As the public becomes more familiar with your organization, you may find that the demand for environmental, social, and governance reporting grows. If you've never worked on an ESG report, you've been missing out on the chance to tell your organization's story and build a strong reputation.
If you've been thinking about creating an ESG report, it's important that you understand how it could benefit your organization and how to initiate the process.
What is an ESG report?
An ESG report discloses information about an organization's operations related to environmental concerns, social responsibility, and governance. If a discerning consumer wants to know if your organization's values align with their own, they can look to the ESG report. Additionally, an investor might explore this report before committing to your organization.
"If a discerning consumer wants to know if your organization's values align with their own, they can look to the ESG report."
The reported information leads to ESG scores, which you can see published by Bloomberg and other financial organizations. These ratings help create a picture of the organization's risks based on social, governance, and environmental factors. If you report ESG performance regularly, your organization may score higher than if you report less frequently.
What does an ESG report include?
An ESG report should contain a full scope of data, including qualitative and quantitative information. Include information related to these three components:
Environmental factors
The data you provide as part of an environmental examination of your organization demonstrates the steps you are taking to protect the environment. For example, your organization might be taking steps to fight climate change and reduce carbon emissions. Or, the data might demonstrate that your company has been responsible for improving water quality, recycling, or preserving biodiversity.
Social factors
This component of the report will include information about what your organization is doing to provide social improvements in the community. This might include the organization's engagement in nurturing employees, protecting privacy, and sponsoring human rights causes and inclusivity initiatives.
Governance factors
Next, the report will focus on ways in which the organization is handling issues such as avoiding corruption and providing a sustainable future. This part of the report relates to compensation, political contributions, whistleblowing, shareholder rights, and more.
Why should you complete an ESG report?
One 2020 study found that 88% of publicly traded companies and 67% of privately-owned companies utilize ESG initiatives. You might be wondering if there are benefits to publishing this report. The truth is that there are quite a few benefits to releasing this information. In fact, an ESG report can contribute to your company's growth in several ways.
Values alignment
For one, sharing your company's values and principles can help investors and consumers determine if the company is a good fit for them. For instance, some investors might want to invest their money in a company they feel is helping to make important social changes. You may build more brand loyalty by publishing an ESG report.
Additionally, one study showed that 86% of employees prefer to work for companies that care about the same issues they care about. You may find that you build better morale in the workplace if you are clear about your company's values.
Compliance
Some organizations must disclose ESG information. Your report documents that the organization complies with any applicable regulations. If you aren't sure which regulations are in place, a lawyer can inform you about what you should include in your reports.
Transparency and trust
Many investors and consumers appreciate transparency in the organizations they become involved with. A transparent organization appears more trustworthy. In some cases, the demand from investors for ESG report information becomes so great that you may find it difficult not to complete a report. If investors are asking for more information, providing it may keep them on board.
Risk assessment
Your ESG report will expose information related to areas of risk. If you'd like to get ahead of any issues you foresee being a problem for investors, your report will help you share information in a transparent manner.
Awareness and potential innovation
Many organizations simply aren't aware of the data that comes up in their ESG reports. When your organization is aware of this information, you can use it to make progress in areas where you'd like to see changes. For example, you may not realize how much effort you could be putting into human rights causes in your area until you see the figures on paper. Seeing this information can help you decide what you'd like to do next. You'll also be able to track your goals after you do take action.
How do you write an ESG report?
If you'd like to learn how to write an ESG report, you'll find it helpful that several frameworks already exist. You may want to look at the reports published by other companies, including Microsoft, 3M, and Coca-Cola. These organizations use tools such as the Global Reporting Initiative Sustainability Reporting Standards and the United Nations Guiding Principles Reporting Framework to guide the process.
Tips for creating your own ESG reports
When you follow ESG report best practices, you confirm that your reports are reliable and valuable. These tips will ensure that your reports are thorough and include all pertinent information.
Identify your audience
To write an ESG report, the first thing you'll need to do is identify all stakeholders. Keep this audience in mind as you complete reports with your team. Consider each piece of information that a stakeholder may want to know and use this information to collect the best data for the readers.
Build a strong team to write the reports
Next, it's important that you build a strong team of people to participate in writing your report. You'll want the team to collect the data from all corners of your organization, including human resources, finance, and other sectors. Each member of the team should familiarize themselves with ESG reports so that they know which frameworks are most effective at conveying the details.
Confirm the accuracy of all data collected
Your ESG report should include a lot of figures, and you'll want to make sure that the data is accurate. Ensure that the data is easy to confirm and that you publish exactly where each piece of information comes from. Transparency is key when you write these reports.
Offer information beyond the figures
A report of numbers without context will not be as helpful as a report that provides some analysis and backstory. A stakeholder who picks up the report should be able to discern what the numbers are meant to convey.
Annual ESG reports could be one of the most beneficial things you do for your business, and your stakeholders can make smarter decisions with the information you provide. You also build a strong reputation when you're transparent and accurate with your data.
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