ESG Disclosures and CSR Report
ESG disclosures have become an increasingly common practice with increasing stakeholder demands. Many investors today want to know how their investments will impact society for the better, not just their portfolios. As such, companies that want to attract these individuals need to make sure their reporting puts them in the best position for success. However, there are a number of protocols that need to be followed in order to create the most successful communications in this regard.
When itâ€™s time to draft ESG policies and performance disclosures for your CSR report, sustainability website, and ESG communications, following appropriate ESG frameworks isnâ€™t just best practice. Itâ€™s table stakes. Increasingly, major institutional investors are calling for alignment with TCFD and SASB, making these guidelines impossible to ignore. At the same time, ESG ratings agencies, including MSCI, Sustainalytics, and ISS, are using the same scoring metrics as the frameworks. Clearly, ESG framework alignment and ESG ratings are joined at the hip.
But there is more to an award-winning CSR report or successful ESG ratings remediation than a template. Companies looking to take ESG communications to the next level, outrank peers, and create competitive advantage must work the investment narrative from every angle to capture the full intrinsic value of their ESG policies. Itâ€™s not just science. Itâ€™s art.
A multi-faced approach that combines data,Â , and deep understanding of your unique ESG strengths through the lens of the evolving ESG landscape is key to optimizing your ESG disclosures and relatedÂ . Get your ESG positioning right, and youâ€™ll not only improve ratings; you will more deeply connect stakeholders with your investment thesis, driving equity valuation in the process.
Why Do a CSR Report?
CSR reports, also known as corporate sustainability reports or ESG reports, can be a significant corporate communications vehicle to tell your companyâ€™s holistic ESG story and to deliver ESG disclosures. They can also be beneficial for:
Proving your commitment to ESG
Publishing your reports can help fuel your companyâ€™s commitment to executing a sustainability strategy. Setting goals and announcing initiatives to support the strategy holds your company accountable for following through while showing your stakeholders that ESG is a core component of your companyâ€™s overarching strategy.
Providing a baseline for reporting
Publishing a CSR report on an annual basis establishes a way for you to communicate with investors and other key stakeholders and update them on the progress of your ESG initiatives and overarching strategy.
Delivering messages to additional stakeholders
The various aspects of a report can be repurposed to present the information in materials specifically delivered to customers, employees, and the community. Promoting your work to employees can help your reputation and aid employee retention and morale, for starters.
What should be included in a CSR Report?Â
The primary focus of CSR reports will vary based on what the organization does and the relevance of its most material environmental and social factors. Components of a typical CSR report include:
- An overview of the company
- A letter from the CEO endorsing ESG initiatives and progress
- ESG strategy, specific goals, and commitments
- Materiality assessment results and ESG priorities for the business
- A summary of progress and impact, with sources and statistics to substantiate information, where applicable
- ESG data and metrics
- Alignment to ESG frameworks
- Board oversight of ESG
Types of Reporting Frameworks
The roadmap to achieving meaningful ESG disclosure includes reporting in alignment with supporting frameworks. Various sustainability-driven organizations, including TCFD, CDP, SASB, GRI, and UN SDGs, develop wide-ranging metrics and reporting standards as part of such frameworks.
The different ESG frameworks are used for different reasons. TCFD is the most supported frameworks to report climate-related data and disclosures by investors and regulators globally. CDP is a widely used questionnaire to report climate-related information that is used by thousands of companies, with larger companies and regulators pushing more companies to complete the questionnaire each year.
SASB is used for industry-specific topics and reporting financially material data and disclosures. GRI is also used to report material topics and is often leveraged as a reference for materiality assessments. Lastly, the UN Sustainable Development Goals (SDGs) consist of 17 goals that aim to tackle large, global topics like climate change, ending poverty, and reducing inequality. Understanding the differences can help you determine which frameworks are best suited for you to meet the expectations of your stakeholders.
ESG frameworks can inform you on what information is most relevant to include in CSR reports, and how best to deliver this information to the relevant audience. The standardization of such scoring facilitates relevant comparisons with similar companies that are using similar frameworks. This gives investors or other stakeholders a clearer ESG snapshot of your company.
Selecting the right ESG consultants for your business
When reviewing your options for ESG consulting expertise, it is crucial to take a close look at the firmâ€™s experience and capabilities. For example, itâ€™s important to find out if the firm adheres to one of the many recognized frameworks, such as the Task Force for Climate-Related Financial Disclosure (TCFD), the Global Reporting Initiative (GRI), the International Sustainability Standards Board (ISSB), or the United Nations Sustainable Development Goals (SDGs).
Itâ€™s also a good idea to make sure the firm you choose has professional certifications such as from the Sustainability Accounting Standards Board (SASB) or CDP. If possible, the consultants should be able to share a published services approach with you that outlines exactly how they will work with you.
Of course, having specific industry experience and a proven track record of success with other clients similar to your company should tell you a lot about how the consulting firm you choose will deliver results.
Regarding climate-risk reporting, the various ESG standards and frameworks, including CDP and TCFD, along with the new climate rule proposed by the SEC, can be a challenge to sort through.
Companies are recognizing that reporting on an effective ESG strategy includes the adoption of voluntary ESG reporting frameworks.
Five proven strategies for producing an ESG report that speaks to stakeholders.
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