ESG Reporting: An Overview

What is ESG reporting?

ESG reporting means measuring and disclosing the company’s environmental, social, and governance (ESG) data. Its main purpose is to offer transparency and demonstrate that the company is truly working towards its goals.

Environmental data includes things like carbon emissions, energy consumption, and waste management. 

Social data refers to things like diversity and inclusion (DEI), and human rights. 

Corporate governance looks at data on how an organization is directed, such as board elections, independent directors, or executive compensation.

It’s easy to say your organization cares about the climate, DEI, and other similar issues. ESG reporting helps you prove it and shows the steps you’re taking toward improvement. It also allows investors to get a better view of the projects you’ve been working on.

ESG vs corporate reporting

You might sometimes hear the term corporate reporting used instead of ESG reporting. The two concepts are similar, but they’re not exactly the same.

Corporate reporting takes on a broader look at a company’s activities. It can include both financial and non-financial data such as people data, management data, financial statements, and more. 

ESG reports, on the other hand, focus solely on data related to environmental, social, and corporate governance. You can integrate them into a single corporate report, or keep them separated.

Benefits of ESG reporting

1. Risk management

ESG reporting will force you to look at your data. You’ll see what’s working, what opportunities for growth you have, and any ESG-related risks the company may be facing. The exact risks you can identify depend on your company and the sector in which you operate.

For example, if you operate in an area with high corruption, your company could face risks such as bribery or discrimination. These could disrupt your production rhythm, cause issues within the company, and eventually lead to decreased revenue and reputation loss.

ESG reporting can help you identify these risks early on and take appropriate measures to ensure they don’t become reality.

2. Increased transparency

If there’s one benefit of ESG reporting everyone talks about, it’s transparency. From employees to investors and stakeholders, everyone expects companies to be more transparent about their ESG-related practices.

These reports help investors and stakeholders make data-informed decisions. They’ll also trust the company more if they know your efforts are real.

3. Compliance with regulations

ESG reporting is more than just a tool to make stakeholders happy. There are several regulations you must comply with depending on your location, the size of your business, and more.

In the US, the Securities and Exchange Commission (SEC) adopted, in August 2020, a broad set of rules regarding disclosure requirements. These include human capital data, but also information on things like climate change risks.

In the European Union, the Corporate Sustainability Responsibility Directive (CSRD) was adopted on November 28, 2022. It comprises a wide set of reporting standards, encompassing issues on ESG.

4. Positive social and environmental impact

When companies report on their ESG practices and their results, they’re motivated to always do better. The company, with its employees, investors, and stakeholders, is the first obvious beneficiary.

But these practices can have a positive impact on the outside world as well. Say you’re a company that’s constantly measuring its carbon emissions and water waste and creating periodic reports. Inevitably, you will notice as soon as problems appear in a certain area and you’ll be able to take measures. In time, this has a positive impact on the environment, ensuring you keep the water waste and carbon emissions to a minimum.

5 steps to creating an ESG report

Local laws and regulations such as SEC and the CSRD come with ESG reporting requirements and standards. While the exact components of your report might vary depending on the regulations you need to comply with, there are a few steps to help you get started.

1. Identify the scope

To create an ESG report, you must know your goals, what you’ll be reporting on, and to whom. If this is your first time creating an ESG report, you may also want to define your reporting period.

All this will help you focus your efforts in the right direction, collect and analyze the most useful data, and select the appropriate format for your report.

2. Collect data and identify ESG metrics

Now that you know the scope, it’s time to identify the metrics you’ll need and collect the data. At this stage, you may need to think outside the box to find the appropriate source for data. HR and internal departments will be the first in line, but don’t be afraid to ask third-party data providers to contribute. 

ESG data can include any HR metrics that fall within the scope of your report, such as those related to DEI, but they’re not the only ones. You also need to include metrics on things like water usage, waste management, or labor practices, depending on your company’s sector and the scope of the report.

3. Analyze the data and create the report

You have the scope, the data, and the metrics. It is time to interpret your findings and create the ESG report.

Look at your data, and try to find patterns, trends, areas that are going as planned, and areas that could use some improvement. You can also benchmark against the competition to identify gaps and find opportunities for improvement.

How you structure your report may vary slightly depending on the ESG reporting standards you need to adhere to. Regardless of what laws and regulations you’re complying with, if any, you’ll probably want to include a detailed analysis of your findings. Case studies, infographics, and other tools that make it easier to present your findings will also be great, but not mandatory.

4. Publish your report

Now that you wrote the report, all that’s left to do is publish it. Most companies publish ESG reports on their website. You can also send it directly to stakeholders or investors or present your findings during an annual board meeting.

There’s no right or wrong way as long as you make it available to all interested parties, and the authorities, if the situation requires it.

5. Monitor the results and make improvements

It may seem the process ends with publishing the report. It doesn’t. To truly improve your business, you’ll need to analyze the reporting process, look at the results, and be prepared to make improvements.

An ESG report is not a one-and-done deal. You need to create them periodically. Look at how the current report went. Was it easy to create? Is there anything you could’ve done better? How was it received, and what was the feedback? 

All this will help you create better reports but it will also guide you so that you can focus your ESG efforts where it matters. Plus, don’t forget that ESG reporting requirements and regulations may change, so be prepared to adjust your future reports as needed.

How HR can support ESG goals

When you say HR, you often think of everything that has to do with employees—talent acquisition, onboarding, retention, offboarding, reviewing HR metrics, and more. But where does HR stand when it comes to ESG reporting?

Their first role is probably the most obvious one and has to do with the social part of ESG. Human resources will play a crucial part in the company’s DEI efforts, for instance. They’re the best placed to analyze data related to things like gender, race, or other dimensions of diversity.

HR can also ensure health and safety standards are up-to-date. When you collect data for your ESG report, you’ll be able to identify risks for employees, including possibilities of accidents, injuries, or even burnout.

Your HR team can assist in creating an environment where the physical and mental health of employees is prioritized, along with their work-life balance. 

HR can also help you look at how each of the factors included in ESG impacts your business. For example, environmental factors that create health risks may impact productivity or retention. By looking at both ESG and HR metrics, you can spot patterns and trends, and use them to reach your goals.

Using people analytics for ESG reporting

People analytics is the way to go if you want to turn HR and organizational data into actionable insights that will help you grow your business. They also help immensely with ESG reporting.

People analytics can boost your ESG results, especially in the social and governance categories. For instance, it will allow you to measure your DEI efforts, helping you promote equality and fairness in the workplace. These are critical components of ESG. Without them, other areas, as unrelated as they may feel, could start falling apart.

You can use your people data in other areas as well. For instance, absenteeism rates may signal an issue with employee well-being, health, and safety. Dropping engagement rates could have a lot of causes, some of which may be related to ESG issues.

When you use people analytics for ESG reporting you can leverage that data to create a sustainable workforce, equitable and fair for all, with transparent practices that attract and retain top talent.