According to Visual Lease, Joe Fitzgerald holds the position of Senior Vice President of Lease Management Strategy.
Due to its impact on key stakeholders, ESG reporting has become vital to business well-being.
Gartner reports that 85% of investors conduct due diligence on ESG aspects. Employees and customers are also paying attention, with 66% of consumers willing to pay more for sustainable products.
Our research indicated that 90% of senior accounting and finance executives want to set new sustainability goals in two to five years. Before setting these goals, companies must assess their effect in these areas.
Thankfully, regulatory agencies are issuing reporting recommendations to help businesses use comparable and meaningful datasets. The International Organization of Securities Commissions recently approved the first ESG standards from the International Sustainability Standards Board. In early October 2023, California passed the groundbreaking California Climate Accountability Act to combat climate change.
The Office of Finance faces risks and possibilities when it establishes benchmarks and implements new business-critical processes:
Risk: Operational Inefficiency
ESG data is available practically everywhere in a business. Some sources include utility meters, service contracts, facilities management software, HR software, and fleet management systems. The units of measurement, data scope, and reporting techniques vary.
Without a centralized system of record, teams gathering and evaluating this data may make key errors that lead to noncompliance, fines, and thousands of wasted employee hours.
Opportunity: Time And Cost Savings
Effective ESG reporting demands precise collection, monitoring, documenting, and reporting of large amounts of dynamic data like waste management metrics, energy use, and greenhouse gas emissions.
Companies may better identify investments that will have the greatest impact on property sustainability or prioritize leases that support their sustainability goals with visibility into critical costs and functions.
Risk: Damaged Credibility With Employees
When employers don’t commit to ESG or follow through, employees are pushing back. Amazon employees protested due to a lack of trust in the corporation due to its 40% increase in carbon emissions in 2021 from 2019, the year it released its “Climate Pledge.”
Companies that set goals without knowing their emissions are at risk. Beyond correcting inaccurate data, investments done without reliable data may fail. This resource misallocation can anger investors and employees.
Opportunity: Greater Customer And Employee Trust
There’s a reason employees repeatedly designate Patagonia a top U.S. workplace. Patagonia revealed an incredible 4% staff turnover rate in 2019, and major business schools examine their ESG-focused business model.
Businesses may establish transparent, accurate ESG reporting based on greenhouse gas emissions from leased and owned assets with a centralized system of record and strong control structure. Companies can share their net-zero workplace progress using this data. Transparency may strengthen consumer and employee relationships.
Risk: Poor Investor Evaluation
Since most investors evaluate ESG variables, new ESG legislation and reported financial benefits of ESG policies will undoubtedly increase their importance. Public corporations that fail to satisfy investor expectations may lose stock value and need more time, energy, and money to regain trust.
Opportunity: Greater Investor Trust
Nearly 70% of corporations experienced higher-than-expected financial returns on climate initiatives in 2022, according to EY. According to S&P Global, 53% of the 500 largest U.S. corporations’ revenues and 49% of the 1,200 top global companies’ revenues come from sustainable development efforts.
Being proactive about an ESG strategy and clearly providing important data shows investors that a company cares about its longevity and reputation.
The Time To Start Preparing Is Now
From the introduction of numerous accounting standards over the previous few years, firms misjudged the time and effort needed to achieve the criteria, resulting in costly and time-consuming mistakes.
Leaders should consider this as ESG reporting standards change. Finance departments may avoid risks and reap the benefits of ESG reporting faster if they have a plan and a way to collect data on environmental issues throughout their organizations’ leased and owned asset portfolios.
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Tran Dung/Ates Global
Source: Forbes
