Sustainability reporting FAQ: your comprehensive guide
Struggling to navigate the complex world of ESG reporting? We’ve put together a list of 26 frequently asked questions to help demystify the reporting journey – from reporting essentials to the intricacies of ESG frameworks, our experts tackle some of your most pressing questions.
1. What is ESG reporting?
ESG reporting is the formal disclosure of data related to an organisation’s environmental, social and governance initiatives. A cornerstone of sustainable business practices, ESG reporting impacts investment decisions, consumer preferences and organisational reputation.
ESG reporting requirements, while often global, frequently include additional regional variations. Assessing and reporting on material ESG matters, in a way that can be audited, requires the right tools and processes.
2. Is ESG reporting mandatory?
While ESG reporting is not yet compulsory in every jurisdiction, mandatory reporting is gaining traction globally. In the EU, for example, new legislation – the Corporate Sustainability Reporting Directive (CSRD) – will make sustainability reporting mandatory for more than 50,000 companies doing business in the region.
3. How is ESG reporting data used?
ESG reports gives investors, stakeholders and regulators an insight into a company’s sustainability practices and performance. Report results can be used to inform strategic decision-making and to drive long-term value creation.
4. Why does ESG reporting matter?
Investors favour companies that perform well across the ESG reporting factors as these companies are likely to be more stable, resilient and profitable.
Prioritising sustainable practices yields numerous long-term benefits, including greater access to capital, reduced costs, enhanced reputation, effective risk management and increased competitive advantage.
5. What is a materiality assessment?
A financial and/or impact materiality assessment will help you identify the ESG issues that are material to your business; these insights will ultimately inform your strategic objectives and enhance performance.
In Europe and China’s Mainland, companies are now required to conduct double materiality assessments (DMAs) which analyse the reciprocal relationship between an organisation’s sustainability efforts and its financial performance.
6. Who is involved in sustainability reporting?
The reporting process requires input from a range of internal and external stakeholders, including executive leaders; shareholders; clients; and internal functions such as Finance, HR and Procurement.
7. Who is responsible for compiling sustainability reports?
Report ownership will vary depending on company size and organisational structure. In large organisations that have reached a high level of ESG maturity, CSOs and CFOs will often share the responsibility of compiling reports, ensuring that financial and sustainability goals are closely aligned.
8. How many ESG reporting frameworks are there?
Worldwide, there are over 600 ESG reporting frameworks and standards.
Examples include:
- European Sustainability Reporting Standards (ESRS)
- International Sustainability Standards Board (ISSB)
- Sustainability Accounting Standards Board (SASB)
- Task Force on Climate-related Financial Disclosure (TCFD)
- Global Reporting Initiative (GRI)
- United Nations Global Compact
- UN Principles for Responsible Investment (PRI)
- Sustainable Finance Disclosure Regulation (SFDR)
- The Global Real Estate Sustainability Benchmark (GRESB)
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