What is ESG Reporting?

ESG reporting is the process of disclosing information on an organisation’s impact in three areas: environmental, social, and governance. It provides quantifiable data on how the organisation manages its environmental practices, treats employees, and maintains ethical business operations. 

This reporting helps investors and stakeholders evaluate the company’s sustainability and commitment to social responsibility and efforts through its goals, practices, and performance.

What is the role of ESG reporting?

ESG reporting demonstrates a company’s achievements concerning its corporate environmental, social, and governance responsibilities as a business organisation. This is crucial in enhancing the level of confidence with its stakeholders. The more regulations tighten and investors focus on sustainability, the more systemic and relevant these disclosures are for the company’s well-being. Here are three reasons ESG reporting matters:

• Increases confidence and trust: ESG reporting provides a clear picture of how a business operates and its accountability in the three areas it covers. This builds up the confidence of stakeholders, customers, and investors towards the company, indicating that the business practices are ethical and toward greater social responsibility.
• Leverages market and pulls investors: In contrast to some other investing practices, it appears that sustainable companies with strong ESG policies tend to win the interest of long-term focused investors. Proper ESG practices allow new investments and create a favourable environment for strategic partnership and prospects for the company’s development and strategic advantage.
• Helps mitigate risk and strengthen compliance: As the world has become diverse in ESG reporting requirements, compliance allows businesses to shield themselves from the potential ramifications of legal action. By addressing ESG issues such as climate change and governance in advance, the company’s ability to adapt to market disturbance and offer sustained growth will increase.

ESG Reporting Standards and Frameworks

The reporting standards on ESG are guidelines that allow organisations to effectively and accurately report their sustainability initiatives. Key ESG reporting standards include:

• Global Reporting Initiative (GRI) Standards: Appealing to larger organisations, the GRI provides a thorough method for outlining how actions affect ESG and economic impacts. It emphasises transparency and helps companies be accountable for their sustainability efforts through the three series of standards:
  • GRI Universal Standards: This applies to all organisations and provides the foundation for reporting, including core principles and requirements. They guide organisations in how to report general information about their structure, activities, and material topics.
  • GRI Sector Standards: These standards are tailored to specific industries and improve the quality and consistency of sector-specific reporting. They list material topics relevant to each sector and include disclosures organisations must use if an applicable standard exists, such as for the oil and gas, fishing, and agriculture sectors.
  • GRI Topic Standards: This gives focus on specific sustainability topics under the economic, environmental, and social classifications. Some topics include waste, health, or tax, and provide detailed disclosures on how organisations manage these issues.

• Sustainability Accounting Standards Board (SASB): The SASB created 77 industry-specific evidence-based metrics and targeted particular ESG clusters most relevant to each sector.  These standards guide reporting significant ESG factors based on each sector’s unique challenges and opportunities, giving stakeholders a better understanding of a company’s performance. The framework is evidence-based, globally applicable, and focuses on five key areas: environment, social capital, human capital, business model and innovation, and leadership and governance.
• Task Force on Climate-related Financial Disclosures (TCFD): This framework is increasingly adopted worldwide, especially in the Asia-Pacific region. This was established to help disclose climate-related risks and opportunities in a way that is clear and useful for investors. Its framework focuses on four key elements: governance, strategy, risk management, and metrics and targets. TCFD encourages companies to report both transition risks, which are related to moving to a low-carbon economy, and the physical risks from climate impacts along with the financial implications.