I started my career in sustainability consulting over 13 years ago and there has been huge advancement on the sustainability transitions being made in modern society. Sustainability transitions are required to address challenges of climate change, economic development, ecological integrity, and social justice.
Many sustainability transition disclosure programmes have been introduced over the course of this time. These disclosure programmes have often come to create additional complexity to the reporting process as companies are now increasingly being inundated and end up worrying more about the reporting templates thus leaving very little time to implement the actual sustainability transition programmes within the corporate strategy.
What is ESG reporting?
The sustainability reporting and disclosure processes have now been consolidated into the globally adopted ESG reporting framework. However, the principles behind ESG are decades, maybe even centuries, old (much older than my sustainability career even). It just depends on where you draw the line (or boundary scope as we often to refer it within the sustainability reporting context). A 2004 report from the United Nations – titled Who Cares Wins – carried what is widely considered the first mainstream mention of ‘ESG’ in the modern era.
ESG reporting is defined as “the process of publicly disclosing an organisation's progress toward meeting its goals and commitments on environmental sustainability, social issues and corporate governance”. The reports are generally done on an annual basis and typically include details on different ESG metrics used to measure performance in those three areas in both quantitative and qualitative ways. They often also list the long-term objectives of ESG strategies and the reporting framework used to develop the report.
How can companies start their ESG reporting journey?
ESG reporting is a journey, not a one-time event and is preceded by an ESG strategy. As a result, it can be daunting to know where to begin. The following are ESG focus areas that will need to be incorporated into the reporting, on an annual basis:
The environmental (The "E") component covers how a business interacts with the natural environment, the impacts of its operations, and the actions it takes to alleviate adverse effects through effective risk mitigation.
The social aspect (The "S )encompasses how an organisation’s activities affect people—from its workforce to customers, local communities, and those working in its extended supply chain.
The governance (The "G") facet relates to the policies, structures, and procedures of how an organisation or country functions.
By understanding these metrics it becomes clear that strong and reliable ESG data will be key in the reporting process. ESG data often comes from various sources in different forms. There are internal and external data sources. Internal data is provided by the company itself whereas external sources are from third-party agencies, government agencies, and other media platforms.
ESG Reporting Levers
ESG data is often complex and the larger the organisation the large the ESG data set. Technologies are already being sourced in the ESG reporting processes by large organisations and can thus be used to improve efficiency, reduce waste and provide less carbon-intensive means that is often associated with the ESG data reporting process.
As an example, the real estate sector is one of the largest consumers of electricity and water and it’s no surprise that real estate investors are increasingly looking towards digital technologies to not only manage these operational risks but to also assist in disclosing the ESG factors to their stakeholders on an ongoing basis. These come in the form of digital technologies fondly known as proptech solutions.
Proptech is information technology that helps individuals and real estate companies research and manage real estate. These will be further unpacked in the upcoming article.
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