ESG reporting: a job worth doing

I f you’re not legally required to report on environmental, social and governance ESG, should you be doing it anyway? And if so, what’s the best way to proceed and how much should you be telling people about it?   

The regulatory pressure on organisations to demonstrate their commitment to ESG varies considerably from country to country, but consumer expectations of brands are growing.  Shoppers are increasingly looking for labels that indicate fair trade and ethical sourcing, while a number of high profile brands have been roasted in the media for treating workers badly.

Ironically, in the United States there has been a move away from sustainable investing as a trend in spite of consumer opinion. The six largest banks in the US recently left the Net-Zero Banking Alliance and BlackRock, which for several years was at the forefront of the responsible investment movement, made no mention of ESG in its 2024 annual report. Nonetheless, the behaviour of US household brands is still under scrutiny from customers.

In Europe, meanwhile, communicating that you have ESG credentials is more important than ever. For one thing, new, stricter regulations are emerging. The EU is in the process of rolling out its Corporate Sustainability Reporting Directive (CSRD), which will increase sustainability reporting requirements, particularly for larger companies. In the UK, the Companies Act requires large companies to report on their engagement with stakeholders and their impact on the natural environment. Many public sector tender documents require even smaller suppliers to provide answers about their ESG strategies.  

"For smaller businesses, where no clear reporting framework is designated, it can be hard to know where to begin"

Xanthe Vaughan Williams Director

Aside from the legal requirements, there are very strong reasons to consider publishing your own report and setting targets for your organisation. Firstly, there’s plain good business practice. Robust governance, high employee retention rate and the avoidance of environmental damage should all be priorities for any organisation. There’s no financial advantage to being sued for releasing toxic waste, making your employees miserable or keeping your company books shoddily. But there is also a strong case for making public your goals and achievements in these spheres. As companies accused of “greenwashing” will know, it’s very easy to say the right thing in general statements but much harder to live up to written promises. By publishing targets, an organisation is obliged to consider what it can really achieve and is held accountable for its success or failure. 

For smaller businesses, where no clear reporting framework is designated, it can be hard to know where to begin, but there is a growing number of companies offering help. For businesses with a significant level of emissions, a specialist partner to help with the tricky calculations is essential. And an outsider’s perspective can be valuable in scoping out a project and helping the management team to set targets. Whether you decide to go full B-Corp or simply publish an ESG strategy, there are a number of points that organisations of any size should bear in mind.

Prioritise your goals

The research phase of the project is commonly referred to as a materiality assessment, though this is still not a term that is well-used outside the ESG sphere. Essentially, it involves researching your stakeholders, both inside and outside the organisations, to ascertain what goals matters most to you as a company. You may also wish to consult the United Nations Sustainable Development Goals (SDGs), which can provide pointers on where to begin. 

Put it down in writing

Once you’ve drawn up your objectives, benchmarked your current position and set some achievable goals, documenting this does matter. Creating a strategy and sharing it with your team, your stakeholders, and publishing it on your website makes you accountable. And the process continues with an honest review of an organisation’s progress, keeping the same stakeholders informed and making sure that the information is easily available to others who need it.

 Communicate with care

The communications element is where many organisations fall down. The temptation to tell the world that you’re doing the right thing can be very great, and can lead to trouble. As an example, when BrewDog boldly announced the planting of 500,000 trees, half of which then died, the resulting fall-out was bad. So bad that former CEO James Watt commented that spending the same amount of money on cocaine and prostitutes in Las Vegas would have caused less damage to the brand’s reputation. Claiming the moral high ground is a dangerous strategy.

Honesty is the only policy for success where ESG is concerned. Setting goals is vital but so is accepting that not every initiative will work and admitting failure when it happens. For large organisations, policing a global supply chain is very difficult. It’s great for companies to share the measures they have put in place to maintain working conditions and environmental standards among their suppliers, but it’s also important to acknowledge that these may not always work. Grand claims of ethical practice worldwide are too easy to find flaws in. For smaller companies, a similar rule should apply – set goals that are achieveable and stick to them. Don’t say you’re changing the world if you’re simply recycling your coffee cups. 

It is extremely important, however, that companies are not deterred from communicating that they take sustainability and good governance seriously. In many ways, creating an ESG strategy is just an extension of a well thought out business plan, so fears of accusations of greenwashing should not be allowed to get in the way.  Regardless of whether ESG is currently a fashionable term, customers, partners and employees prefer that you are doing something to improve the world rather than making it worse. And whatever you think of the over-used “triple bottom line” of people, planet and profit, all three of these things matter.

This article originally appeared on StrategicHQ.