ESG reporting serves as a means for companies to transparently communicate their sustainability efforts. Sustainable development is no longer just a concept for promoting businesses but is gradually becoming an obligation for companies. What does the ESG idea really mean, how can you implement it in your company, and what benefits can you expect? Read this article and find out.
What is ESG reporting – table of contents:
What is ESG reporting?
ESG reporting involves transparently and consistently sharing information about a company’s environmental, social, and governance performance and actions with stakeholders. ESG stands for Environmental, Social, and Governance. With the growing importance of sustainability in business, these are crucial areas that set standards for business operations. They also have a great impact on creating positive relations with the company’s stakeholders – customers, strategic partners, investors, etc. What exactly do these concepts are all about?
- Environmental – it refers to actions related to environmental protection and the way a company tries to prevent pollution, reduce energy consumption, mitigate excessive exploitation of natural resources, and promote the humane treatment of animals.
- Social – it pertains to a company’s relations with various entities in its closer and further environment. It is often combined with a CSR (corporate social responsibility) strategy, which aims at promoting important social issues, such as accepting diversity, being eco-friendly, fighting discrimination, etc.
- Governance – is related to a company’s leadership and management style, a fair selection of executives, transparency and honesty, as well as legal compliance.
ESG metrics examples
ESG metrics may refer to both quantitative and qualitative aspects of doing business. Here are some examples you can come across in ESG reporting.
- Greenhouse gas emissions
- Energy consumption
- Waste minimization and pollution prevention
- Environmental compliance
- Gender pay gap
- Employee turnover
- Health and safety incidents
- Community investment
- Employees with collective agreements
- Employee training
- Board structure (the principles for selecting board members, their experience, and competencies)
- Data protection policy in a company
- Code of business ethics
- Anti-corruption measures
- Financial results
The role of ESG metrics in business development
ESG reporting and adopting sustainability strategies are becoming more and more important in business. So what aspects does it have a real impact on, and what are the benefits that arise from it?
- It is a method for managing risks related to environmental protection, societal impact, corporate governance, and financial decision-making within a company.
- ESG reporting offers protection to companies, as regulatory bodies are less likely to accuse them of legal violations. It also strengthens brand equity and reputation among consumers, as well as provides a basis for assessing and promoting employees who align with the company’s sustainability goals.
- Preparing ESG reports is a good opportunity for strategic analysis of your company, assessing its achievements, setting future goals and ways to meet them.
- It can be a useful source of information during a due diligence check, when applying for funding, getting a loan, partnering with another business, or going public.
- Implementing ESG practices is well received by prospective employees, as candidates can identify with the company’s values, which has a positive impact on their motivation.
How can small and medium-sized companies implement an ESG strategy?
Implementing ESG practices isn’t an easy task, as it often requires huge financial investments and effort. However, this is inevitable given the changing regulatory environment and growing public awareness. What actions can you take right now that will move you closer to a more environmentally friendly, pro-social management style? Here are some useful tips:
- Pay attention to environmental problems. What materials are your products made of? Is it possible to introduce biodegradable packaging solutions, and reduce electricity and water consumption (e.g. by replacing traditional light bulbs with energy-saving ones, and adjusting your energy tariff to the company’s workflow)? Also, verify your suppliers (if you cooperate with any).
- Track other companies’ sustainability activities and ESG reports to follow the best practices.
- Emphasize the importance of sustainable consumption in your marketing communications and promote it among consumers.
- Actions speak louder than words. Support charity campaigns and start cooperating with non-profit organizations.
- Embrace continuous learning. Such an approach will help you stay open to new ideas and initiatives to grow your business.
- Involve your employees in ESG activities, not only by encouraging them to share ideas but also to participate in employee volunteer programs.
- Finally, you can register for the certificate in ESG investing. Such a certificate will have a positive impact on your image among the community or business partners.
Undoubtedly, ESG metrics and ESG reporting will become increasingly important for businesses in the future. And it doesn’t only stem from emerging EU regulations but also the positive impact on relations with various stakeholder groups. By changing your management style, being open to new ideas, and learning from industry leaders, you can greatly influence your company’s development.