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ESG Reporting Basics

ESG Reporting: Uncovering the Benefits & Basics

More than 90% of S&P 500 and 70% of Russell 1000 firms engage in sustainability reporting, according to business consulting firm, McKinsey. While the objective is to uphold ethical and responsible practices, organizations also aspire to stand out, excel in the public eye, and attract investors and funding. ESG reporting serves as a conduit to achieve these goals.

So, what is ESG Reporting?

ESG reporting encompasses a company’s environmental, social, and corporate governance performance disclosure. Greenhouse reporting such as this offers investors insight into a business’s impact in these domains, aiding investment decisions and identifying potential financial risks associated with poor practices.

  • Environmental: Focuses on a company’s ecological impact and resource usage, covering energy efficiency, carbon emissions, biodiversity, air and water quality, deforestation, and waste management. Companies neglecting environmental aspects risk financial repercussions and investor scrutiny.
  • Social: Assesses a company’s commitment to its people, culture, and broader societal impact. Key factors include inclusivity, diversity, employee and customer satisfaction, data privacy, community relations, and labor standards.
  • Governance: Reviews a company’s internal controls, procedures, and adherence to industry standards. It encompasses leadership, board composition, internal controls, shareholder rights, corruption, and political contributions. Proper governance ensures a company remains compliant, transparent, and engaged with regulators.

Looking at the Steps for ESG Reporting…

  1. Scope Determination: Decide on the report’s content by identifying carbon emission-related topics pertinent to your organization and stakeholders. Use a materiality assessment to pinpoint critical issues and consider industry benchmarks to align your reporting with market standards.
  2. Standard Alignment: opt for recognized ESG frameworks like GRI or SASB to lend credibility and comparability to your report. These standards guide efficient data disclosure across various industries.
  3. Report Outline: Craft a structured outline based on chosen ESG issues and frameworks – a blueprint for data collection and ensures data completeness.
  4. Data Collection & Evaluation: Collaborate cross-functionally to gather relevant emission data. Utilize internal audits and external validation to guarantee data accuracy.
  5. Report Design: Draft the content and engage internal departments like marketing for stylistic and legal approvals. Incorporate visuals for easy comprehension.
  6. Publication & Reflection: Release the report through multiple channels for maximum reach. Post-publication, review performance gaps and plan for continuous improvement in sustainability strategies.

3 Pillars of ESG Reporting

Strong internal controls, industry benchmarking, and third-party validation are all necessary for ESG reporting accuracy and efficacy as organizations navigate this complexity. It’s best to think of them as the three pillars or even the three legs of a chair.

Pillar I: Internal Controls

Credible reporting starts with strong internal controls. Systems, rules, and practices manage the data lifecycle from collection to distribution. These controls are indispensable for accurate and honest disclosure, not only procedures. Establishing these procedures internally isn’t enough.

As such, companies should execute cross-functional evaluations and benchmarking to improve performance and satisfy industry standards. Cross-functional evaluations and benchmarking help firms improve performance and satisfy industry standards.

Pillar II: Benchmarking and Expert Consultation

Industry benchmarking offers an external perspective on ESG disclosure quality. Maintain your sustainability measures up to date with industry standards. as it aids reporting and reduces “greenwashing” by aligning disclosures with reputable external sources.

In some instances, to enhance the reporting process, external consultants with ESG-related expertise might provide insights that internal teams may miss.

Pillar III: Third-Party Insight: The New Standard

Third-party assurance or attestation introduces an examination lens, a must-have for organizations concerned about sustainability. Thus, a thorough scope-setting, control design, and effectiveness from a third-party perspective.

Exploring the Benefits of ESG Reporting for Businesses

Moving forward, ESG reporting is a lever for business success rather than a compliance hurdle. Here’s why:

  • ESG reporting can be complex and time-consuming, but ESG software or consulting services can help simplify the process.
  • Transparent reporting meets regulatory demands and helps you track your environmental impact.
  • Sustainability reporting can improve your company’s attractiveness to investors, consumers, and talent.
  • More customers are requiring carbon footprint data from their vendors, so an effective ESG reporting process can give you a competitive edge.
  • Investors increasingly look at environmental criteria when making investment decisions, so ESG reporting can help your company stand out as a socially responsible enterprise.
  • Assets under ESG considerations have grown significantly in recent years, so companies that do not engage in transparent sustainability reporting may be at a disadvantage when it comes to accessing capital.
  • ESG reporting is likely to become mandatory in the US in the near future, so it’s important to get ahead of the curve and start reporting now.

Integrate Verdafero in Your ESG Reporting

ESG reporting does not have to be burdensome nor complicated, as Verdafero introduces straightforward software streamlining the process by transforming your utility data into precise and understandable Scope 1 & 2 reports.

To save time and effort, we have automated ESG administration as our utility software data is tracked and analyzed in a safe environment. Plus, the dashboard is readily available at any moment for you to check in on the status of your business and its metrics.

Get the Verdafero ESG Reports sent to your mailbox yearly or quarterly for convenient reporting on ESG factors.

Become a part of the businesses that approach ESG in an intelligent, efficient manner and request a demo:

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