the first steps in your reporting process should be to take stock of the ESG information you already have, where it comes from, how far back your records go and what data you weren’t able to find.
Steer clear of pre-packaged KPIs and vague statements about how much your company cares about the planet: you’re looking for quantifiable, objective data at the source.
For example, your company’s utility bills and waste management invoices are a valuable source of granular environmental data. On the social side, you might be able to source diversity and workforce-related statistics from your talent management system or health and safety reports, and you’ll probably find qualitative governance-related information in your company’s annual reports.
Gather all the spreadsheets, PDF files and folders you can find in one place, like a shared drive or a sustainability reporting platform. If you operate in several regions, you’ll also need to list all your worksites. This will help you define different levels of granularity for your data.
Once you know what sustainability information you have and what’s missing, you can determine who’ll manage it.
ESG reporting is interdisciplinary by nature. For a company to become truly sustainable, a sustainability mindset has to be embedded at every level of the organization and across every function.
To start, you’ll need a thorough, organized sustainability manager to coordinate data collection and reporting across teams, sites or divisions. In smaller companies, those responsibilities can be shared by a cross-functional committee of sustainability champions.
You’ll also need a go-to person from each of your departments to provide and approve each type of data. For example, your head of human resources could be your subject-matter expert for people- and culture-related data, whereas your head of procurement might be responsible for supplier, energy and waste management data.
At Metrio, we’ve put together a committee to manage our sustainability initiatives. We find that this is a great way to see the bigger picture, get the whole company on board and keep our team engaged.
If you don’t have someone on your team with a sustainability background yet, you can hire an external consultant to help you plan out your strategy. In fact, many of the businesses that use our scalable ESG reporting platform involve consultants early on to help set a solid foundation and reporting structure.
Once you know who’ll be involved, you’ll want to define an ESG reporting process to help your team collaborate more efficiently.
Many companies have large quantities of data scattered throughout different teams and systems. Their challenge is centralizing it and keeping it up to date.
Whether you’re working with an internal sustainability champion or an external consultant, your specialist will have the difficult but crucial task of developing a regular data collection workflow.
The process should involve each person who’s responsible for providing a different type of data at just the right time. It should also be well defined, so that it can be repeated monthly, quarterly or annually, depending on the step.
You can ask yourself:
What data will be collected within the company, and what will require surveying external suppliers? The more you can decentralize and delegate data entry, and the closer to the ground your data collectors are, the more accurate your data will be—and the more data you can collect.
Will your data be approved by worksite managers, by your sustainability specialist or by a member of your senior management team? Generally speaking, the person approving data shouldn’t be the person who collected it. That’s why our reporting system can have up to two rounds of approval.
When is your usual reporting season? When do you want your first report to come out, and how much time do you have to work on it, realistically? Our specialists recommend giving your team a bigger buffer for the first year while you’re still working out your process.
Using a specialized ESG data collection tool can help you officialize the entire process and make it more efficient.
Companies that are just starting out often gather their data across multiple spreadsheets, whereas companies that are more advanced in their reporting tend to choose a specialized, end-to-end ESG reporting tool to centralize, analyze and publish their data.
Make sure you choose a piece of sustainability software that gives you the flexibility to collect an unlimited amount of primary data. Instead of repeating the collection process for every question, you can instead transform that granular data into any performance indicator or output, based on any reporting framework or disclosure regulation.
You’ll need an audit trail and branded publishing tools to issue investor-grade reports, which can lead to more accurate ratings and rankings.
You should also look for a system with automated workflows, so you can set task start and end dates, schedule automated reminders for data collectors and approvers, and even send surveys to your external suppliers.
By setting up regular data collection workflows and sticking to them, it’ll be much easier to get your collaborators—and the whole company—on board.
Once you’ve worked out your ESG data collection and reporting process (i.e., who your reporting stakeholders are, what aspects of your business need the most improvement, what kind of data and resources you have access to, and which performance indicators you’ll track), you can develop a company-wide sustainability strategy to apply the insights gained from your data.
We recommend setting concrete, realistic and measurable goals for each KPI. Showing your investors and other stakeholders that you’re making progress year after year can give your organization a strong competitive advantage and, more importantly, create value for everyone involved.