Reporting on ESG and CSR
Reporting on sustainability and ESG is increasingly important because it allows companies to transparently communicate their environmental, social, and governance performance to stakeholders, including investors, customers, and employees. The latest development, in shifting from reporting following section 99a in the Danish Financial Statements Act to reporting following the EU CSRD (Corporate Sustainability Reporting Directive) is a game-changer to the legal requirements of ESG reporting.
What is a ESG report?
An ESG report, short for Environmental, Social, and Governance report, is a document that outlines a company's performance and practices in relation to environmental sustainability, social responsibility, and corporate governance. It provides information on the company's efforts to mitigate environmental impacts, promote social welfare, and maintain ethical business practices.
The report typically includes key ESG metrics, such as carbon emissions, energy usage, waste management, employee diversity, labor practices, community engagement, board structure, executive compensation, and other relevant factors. The purpose of an ESG report is to communicate the company's commitment to sustainability and responsible business practices to various stakeholders, including investors, customers, employees, and regulators. It helps stakeholders assess the company's impact on society and the environment and make informed decisions regarding their engagement with the organization
What shall an ESG report contain?
An ESG report typically contains information on a company's:
Environmental impact: Energy usage, carbon emissions, waste management, etc.
Social initiatives: Employee diversity, labor practices, community engagement, etc
Governance practices: Board structure, executive compensation, ethics policies, etc.
ESG strategy and goals: Long-term objectives to address environmental and social challenges.
Performance metrics: Quantitative data measuring progress towards ESG goals.
Risk management: Approach to identifying and managing ESG-related risks.
Stakeholder engagement: Communication with investors, employees, customers, and regulator
Reporting frameworks such as CSRD, GRI or other standards used to guide the ESG report.
Why it is a good idea to have an ESG report
It enhances transparency: An ESG report provides stakeholders with clear and comprehensive information about a company's environmental, social, and governance practices, promoting transparency and accountability.
Builds trust: By disclosing ESG-related data and performance metrics, a company can build trust and credibility with investors, customers, employees, and other stakeholders who value sustainable and responsible business practices.
Attracts investors: Many investors consider ESG factors when making investment decisions. An ESG report showcases a company's commitment to sustainability, potentially attracting investors who prioritize ESG-aligned investments.
Mitigates risks: Identifying and addressing ESG risks and challenges through an ESG report allows companies to proactively manage and mitigate potential financial, reputational, and regulatory risks.
Drives positive change: An ESG report encourages companies to set and work towards specific ESG goals, driving progress in areas such as environmental protection, social equity, and ethical governance
Meets regulatory CSRD requirements: In the EU, companies are required to disclose ESG information as part of their regulatory obligations. Having an ESG report ensures compliance with such requirements.
Improves stakeholder engagement: An ESG report facilitates communication and engagement with stakeholders, fostering dialogue, and allowing companies to understand and address stakeholder concerns and expectations.
An ESG report benefits companies by promoting transparency, trust, risk mitigation, attracting investors, driving positive change, and meeting regulatory requirements, while also improving stakeholder engagement.
In short, ESG-reporting is a way for companies to demonstrate their commitment to sustainability, which can enhance their reputation and help them meet and document customer demands in tenders and ESG questionnaires e.g., Sedex or Ecovadis. There is no one way of making an ESG report, but we often follow the path below:
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We help define the scope and boundaries of the report: This step involves determining what ESG regulations and issues will be reported on, as well as the time frame and geographic scope of the report
We conduct a double materiality assessment: This step involves identifying the ESG issues that are most relevant and material to the company and its stakeholders, which will be the main focus of the report
We conduct a gap analysis based on the demands in CSRD and initiate actions to close the gaps and report in alignment with the applicable provisions in CSRD
We help collect and verify data: This step involves gathering data on the company's ESG performance and ensuring that the data is accurate, reliable, and consistent
We help to choose a reporting framework, such as the UN Global Compact, Global Reporting Initiative (GRI), or the Sustainability Accounting Standards Board (SASB), which will help provide a structure for the report
We write the report: This step involves organizing the data and information gathered into a clear, concise, and easy-to-understand report
We ensure a tailored ESG report that meets both legal and market requirements, is action-oriented, and provides stakeholders with a clear picture of your company's ESG performance and targets, and the direction going forward.
For the largest and listed corporations, the EU Taxonomy pushes the demands for information provided in the ESG report or in an integrated annual report even further, which again leads to increased demands on data and performance throughout the supply chain