ESG issues are increasingly important to investors, customers, employees, and government authorities. The SEC may require quarterly ESG reporting for all public businesses, according to June 2021 reports. That news followed the March formation of its Climate and ESG Taskforce to combat ESG-related misbehavior. President Biden aims to make the power sector carbon neutral by 2025, thus oil and gas companies without ESG reporting will need to quickly design and implement strategies to show the administration they are reducing emissions.
However, ESG is such a big and multi-faceted topic that more than simply the energy sector must soon meet its duties. Indeed, all companies must. Company leaders in climate change, workplace safety, and equal opportunity are increasingly rewarded by investors. In 2020, Blackrock found that companies with strong and transparent ESG profiles outperformed their competitors. It states these firms built stakeholder confidence, enabling long-term investment and sustainable growth.
ESG’s growing importance
ESG reporting began as requests for corporations to disclose their environmental efforts, such as minimizing carbon emissions or implementing sustainable business principles. Such knowledge was once considered a “nice to have” rather than a need. ESG has become increasingly important as public knowledge of the climate catastrophe grows and activist investors point out social and governance failings such inadequate worker safety and lack of diversity on boards and in the workplace. Businesses increasingly prioritize understanding future shareholders and what they want from a public company.
Implementing ESG reporting takes extra labor. Thus, knowing what to measure before starting pays off.
- Oil and gas businesses may have to disclose their environmental impact and CO2 emissions.
- For consumer-facing businesses, it could include gathering data on racial diversity and training personnel to be attentive to such concerns to make consumers more comfortable and promote loyalty.
- ESG reporting for a bank or corporation may focus on board diversity and women.
Business leaders should identify up to five ESG criteria that can be measured and report on them in detail. Creating a coherent, centralized process for collecting environmental, social, and other risks will help you produce complete ESG reports and simplify data collection and problem-solving in your organization.
Benefits of ESG Reporting
This may seem daunting, but proactive ESG companies have opportunities. As Blackrock shown, it can boost profits and sustain growth. It can identify operational savings that save waste and boost business performance. It also reduces worker danger. Companies in high-risk industries can utilize an ESG program to identify high-risk areas and adopt mitigation measures and staff training to prevent future disasters.
In siloed ESG data organizations, this is challenging. Centralized ESG data systems can help with this. With all ESG data in a single, safe, and integrated system, data visualizations and dashboards can instantly identify organizational patterns and opportunities for improvement. Simply click to generate ESG reports and spin up multiple data cuts in seconds. Data collection and reporting are much faster with a centralized system. It saves job duplication, enhances reporting accuracy, and increases ESG program openness.
It’s also possible to reduce activist pressure from people or ESG-focused investment firms. By disclosing ESG data and exhibiting a clear plan to change, corporations can build ties with activist investment firms to improve governance and social responsibility, attracting new investors. High standards imposed by transparent ESG reporting can protect corporations from future interference.
It goes beyond shareholder recruitment and retention. A clear ESG policy helps attract top talent. New hires want to work for firms that emphasize sustainability and inclusivity. This has practical benefits, as mission-driven employees work hard to build a future-proof organization.
This cannot be a PR stunt. Companies that selectively disclose ESG data risk “greenwashing,” therefore they should be honest about issues and have a plan to make improvements quickly.
Today’s investors emphasize corporate values over immediate returns, making now the best time to aggressively implement an ESG data strategy. The future of your firm may depend on it.
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Tran Dung/Ates Global
Source: Entrepreneur
