18 June, 2021 / Comment
Setting the record straight: A three-step guide to ESG reporting
By Sue Bonney, UK head of ESG, KPMG
KPMG's Bonney shares advice for firms reporting on ESG and how to ensure they are putting their best foot forward in an evolving landscape
ESG reporting is relatively new for most businesses but is evolving fast. In recent years many have started the journey to report on environmental impact and sustainability, but much is narrative based and, in any event, is just the tip of the iceberg. There’s some way to go before all companies feel able to report confidently and robustly on a wider range of ESG measures.
For most, knowing where to start can be the hardest part. There is an absolute alphabet soup of different frameworks, all serving slightly different purposes. For example, the Taskforce on Climate-related Financial Disclosures (TCFD) reporting is on climate-related risks and opportunities for the business, whilst the Global Reporting Initiative (GRI) covers the impact of the business itself on the environment and wider social factors. With no one-size-fits-all framework, and often real challenges on gathering data, reporting can quickly become a minefield.
Here are my top three tips for clients looking to step up their ESG measurement and reporting.
Identify your audience
First understand who cares, and about what. Which stakeholders are most important and what is their particular focus? For many, investors and regulators top the list, and they will therefore concentrate on laying out aspects such as resilience and growth opportunities.
But don’t overlook other key groups. Consumers and employees increasingly care about the broader ESG agendas of companies they buy from, or work for. Have they signed up to carbon zero targets? Are they committed to eliminating human slavery throughout their supply chain? And so on. A narrative which connects effectively with these groups is therefore key.
Knowing your audience will help steer you. For a solid start, try the World Economic Forum’s ‘Stakeholder Capital’ framework. Based around existing reporting standards and focusing on your most material metrics with space to add others important to your business, this is a global approach helping to elevate best practice.
Be authentic and honest
The ESG agenda is so wide ranging: from use of natural resources and the waste you create; policies on inclusion and diversity and paying fair taxes; to your board demographics and processes for sound decision making. Not every element will be relevant for every business. Responsible water use, for example: a critical consideration for a brewer or horticultural business, much less so for a consultancy firm.
So, focus on the material. Things you are genuinely proud of and need to shout about more. But equally those areas where you are vulnerable. Sweeping these under the carpet will likely catch you out and prompt accusations of greenwashing. Being upfront with a clear plan to make them better puts you in control of your narrative.
And remember the reporting isn’t the end in itself. It is the outcome of delivering against your strategy. The more it can be a real time reflection of where you are in your journey, the more useful it will be for driving the business.
Data, data, data
Data is absolutely critical. Much of it is non-financial, inconsistent and fragmented across the business. Whereas every business is set up to record, report and review financial data, that discipline is often lacking here.
Companies need to build out the systems to capture and track the information as part of business. Technology as simple as a smart meter can be useful here, as well as qualitative input from staff and suppliers. As far as possible I’d always recommend having real-time or even predictive data to help inform decision making.
For all businesses ESG reporting is only going to become more and more important. Those that get on the front foot will be in control of their narrative as they engage with their stakeholders, and are set to benefit from arming them themselves with quality data that can inform better decision making and ideally fuel growth.
A part of the Mark Allen Group.