Who could have predicted that a little girl, sitting alone outside the Swedish Riksdag, or parliament, would cast her shadow over corporate reporting and investment management across the globe? But the ‘Greta effect’, as it’s become known, has done just that.

While Thunberg was (and still is) worried about climate change, there’s an obvious connection with other aspects of ESG reporting. ESG – environmental, social and governance – is all about doing the right thing for the planet as well as for people.

Demonstrating your credentials as a responsible business has never been more important. Increasingly, asset managers and other financial institutions assess and compare the ESG performance of companies. ESG has become a defined investment market. The ESG rating of corporates impacts who will invest in them, and indeed, who will do business with them at all. 

For financial services, where data and transparency are so important, ESG scoring is applied to both how and where money is invested. Responsible and sustainable investment is rated more highly than ever before. You can’t afford to get it wrong.

Trust me, it’s complicated

Reporting on environmental, social and governance matters isn’t easy. In part, because there are no absolute standards. Right now the reporting is based mainly on frameworks, often voluntary, and the information is often non-financial.

Navigating these frameworks, and taking into account the varying requirements of different stakeholders, isn’t straightforward. Companies want to demonstrate their commitment to ESG performance and reporting while avoiding accusations of ‘greenwashing’.  

Requirements and frameworks for ESG reporting for UK companies include:

  • Section 172 statements from the Companies Act 2006.
  • Sustainability Accounting Standards Board (SASB) reporting.
  • Taskforce for Climate-Related Financial Disclosure (TCFD).
  • Streamlined Energy and Carbon Reporting (SECR).

The journey towards consistent and mandatory standards is in progress. While companies have established processes for collecting and reporting on financial information to meet the needs of their stakeholders, this is not the case with ESG data. It’s still not clear what different people want to see and how they want it presented.

There’s more to sustainability than being green

Right now, it’s easy to mistake E as being the biggest letter in ESG. Greta’s done a great job in pointing out how recent business practices, and many of those still in use today, will damage the future environment she and her generation must live in. But the S (social) and G (governance) shouldn’t be overlooked.

Environmental 

This has already been covered above, with reporting that addresses issues around the climate crisis. In short, investment in anything related to fossil fuels is less attractive, while anything that avoids depleting the planet’s natural resources and that doesn’t damage the atmosphere is more likely to attract interest. Companies are increasingly under pressure to demonstrate they’re working towards a net-zero impact on the environment. In short, leaving the planet as they found it.

Social

Every organisation touches the lives of people – its employees, its customers and the community it operates in. Social responsibility is about treating all of these well. This includes:

  • Health and welfare of employees.
  • Diversity in the workplace.
  • Protecting the customer from poor products and services.
  • Impact of commercial operations on the local community.
  • Animal welfare.

Governance

There’s been growing scrutiny on how businesses conduct themselves and how they manage risk. Governance issues include:

  • Business ethics.
  • Executive rewards.
  • Treatment of whistle-blowers.
  • Avoidance of financial crime.
  • Regulatory compliance.
  • Transparency

Your ESG Reporting Strategy

ESG isn’t just a paragraph in your annual report, or a quiet department tucked away in a back office. It now touches everything you do – because of how it impacts everyone. Data and transparency are critical to the quality of your ESG reporting, as are meeting the needs of your stakeholders. These include investors, regulators, financial institutions and employees.

Effective ESG reporting balances the risk of not sharing enough, or inaccurate, information, against the costs of capturing and processing those metrics. Your ESG reporting strategy should be flexible enough to meet today’s requirements while having an eye on what’s coming in the near future. The ESG reporting landscape is changing, and fast. It’s also a broad landscape, covering a wide range of financial and largely non-financial factors, for many of which there are no agreed standards.

1RS GRC and ESG

A poll by a leading consultancy firm revealed that nearly 7 out of 10 executives did not feel prepared for the ESG reporting that lay ahead of them. Many aren’t clear what’s mandatory right now, or how to assess the materiality of the matters they could be reporting on.

The 1RS ERIC, governance, reporting and compliance tool, brings automation and efficiency to the reporting process. Our solution helps you achieve consistent data collection and assessment, making it easier for your team to focus on the important facts rather than wasting time processing data unnecessarily.

This helps you to deliver high quality and consistent reporting to your stakeholders, equipping them to make better-informed decisions.

The ESG reporting climate has changed significantly over the last two decades, and there’s a lot more change to come. Our tools allow you to weather that change more easily.