Sustainability simplified: how firms can fix green reporting
With increasing pressure for companies to become more sustainable, a new report looks at the first steps companies must take to successfully adapt to a new reporting environment
Companies are facing increasing pressure from investors, boards, banks and customers to improve their Environmental, Social and Governance (ESG) standards. As we enter 2022, good sustainability practice is no longer optional, according to a new report published by 4xi Global Consulting and Solutions called ‘Sustainability Simplified’.
ESG was coined in 2005 as a principle to guide corporations on how to respond to environmental concerns, treat their workers, build trust and innovation, and manage their supply chains. Corporations also use ESG to determine the resiliency and efficacy of businesses. By 2025, ESG assets are expected to hit US $53 trillion (a third of global assets under management). This further suggests how important it is for companies to disclose their ESG progress.
Attracting talent through sustainability
Employees are considerably more likely to join and stick around if they feel their company’s values align with their own. The increased awareness of social, environmental and economic issues means corporations cannot afford to ignore socially responsible values anymore. Companies with strong ESG practices have a competitive edge, from talent retention to building trust with stakeholders.
A recent survey from PwC found 83 per cent of consumers think companies should be actively shaping ESG best practices and 86 per cent of employees prefer to support or work for companies that care about the same issues they do. Many companies report on their ESG practice and performance but it is still considered a tick boxing exercise. More progressive organisations have been taking environmental issues seriously for some time and showing continuous improvement and reporting on science-based targets, everyone else is now playing catch up.
Framework for ESG reporting
The amount of data collection involved in ESG reporting can often be overwhelming and with more than 30 voluntary environmental reporting frameworks, it’s difficult to know where to start. It is therefore important to set up a management framework to reduce this burden.
The United Nations Global Compact (UNGC) is the world’s largest corporate sustainability initiative. It lays out a voluntary framework for companies to publicly commit to ten universal principles. By incorporating the principles into strategies, policies and procedures, and establishing a culture of integrity, companies are not only upholding their basic responsibilities to people and planet, but also setting the stage for long-term success. By joining, companies can operate responsibly, report effectively on ESG efforts and take actions that support local communities. They also gain access to a network of potential partners that represent nearly every industry sector and size across over 160 countries world-wide.
‘Organisations claim data collection is the most frustrating aspect of ESG reporting…’
Even with the UNGC’s framework, there are limitations and challenges for organisations to overcome. Vranda – a software company that provides solutions to better enable companies to track, monitor and act on ESG material issues – found that 45 per cent of organisations claim data collection is the most frustrating aspect of ESG reporting. There is also a lack of understanding from contributors on what is needed, why it is needed and how the information is used.
How to turn reports into action is down to the company. However, it is important to remember that corporate social responsibility and ESG are not the responsibility of one person but the whole organisation. For the greatest possible impact, stakeholders must be aligned and actions should start at the top and work its way into every aspect of a company.
Read the full report on ‘Sustainability Simplified’ here.