Research from Grant Thornton’s International Business Report (IBR) survey shows that sustainability is now a major priority for ASEAN businesses, with 74% believing sustainability to be as important or more important than financial success. Many companies today set sustainability ambitions to future-proof themselves — and these include the desire for a sustainable recovery from the pandemic, to improve operational efficiency and investment, and client pressure.
Having a clear and more sustainable future is now more than just a slogan, but an actual global aspiration like the UN’s 17 SDGs, for instance. An increasing number of businesses are committing to renewable energy investments, green practices and operations, clean technologies and products, and social protection initiatives.
And as future-forward enterprises put greater emphasis on sustainability, they are required to provide information on non-financial aspects metrics—or the ESG factors. Learn about ESG reporting and the merits of reporting on a formalized sustainability agenda.
Why ESG Reporting is Important
As with all disclosures, ESG reports aim to shed light on the sustainable activities of a company. It enables the business to be more transparent about its risks and opportunities in sustainability. But besides its part in convincing more companies to be more sustainable, ESG reports are quickly becoming a critical requirement for corporates all over the globe.
In Singapore, SGX announced mandatory climate reporting starting FY 2023 for businesses in the financial, energy, agriculture, and food and forest products industries. SGX also provided a list of core ESG metrics that issuers can use for their reporting. As for Malaysian public listed companies, the International Sustainability Standards Board (ISSB) released two proposals for new reporting standards, aiming to promote a unified approach to mandatory ESG reporting.
In addition to that, Hong Kong Exchanges and Clearing Ltd (HKEX) issued a revised version of their ESG reporting guide in 2020 stressing that companies will need to give an explanation if they refuse to disclose. Hong Kong-listed companies are required to comply with the mandatory reporting on climate change-related information. With the growing mandatory regulations around sustainability reporting, it only makes sense for organizations to comply—particularly if they want to future-proof themselves.
What Makes an ESG Report Stand Out
The data collected in the ESG report can help companies improve their culture and reputation and even draw more investors into the business. In the investor survey from PwC, 79% of the respondents reveal that ESG risks and opportunities are crucial aspects of investment decision-making. A quality sustainability report, backed by a robust ESG assessment, gives a company an opportunity to tap capital or funding to efficiently roll out ESG-specific projects
Investors and other stakeholders want an ESG report that stands out — meaning it should meet their information needs and be assurance-ready. That said, here are the attributes of a good ESG report.
Credible
Transparent ESG reports are imperative to investors and customers. Regardless of the location or format of the disclosure, all disclosed information must be accurate. Any material omissions or misstatements could lead to liability. So, besides adapting to reporting standards and regulations, materiality assessments and external assurance should be considered to support investor confidence and quality control.
Balanced and Complete
Data in the ESG report should show no bias. It should exhibit balance, which means reporting on both the positive and negative aspects of the company’s performance. Comparing them to previously reported targets and projections is also advisable. Completeness is another aspect to consider when creating your ESG report. Check the information’s level of preciseness or specificity, which might include cost and benefit concerns and future-oriented plans.
Ties with strategies
Your company’s sustainability agenda or plan should be consistent with the overall business strategy. Start by reviewing sustainability developments and recommendations regarding their relevance to the company. Make sure to also work with other groups like your management committees or investor relations team so you can be informed of ESG-specific queries or issues that you can address in your sustainability reporting process.
Consistent and Comparable
ESG disclosures must be aligned with widely used reporting standards to make them comparable among peers in the same industry. Using the quantitative and qualitative indicators, the report can provide a better picture of the company’s sustainability efforts. And to support investor confidence in the provided data, companies must consistently present these indicators.
How a Compelling ESG Report Impacts Your Organization
By 2025, global ESG assets are expected to hit over $53 trillion, which is more than a third of the projected total assets of $140.5 trillion. This is a clear indication that investors and younger generations are looking more critically at the sustainability performance and impact of the company they want to invest in and support.
At the same time, legislators are moving toward making sustainability reporting a legal obligation — increasing the demand for compelling and accurate disclosures. Here’s how a quality report impacts the business and its long-term value creation:
Increased focus on the ESG aspects
Topics like climate change, social justice, and human rights have not been the usual top priorities for companies. Some find it difficult to routinize sustainable practices, involve all employees, or have issues with managerial commitment—something sustainability reporting can help with.
Besides being mandatory in most states, ESG reporting enables companies to announce such sustainability goals and translate them into actionable plans across the organization. Not only they could track their sustainability activities but also become more accountable for their impact and future goals.
May it be reducing carbon emissions, creating safe working conditions for employees, or establishing strong risk management and board structure, companies can make continual and attainable progress. With sustainability reports, organizations can capture and examine their ESG data in a broad range of metrics.
Improved stakeholder relationships
ESG reports that contain compelling sustainability narratives, which most stakeholders want to see, can put the company in a good light. Increased engagement with stakeholders can put the company in a better place when responding to a changing business landscape. Hence, a top-notch report cannot only keep a company accountable for its promises but also push it out of its comfort zone to form better relationships with stakeholders or investors.
Better Risk Management
ESG reporting enables companies to build strong sustainability practices by identifying ESG-related threats. The stronger your sustainability performance is, the lower the incidence rate of revenue shortfalls, fraud, or litigation. The ESG report also allows organizations to look into unaddressed risks, which are more prone to financial and operational risks, and track their progress more effectively.
Improved Business’ Overall Performance
Strong ESG proposition and reporting can help companies improve their overall performance — boosting sales, probability of hiring top talent, and capital inflow. On top of that, stakeholders with a long-term focus on sustainability can see benefits in years and better plans for ESG-mandated assets. Also, keep in mind that stakeholders have established interest in the corporation’s sustainability investing. And since a standout report can significantly support long-term investment returns, you are more likely to create a stronger relationship with them.
Enhanced Corporate Reputation
Having a strong ESG reporting process helps organizations reduce risks of adverse regulatory or legal interventions, and place their name on top of the line. ESG reports with compelling and credible narratives can help companies shape a smarter response to relevant sustainability concerns. Doing so can demonstrate commitment to your company goals and society, helping you build a reputation for good stewardship. After all, good green credentials can draw investor and customer interest.
Competitive Advantage
A well-founded ESG report aligns with the company’s sustainability priorities, which enables better assessment and response to issues investors and customers care about the most. More than just sustainability metrics, the report can showcase how your ESG efforts tie with business goals and sustainability standards. This helps set you apart from similar businesses, giving you that competitive edge and catching the attention of more people.
Convene ESG: The Only Tool You Need for a Standout ESG Reporting
Crafting an accurate and compelling ESG disclosure is a challenge that many companies struggle with. At Convene ESG, we can assist you in creating credible and great narratives that do not just align with your business goals, but also with the stakeholders’ and investors’ interests.
From personalized dashboards and graphs to automated report generation, we have everything you need to produce an ESG report that stands out. Take a deeper dive into Convene ESG.
