Environmental, social and governance (ESG), also referred to as sustainability reporting, has become a critical component of any company’s success with investors, stakeholders and the public at large. Corporations of all sizes and across most industries, such as engineering and mining, consumer goods and transportation, to name a few, have adopted ESG to some extent.
In their 2020 survey of sustainability reporting, KPMG found that “80 percent of N100 companies worldwide now report on sustainability.” The KPMG N100, for context, refers to a global sample of 4,900 businesses that represent the top 100 companies by revenue across 49 countries included in their research.
Meanwhile, KPMG also reported that since 2011, 90% or more of the G250 have reported on their ESG performance. The G250 refers to the 250 largest Corporations, globally, by revenue based on Fortune 500 rankings.
In our last article, we brought you 3 key tips from our ESG software experts on how to avoid the common pitfalls of ESG reporting. This time around, we’ll address another 4 important recommendations when it comes to ESG disclosures and how to overcome the challenges most businesses encounter.
Our team has helped countless large organizations adopt and even improve their climate disclosure and reporting since 2009. We even created an ESG reporting strategy planning guide to help businesses starting on their sustainability journey.
From the challenges associated with ESG data collection to choosing the right KPIs to include in your reporting, how to avoid being labeled with “greenwashing”, how to tackle double materiality assessments, and more, you’ll be able to find helpful tips and takeaways from our team below.
Countless organizations have faced and overcome the same hurdles before you, so you can benefit from their experience, recommendations and resources.You’ll likely also have to consider new legal requirements and challenges that are specific to your business. All of this involves doing a bit of research.
Milena recommends carrying out a double materiality assessment. If you look past the name, a double materiality assessment doesn’t actually require two separate assessments or draw two separate matrices.
To explain what a double materiality assessment is simply, it requires you to gather evidence, assess, and explain why issues you highlighted are material both from the “impact” and “financial perspectives. If you’re able to cover how the topics your company is reporting on are financially material to your business and material to the market, people and the environment, then you’ve successfully carried out a double materiality assessment.
Most importantly, Milena recommends staying up to date on corporate accountability and disclosure laws. You’ll want to know the minute changes are announced to determine if and how they’ll affect your business. If you’re in the U.S. for example, you might want to stay informed on the SEC climate disclosure proposal.
Visiting forums and conferences, such as Economist Impact’s Sustainability Week and Greenbiz is a great way to connect with the wider network of sustainability experts from companies across the world. You can also take advantage of a number of online tools to get your employees engaged, such as sharing this personal carbon footprint calculator with them. Needless to say, the IPCC’s latest assessment report for emissions factors is a great reference point as well.
Julien Belisle, who heads our business development team, has a simple reporting hack: Look at published ESG reports and materiality maps from similarly sized companies in your space and industry.
The most important factor in establishing a single source of all truth with your ESG data is asking yourself - what data is available to me and where does it come from? It’s great to have your KPIs figured out, but it’s only useful if there is data behind them. You need to have a strong understanding of where your data sources come from before you can streamline your data collection and plan your reporting.
Environmental metrics are simple to quantify because they’re measurable, whereas social metrics are qualitative and more difficult to report on. There is always a fine line between greenwashing and solid metrics when it comes to the “S” in ESG.
If you want to accelerate your data collection, you’ll need to consider the best way to collect and get approval at the corporate level. As a general rule of thumb, you’ll want to have a different person to approve the data than the person collecting.
It’s always a good idea to have a second pair of eyes on the data you’ll be disclosing. Many organizations have a small team of core people that handle everything, but you’ll want to decentralize and have key roles that are close to the ground, entering the data, with at least one layer of approval - possibly two. For example, energy metrics are generally entered at the site level and approved by corporate management, who actively look for discrepancies.
Meanwhile, indicator selection should depend on how well your team knows your organization’s materiality. For many corporations, the highest levels of emissions come from scope 3. SASB (or ISSB) is a good starting point for industry-specific standards.
Your company will evolve over time, and the ESG reporting tool that you choose should be able to evolve with you.
Some companies base their entire sustainability reporting process on collecting data to answer specific questionnaires and populating information into spreadsheets, docs or PDFs. But as soon as the disclosure laws or reporting frameworks change, they have to build the bulk of their answers from scratch again.
In fact, we’ve seen companies build out an entire reporting process with limited software just to start the process over again in more robust data collection software.
That’s why it’s important to choose ESG reporting software that uses smaller, more versatile building blocks of primary, unaggregated ESG data.
Granular data can give you the flexibility to answer any reporting or disclosure questionnaire.
Gabriel Lazar is an account manager at Metrio. He works with many large organizations with locations all over the world.
He recommends turning ESG data management into an ongoing process. In other words, once you’ve built your first report, make sure you continue inputting data every month.
By spending only a few hours a month on reporting, you can avoid last-minute crunches and missed reporting deadlines. Gabriel also suggests adjusting your process throughout the year rather than changing it all at once after your report is published.
Before starting a new reporting cycle, you can also take a look at last year’s post-mortem to see what went well and what can be improved on.