7 reasons to prioritise corporate sustainability reporting
Following the Glasgow COP26 summit in 2021 - one of the most significant climate events of all time – we're now seeing an even greater demand for corporate sustainability reporting as part of the global effort towards a net-zero economy.
With that, we explore the benefits of environmental, social and governance (ESG) reporting as a way to maximise your sustainability proposition and meet the growing expectations of stakeholders for greater transparency.
What is ESG reporting and why does it matter?
ESG reporting, or ESG disclosures, refer to the data published by an organisation about their environmental, social and governance impact.
Due to the increasing spotlight on ESG by regulators, ESG reporting is now becoming a mandatory requirement in many countries. Yet even companies outside of those jurisdictions have begun to voluntarily provide this information, recognising its importance in terms of value creation and in communicating their vision and purpose effectively. Especially since it is not just regulators who have a vested interest in ethical and sustainable business practices.
In a recent PwC report, 65% of investors stated that their motive for considering ESG issues was to help manage investment risks, signalling a rise in ethical investing. Similarly, consumers are also taking a stance on sustainability. Generation Z, in particular, is rapidly becoming a force to be reckoned with, accounting for over 40% of global consumers . One survey reported that more than 50% of Gen Z participants stated that knowing a brand is socially conscious influences their purchasing decisions.
With the eyes of the world on organisations to make transparency around ESG practices a top priority, what are the leading benefits of ESG reporting?
1. Enhanced competitive value and brand perception
From employees and investors to consumers and the local community, more and more stakeholders are favouring brands that get behind sustainability. Whether that’s working towards improved labour conditions, advocating diversity or reducing their carbon footprint, the businesses that focus on, and share their commitment to ESG considerations are unsurprisingly the ones being rewarded with increased loyalty.
2. Stronger defence against activists
Activists are yet another stakeholder group gradually putting on the pressure, with 13% of ESG activist campaigns being successful in 2021 compared to 11% for the same period in 2020 . Whilst you could argue that the more an organisation discloses about its sustainability story, the more they open themselves up to challenges – doing nothing is a far riskier approach. One sure way to level the playing field and immunise against activist action is to not only provide the necessary ESG information but also set credible goals for stakeholders to track. Though keep in mind that these must be achievable, as once your ESG sustainability report is in the public domain, activists will be keeping an eye out for underperformance.
3. Increased appeal to investors
ESG investors typically care more about the long term than what will happen in, say, the next quarter. Because of this, they are seeking businesses that share that forward-looking view. By including ESG disclosures in your annual reports, you can reassure existing investors that you are working to reduce your operational and reputational risks, and thus remain a safe and sustainable financial undertaking. What’s more, with evidence of both strong financial performance and ESG practices, you stand a far better chance of attracting brand new investment.
4. Prime pick of the talent pool
It is no longer enough to simply offer employees good compensation for the work that they do. Today’s workers, especially the younger generations, are environmentally and socially conscious, and organisations that champion ESG matters are quickly becoming destination employers. The social criterion of sustainability reporting, in particular, has a huge impact on employee culture, engagement and motivation. Paying attention to this in the long term can not only make for a happier and more productive workforce but also help you to entice top talent.
5. Reduced regulatory intervention
Sustainability has become a global discussion, and this is set to continue in the aftermath of COP26. From climate change and the decline of natural resources to social opportunity and corporate behaviour, governments and regulatory bodies are cracking down to ensure organisations protect the world and the people in it. In jurisdictions such as the USA and the EU, for example, waste management and labour laws are a key focus with businesses being held accountable for non-compliance. By integrating ESG reporting into your system, you can ensure nothing slips through the net in the changing regulatory environment.
6. Improved leverage of opportunities and risks
The first step for any business reporting on ESG is to evaluate your associated sustainability risks and opportunities. This can help you to identify (and combat) the challenges facing your organisation as well as the avenues through which potential growth may occur. Risk professionals will know that this exercise takes both time and a detail-oriented approach. Risk management technology can help to streamline this process, as can aligning to ESG reporting principles or a dedicated framework.
7. Greater contribution to a better planet
Sure, good ESG practices and subsequent reporting can have a positive impact on your bottom line. But more importantly, they can have a positive impact on the world around us and for future generations to come. So whichever sustainability initiatives you’re getting behind – whether on a mandatory or voluntary basis – you can take fulfilment from the fact that you are no longer a part of the problem, but the solution.
The benefits of corporate sustainability reporting are hard to argue with. But where do you start? Take a look at our latest e-book to discover the most commonly used ESG frameworks to guide your reporting endeavours and how to choose the best fit for your organisation.
ESG reporting frameworks explained
Discover the most popular ESG frameworks that you can use to improve your reporting and business performance, and how to choose the right framework for your needs.