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ESG Reporting: Requirements and Best Practices

Sustainability

By Ayna Custovic

In recent years, ESG reporting - Environmental, Social, and Governance - has become a critical tool for businesses to disclose their performance and impact in these areas and their commitment to sustainable practices. As concerns about climate change, social inequality, and corporate governance intensify, stakeholders increasingly demand transparency and accountability from companies.

With constant changes and new requirements - such as the new CSDDD (Corporate Sustainability Due Diligence Directive) regulations that were agreed just days ago and will likely be placed in law later this year - navigating the landscape of ESG reporting and adhering to the various standards, frameworks, and regulations can be complex.

Read on to find out more about the current requirements and best practices for ESG reporting.

The fundamentals of ESG reporting:

  • ESG reporting refers to the disclosure of a company's environmental, social, and governance performance.
  • The purpose of ESG reporting is to provide stakeholders, including investors, customers, employees, and regulators, with transparent information about a company's sustainability efforts and its impact on society and the environment.

Key requirements for ESG reporting:

  • Standards and frameworks: There are a range of ESG reporting standards and frameworks, including the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD). Each framework has its own set of guidelines for reporting on ESG factors.
  • Materiality assessment: Companies must identify and prioritize the ESG issues that are most relevant to their business and stakeholders through a materiality assessment. This process involves determining which ESG factors have the most significant impact on the company's financial performance and long-term sustainability.
  • Double materiality assessment: Under the recent CSRD (Corporate Sustainability Reporting Directive) regulations, it has been mandated that large companies within the EU with an annual turnover of over €150m must complete a ‘double materiality’ assessment. This involves looking at impacts from two perspectives - financial and environmental.
  • Due diligence: Last week, the European Commission approved the CSDDD/CS3D (Corporate Sustainability Due Diligence Directive) which means that companies are legally required to disclose information regarding their supply chain and any potential human rights and environmental violations. This means that companies are now not only liable for their own sustainability impacts, but the impact of the actions of their suppliers.
  • Data collection and management: Gathering accurate and relevant ESG data requires a robust system for data collection, verification, management, and reporting. Having reliable software like neoeco that automates this process and works with existing accounting systems and reporting measures simplifies and streamlines this process.
  • Stakeholder engagement: Effective ESG reporting involves engaging with stakeholders to understand their expectations, concerns, and priorities. Companies should communicate openly with investors, customers, employees, and communities to gather feedback and address any issues raised.
  • Integration into corporate strategy: ESG considerations should be integrated into the company's overall corporate strategy, risk management processes, and decision-making frameworks.

Best practices for ESG reporting:

  • Transparency and disclosure: Companies should strive for transparency in their ESG reporting by providing comprehensive and accurate information about their performance and targets.
  • Consistency: Companies should adopt consistent reporting practices and metrics, both internally and externally. Standardized reporting formats and benchmarks can help investors and other stakeholders evaluate ESG performance.
  • Continuous improvement: ESG reporting is an ongoing process that requires continuous improvement and adaptation to evolving standards and stakeholder expectations. Companies should regularly review and update their reporting practices to reflect changes in their business operations and corporate obligations.
  • Collaboration: Collaboration with industry peers, investors, and other stakeholders can enhance the credibility of ESG reporting efforts. Companies should look for opportunities to address challenges and drive collective action on sustainability issues.

ESG reporting has become a vital aspect of corporate governance and responsible business practices. By adhering to the requirements and adopting best practices, companies can strengthen their ESG performance, build trust with stakeholders, and contribute to a more sustainable future for people and the planet.

With neoeco, your company has the opportunity to get a free obligations report which will outline your requirements for ESG reporting. By using neoeco’s ESG reporting software, you will get accurate and detailed measurements of your company’s performance and impact across all aspects of sustainability, as well as the ability to set targets, gain insights into how you can improve your sustainability, and create robust and accurate reports to share with stakeholders and internally.

To find out more about what exactly the requirements of ESG reporting are, follow us for detailed articles and up-to-date information on the changing regulations.

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