ESG reporting regulations offer similar potential and concerns as the GDPR revised data management rules.
ESG has long been a nice-to-have for firms to emphasize purpose over profit. A continuously changing regulatory framework requires organizations to innovate and implement, monitor, and report on their ESG activities or risk penalties.
A game changer for ESG innovation
ESG has long encompassed corporate responsibility, including sustainability, diversity, trust, and privacy. ESG claims have a well-established impact—a recent McKinsey analysis indicated that products with ESG claims had greater growth rates—but firms haven’t been held to a rigorous reporting standard.
“Companies will have to embrace innovation and start implementing, monitoring, and reporting on their ESG efforts—or face penalties down the road.”
New regulations aim to promote openness and allow investors, customers, and other stakeholders to make informed business decisions. It will also force corporations to integrate sustainability into their corporate strategy, bringing segregated work into the boardroom.
California and the EU are two economies that have enacted new policies, with the EU’s Corporate Sustainability Reporting Directive (CSRD) being the fastest and most robust. Although some corporations will start reporting for CSRD in 2024, KPMG determined that 75% of global firms are not ready. The best spot to start?
Preparing for ESG reporting starts now
Zendesk has taken many steps to prepare for the changes. We have laid the groundwork for CSRD reporting via our annual ESG report, carbon reduction efforts, and science-based goals (SBTs). There’s still more we can do to improve data availability, quality, and transparency for reporting and optimize our programming for greater environmental or societal effect.
Understanding new compliance requirements and whether they affect you is essential at any stage of ESG. With new laws, all organizations must reassess their ESG strategy. Here are five steps you can take immediately to meet reporting requirements and establish a more sustainable and equitable business for your people, customers, and planet.
1- Identify and educate your key stakeholders
ESG work generally requires business-wide stakeholder support. Before creating your ESG strategy, identify and educate your key stakeholders about your present programming and prospective adjustments.
2- Determine if and when your business is in scope
CSRD reporting timelines vary by company size, staff count, EU location, and EU organizations. In 2029, all qualifying US corporations must provide 2028 statistics.
Understand when and how upcoming regulation may affect your organization to prepare for ESG compliance. CSRD is making news, but other legislation is coming up. The SEC is drafting climate legislation, California passed two climate disclosure laws, and others are appearing worldwide.
3- Secure your budget
Consulting and vendor support are essential for CSRD readiness. This includes a materiality assessment vendor, third-party validation, and any other data gathering and management tools or processes. Moving forward, cost estimates and a long-term budget are crucial.
4- Conduct a double materiality assessment
To determine whether ESG concerns are material to your organization and necessitate reporting, conduct a double materiality evaluation. This requires engaging with a third party to understand how your business and the environment affect each other. This inside-out and outside-in examination can help you identify CSRD-mandated reporting concerns.
5- Start gathering data and take action
After determining whether activities are reportable, acquire data and act. Can your company be more responsible? Could you alter that now? If not, what steps are needed to get there?
Ready or not, ESG reporting is here to stay
Every leader should watch and prepare for ESG reporting, whether they must report this year or in five. As we progress in ESG, we will share our insights with our community.
Learn more about how we can help your ESG solutions? Click here To Schedule A Consultation!
Tran Dung/Ates Global
Source: Forbes
