ESG reporting explained

ESG reporting: what you need to know

As the world continues to move towards a more sustainable future, businesses of all sizes are increasingly turning their attention toward Environmental (E), Social (S), and Governance (G) reporting. But what exactly is ESG reporting? This extensive article will provide an overview of the basics of ESG reporting and explain how it can help your business become more sustainable.

For further insight into the topics, simply click on the provided links. Additionally, don't hesitate to contact iimpcoll for advisory sessions or consulting services - our expert team is dedicated to supporting your needs.

The Basics: Taking Climate Action - A Guide for ESG Reporting

ESG reporting is a form of a corporate report that details a company’s progress in meeting its sustainability goals and initiating e.g., climate action. However, ESG also covers a variety of topics, such as governance structures, environmental policies, and social responsibility initiatives.

The primary benefit of ESG reporting is that it allows companies to track their performance over time and understand how they can be more sustainable in the future. By measuring the success of past initiatives and setting clear objectives for the future, businesses can put themselves in a better position to achieve long-term success. Additionally, by making their data publicly available, companies can demonstrate their commitment to sustainability and transparency, which can help build trust with customers and investors.

The process of creating an ESG report involves collecting and analyzing data from a variety of sources, including internal documents, external surveys, customer feedback, public records, and third-party audits. Companies must also provide detailed explanations for all the metrics they use in their reports, such as energy efficiency or the number of employees hired from diverse backgrounds.

Once targets have been set, companies will need to measure their progress against them by collecting data on their emissions, energy use and other metrics related to their climate impact. ESG reporting systems are designed to provide this data in an accessible format that can be easily analyzed by stakeholders.

If you are interested in how to select the best ESG reporting software for your company, check out our upcoming whitepaper on the topic.

In addition to setting targets, it's important for businesses to consider the wider impacts of their operations. This includes assessing the potential risks associated with climate change, such as extreme weather events or changes in global demand for products and services. Companies should also assess the potential opportunities they have to take advantage of new technologies or implement sustainable practices that can reduce their overall environmental footprint.

How Agenda 2030 Shapes Corporate ESG Reporting

In 2015, the United Nations unveiled its Sustainable Development Goals (SDGs) as part of the 2030 Agenda. The SDGs set out a vision for a world with improved conditions and opportunities for people, planet, and prosperity. To achieve these goals, countries must make progress in various sectors, including energy efficiency; environmental protection; sustainable consumption and production patterns; social inclusion; climate change mitigation and adaptation; education; good governance; gender equality; access to basic services and infrastructure, among many others.

The Importance of Sustainability for Businesses

Environmental sustainability involves reducing waste, conserving resources such as energy and water, and using renewable sources for production processes. This helps to protect ecosystems as well as save money on operational costs due to reduced consumption of natural resources. Additionally, it can help improve customer loyalty by demonstrating that a company cares about its global impact.

Businesses must also focus on social sustainability which includes initiatives like fair labor standards, improved working conditions and health benefits for employees, and transparent communication with customers. This can help to build trust in the company’s products and services. Social sustainability also creates an ethical foundation that will be beneficial when facing any potential legal or regulatory issues.

Finally, economic sustainability helps businesses to stay competitive by diversifying their income sources, managing costs effectively, and identifying new markets or opportunities for growth. It is important to keep up with changing trends to remain profitable within a given industry. Investing in sustainable practices can also help bring in more investors as it demonstrates a commitment to responsible operations and long-term success.

Aligning ESG Reporting with the Sustainable Development Goals

To ensure ESG compliance, businesses should:

• Develop a comprehensive ESG strategy that is aligned with the SDGs,
• Monitor and improve their sustainability practices regularly,
• Make use of external assessments to verify their progress,
• Report on their performance publicly, as well as internally.

By following these steps and adhering to the principles set out in the SDGs, companies can demonstrate good corporate citizenship and help create a more equitable and sustainable world. With increased transparency and improved reporting standards, businesses can better understand how to reduce their environmental impacts, create positive social change, and foster economic growth.

Ensuring ESG compliance: a short guide for businesses

Due to a rapidly changing EU legal framework, ESG compliance has become an increasingly important issue for businesses in recent years. Companies have a responsibility to ensure that they adhere to ESG principles and are transparent about their efforts.

Firstly, it is important for companies to develop an ESG strategy and establish a set of goals which align with the business’ core values and determine how these can be achieved through its operations. Furthermore, companies should engage in regular monitoring and reporting of their ESG performance. This includes conducting regular reviews of the company’s operations and documenting the results in ESG reports.

Finally, businesses should implement a robust system for verifying that their ESG activities comply with relevant standards and regulations. Companies can do this by engaging external auditors to assess the company’s compliance with applicable laws, regulations, and industry best practices. With the new European Corporate Sustainability Reporting Directive (CSRD) in place, audits will become mandatory for those companies that fall under the CSRD reporting requirement.

Regular assessments will help ensure that any changes made to improve the organization’s ESG performance are accurately reflected in its sustainability report.

Sustainability reporting: best practices for companies

When it comes to the ESG reporting process, there are certain best practices that businesses should follow.

In short: Firstly, companies should also decide which ESG reporting framework to use (this is discussed further down in this article) and ensure they adhere to the regulations surrounding that framework as well as other legal obligations such as those stated under the EU Corporate Sustainability Reporting Directive (CSRD).

The Corporate Sustainability Reporting Directive (CSRD): An Overview

The European Union’s Corporate Sustainability Reporting Directive (CSRD) is an important component of the EU’s commitment to enhancing corporate sustainability and transparency. The directive sets out requirements for companies in the EU to report on their environmental, social and governance performance.

By 2026, all SMEs, small and non-complex credit institutions, and captive insurance undertakings fall under the CSRD regulations with their first report due by 2027. SMEs can opt-out until 2028.

Complying with the CSRD for ESG reporting

Organizations should ensure they have comprehensive policies and procedures in place to address the requirements outlined in the CSRD Directive.

Internal audits may include assessing current performance against previously identified ESG indicators and auditing compliance with established sustainability goals. External reports require organizations to provide detailed information about their ESG performance, including how they're addressing sustainability challenges.

Organizations should also ensure that their external reporting is accurate and up to date. Companies are required to disclose any significant changes made to their ESG policies or goals in a timely manner. Additionally, organizations should regularly review their ESG objectives to ensure they remain relevant and achievable.

A closer look at the GRI reporting standard for ESG reporting.

The GRI has established a number of reporting principles which it encourages companies to follow in order to ensure the accuracy and completeness of their ESG reports. These include:

1. Stakeholder Inclusiveness: Organizations should identify and engage with their stakeholders and consider their sustainability concerns and interests when reporting. Stakeholder inclusiveness ensures that a broad range of perspectives is taken into account.
2. Sustainability Context: Reporting should reflect the organization's significant economic, environmental, and social impacts and provide a comprehensive understanding of its sustainability performance. It involves considering the organization's internal and external contexts, including social, environmental, and economic factors.
3. Materiality: Organizations should disclose information about their sustainability impacts and performance that is relevant to their stakeholders and has a significant influence on the assessments and decisions of the report users. A materiality assessment helps organizations focus on the most important issues for reporting.
4. Completeness: Reports should include relevant and accurate information on an organization's sustainability performance, capturing the breadth and depth of its impacts. Completeness ensures that the report provides a balanced and comprehensive view.
5. Accuracy: Organizations should strive for accuracy in their reporting, ensuring that the information provided is reliable, valid, and precise. Accuracy involves using appropriate measurement methods and data sources and applying quality assurance processes.
6. Clarity: Reports should be clear, concise, and understandable for a broad range of stakeholders. Clarity involves using plain language, avoiding jargon, and providing clear explanations and descriptions of sustainability performance.
7. Comparability: Organizations should strive for comparability in their reporting to facilitate benchmarking and analysis of their sustainability performance over time and with other organizations. Comparability allows stakeholders to make meaningful comparisons and assess progress.
8. Timeliness: Reporting should be conducted in a timely manner, providing up-to-date information on an organization's sustainability performance. Timeliness ensures that stakeholders have access to current and relevant information.

This ensures that an organization’s ESG report provides a comprehensive overview of its policies, activities and results.

The GRI standards are regularly reviewed and updated to ensure that they remain relevant and applicable in today’s business environment. They provide an international benchmark for organizations to adhere to when producing an ESG report and can help companies demonstrate their commitment to responsible practices.

At iimpcoll, we are proud to be GRI certified and are here to assist you with your reporting needs. Don't miss our extensive whitepaper on materiality analysis with an interactive worksheet! Release in July 2023.

Materiality in ESG reporting: what it is and why it matters

Materiality is a concept that has been adopted by the sustainability and corporate reporting community in recent years. It is important for organizations to consider when analyzing and reporting their environmental, social, and governance (ESG) performance.

Simply put, materiality refers to the idea that some issues are more important than others; it is the process of assessing which aspects of an organization’s ESG performance are most relevant and need to be reported on or addressed.

When determining whether a particular issue should be considered “material,” companies must take into account factors such as legal requirements, investor demands, public opinion, competitive pressures and other external drivers.

To ensure their ESG reporting is comprehensive and accurate, companies should focus on the most material aspects of their performance and activities. This means they must be able to identify the issues that are most important to stakeholders and prioritize them accordingly. By doing so, businesses can better quantify and report on impacts, developing a more robust understanding of their performance metrics in the process.

Using the GHG Protocol for accurate greenhouse gas reporting

The GHG Protocol standard is widely adopted by organizations, governments, and sustainability initiatives around the world. It helps organizations:

1. Measure and manage their GHG emissions: The GHG Protocol provides organizations with a systematic approach to identify, quantify, and manage their emissions, enabling them to set reduction targets, track progress, and implement emission reduction strategies.
2. Facilitate transparency and accountability: By following a recognized standard, organizations can provide transparent and comparable information on their GHG emissions, allowing stakeholders to assess and compare their performance.
3. Inform decision-making and strategy: The GHG Protocol enables organizations to understand the sources and impacts of their emissions, helping them identify opportunities for emission reduction, energy efficiency improvements, and sustainable business practices.
4. Comply with reporting requirements: Many sustainability reporting frameworks, such as the Carbon Disclosure Project (CDP) and the Global Reporting Initiative (GRI), reference the GHG Protocol as the preferred methodology for reporting GHG emissions. Adhering to the GHG Protocol helps organizations meet reporting requirements and ensure consistency in reporting practices.

Using the GHG Protocol for Accurate ESG Reporting

The GHG Protocol standard is widely adopted by organizations, governments, and sustainability initiatives around the world. It helps organizations:

1. Measure and manage their GHG emissions: The GHG Protocol provides organizations with a systematic approach to identify, quantify, and manage their emissions, enabling them to set reduction targets, track progress, and implement emission reduction strategies.
2. Facilitate transparency and accountability: By following a recognized standard, organizations can provide transparent and comparable information on their GHG emissions, allowing stakeholders to assess and compare their performance.
3. Inform decision-making and strategy: The GHG Protocol enables organizations to understand the sources and impacts of their emissions, helping them identify opportunities for emission reduction, energy efficiency improvements, and sustainable business practices.
4. Comply with reporting requirements: Many sustainability reporting frameworks, such as the Carbon Disclosure Project (CDP) and the Global Reporting Initiative (GRI), reference the GHG Protocol as the preferred methodology for reporting GHG emissions. Adhering to the GHG Protocol helps organizations meet reporting requirements and ensure consistency in reporting practices.

Tracking Scope 1, 2, and 3 Emissions for ESG Reporting

When it comes to ESG compliance and reporting, one of the key components businesses must pay attention to is greenhouse gas emissions such as carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O).

The business GHG emissions are divided into Scope 1, 2, and 3 emissions. These three types of emissions describe the greenhouse gases emitted from activities related to business, ranging from direct operations (Scope 1) to indirect sources such as purchased electricity (Scope 2). Scope 3 emissions refer to all other greenhouse gas activities that are not included in Scopes 1 and 2.

When it comes to tracking these types of emissions, businesses should consider creating an inventory of all sources that could potentially Scope 1, 2, or 3 emissions. From there, businesses can estimate their releases based on a baseline for each source and take into account any changes throughout the year. Businesses should also collect supporting documents such as energy bills in order to back up their estimates where needed.

Scope 3 Emissions: What to Include in Your ESG Report

Starting in 2024, some companies have a responsibility to measure and report their Scope 3 emissions, as outlined in ESG compliance regulations. Scope 3 emissions are those generated from activities such as business travel, employee commuting, outbound freight, waste disposal, manufacturing processes and the use of purchased goods and services.

In addition to gathering accurate data on Scope 3 emissions, businesses should also take steps to actively reduce them. This can be done through energy efficiency measures such as switching to renewable energy sources for electricity and heating, investing in more efficient equipment and transitioning away from non-renewable fuels such as gas and coal.

Additionally, businesses can implement policies that encourage employees to use public transportation or carpooling when commuting or traveling for business purposes. By taking proactive steps to reduce Scope 3 emissions, businesses can not only meet ESG compliance regulations but also reduce their environmental impact, which in the end is the point of the whole exercise...

How to Meet the SDGs Through Your ESG Reporting

To align ESG reporting with SDGs, organizations can use various strategies. First, take stock of current operations and identify how they contribute to or detract from specific goals. Next, develop a plan to make improvements. Creating measurable targets is crucial to track progress and make adjustments as necessary.

Companies should consider the impact of external factors, such as leveraging local communities' needs and priorities to improve energy efficiency, resource conservation, and job creation. Finally, organizations must maintain transparency by providing clear updates and detailed reports on performance against each SDG target.

Join forces with our sustainability experts!

As a business owner, it is important to think long-term and recognize the implications of your decisions. Sustainability can be defined as “meeting the needs of the present without compromising the ability of future generations to meet their own needs” (Earthday.org). Business sustainability is an important part of this equation; when done properly, it allows businesses to thrive while also protecting natural resources and ecosystems for future generations.

Unfortunately, many organizations struggle with developing effective sustainability strategies and practices due to lack of knowledge or resources. This is where sustainability consulting comes in – outside experts can provide guidance on goals, regulations, reporting requirements, technology adoption and much more.

Sustainability consultants help companies develop comprehensive sustainability strategies and plans, often tailored to the business’s size, industry, and resources. They can help implement these plans and measure progress towards sustainability goals.

Benefits of iimpcoll's sustainability consulting services

• Achieving Sustainable Business Goals: With guidance from experts, businesses are more likely to stay focused and achieve their sustainability goals in a timely manner. -Competitive Advantage: Having a well-defined sustainability strategy gives businesses an edge over their competition.
• Cost Savings: Many businesses see cost savings due to reduced energy consumption or improved efficiency of operations when they adopt a sustainable approach.
• Employee Satisfaction & Retention: Employees care about the environment and many prefer to work for organizations that have sound environmental policies in place.

If your business is looking to reduce its environmental impact and make more sustainable decisions, consider investing in sustainability consulting services. A qualified consultant will be able to provide you with the resources and expertise needed to create a successful sustainability strategy for your organization.

By working closely with a sustainability consultant, businesses can create positive change that lasts well into the future – something the planet, society, customers, and shareholders will all benefit from!

CONTACT US TODAY TO START YOUR SUSTAINABILITY JOURNEY!