How to work with sustainability and ESG reports in your business!

‍A sustainability report reveals the impact your business has on its stakeholders. The most commonly reported areas are identified as: climate change, human rights, diversity, ethics & governance and supply chain.

At the moment there is no mandatory disclosure or layout format for a sustainability report, though many businesses draw on a combination of frameworks to produce their report.

Understanding what a sustainability report is and why your organization needs one and benefits from having one, can you then appropriately choose the best report for you. 

Why does your organisation need a sustainability report?

It is important to support tenders to those customers who are committed to driving up sustainability standards in their supply chain. And, to satisfy mandatory non-financial reporting such as Directive 2014/95/EU of the European Parliament and the European Council.

Equally important is the use as evidence to existing or prospective investors as to your sustainability performance. You can engage your teams so they understand, and can contribute to, the journey the business is on.

While disclosing and reporting non-financial areas within your business, such as diversity and inclusion, may not be mandatory, they are still of real value and important to your business. 

What's the evidence that sustainability reporting is now becoming an imperative?

Reporting is expected by shareholders, employees, customers and investors. The KPMG Survey of Sustainability Reporting shows over 80 percent of the largest companies in the world are reporting their sustainability.

Sustainability is now an employee expectation. Environmental concern rose by 128% among Generation Z in a year 

There is an increase in sustainable procurement programs. A recent study by Ecovadis found that companies with mature sustainable procurement programs report more benefits across the board, including an 88% increase in risk mitigation, 53% improvement in procurement metrics, 35% more cost savings and 29% increase in innovation.

Increasingly investors are looking for evidence of sustainability (ESG) measures and in addition to this McKinsey report that 97% of investors believe sustainability measures should be audited 

What do you need to consider when creating your sustainability (ESG) report?

Choose a framework, or a combination of frameworks, which suits your business. Then focus on areas which are material and relevant to your business strategy.

Be open to celebrating what' s gone well and be honest about what hasn't. 

Have a robust system to collect the underlying data and keep your approach consistent.

Have your report independently verified by a sustainability professional such as a financial sustainability expert.

How do you choose your sustainability reporting frameworks?

‍Announced at COP26 3rd November, 2021 The formation of a new International Sustainability Standards Board (ISSB) to develop—in the public interest—a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs;

 A commitment by leading investor-focused sustainability disclosure organisations to consolidate into the new board. The IFRS Foundation will complete consolidation of the Climate Disclosure Standards Board (CDSB—an initiative of CDP) and the Value Reporting Foundation (VRF—which houses the Integrated Reporting Framework and the SASB Standards) by June 2022;

Until this is embedded there is no recognised global sustainability reporting framework standard.

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Once we have sustainability standardisation the pace of progress will increase rapidly. Here we share some highlights to help you understand today's landscape a little bit more and what are the options you have open to you today.

Most Common Sustainability Reporting Frameworks

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Global Reporting Initiative (GRI) is for all size businesses covering environmental, social & governance topics. This is a global standard setter for sustainability and has roughly 65% coverage across businesses who report on their sustainability. GRI has recently partnered with B Corp.

The standards cover all topics, it is recognised globally and is for all size businesses. The information provided seems to be in-depth. However it is complex and there is a high level of flexibility about what standards you can choose to include or leave out.

The standards are available to download for free. You pay for the training to use the standards and the cost is €1,250 per person. Annual community membership costs €500- €2,500 for SMEs depending on your turnover.

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Sustainability Accounting Standards Boards (SASB) which adopts a materiality and industry specific approach is merging with the International Integrated Reporting Council (IIRC) which integrates reporting through identifying the 6 capitals of business.

The merged organisation (Value Reporting Foundation) launched in mid-2021 to provide a comprehensive corporate reporting framework. It’s goal is to make sustainability disclosure simplified and encourage integrated reporting. It is working collaboratively with GRI. 

At this stage it is not clear of the link with TCFD or future IFRS standards. Uptake of SASB & IIRC up until now has not been as strong as GRI. Pricing has not yet been released. Current membership of IIRC/SASB is approximately €400 and training ranges from €400 - €1200.

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Task force on climate related financial disclosures (TCFD) focuses on climate change and integrating this into financial reporting. TCFD develops recommendations for more effective climate related disclosures. It's most suitable for organisations with public debt or equity and asset managers and owners. Providing focused and practical support to implement a complex issue. TCFD has 81% uptake and is suitable for larger organisations. Bear in mind it focuses purely on climate related issues 

There is no membership though you are encouraged to become a supporter. Training courses are free and appear to be of a good quality.

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Sustainable Development Goals (SDGS) reporting allows you to map your sustainability measures directly to the SDGs. The SDGs are 17 overarching goals which we are working towards achieving as a society to make the world a better place. They were established by the UN in 2015. The goals are now more easily identifiable and it is promoted well. They link societal and planetary problems to collaborative solutions. Usage of the SDGs in sustainability reporting has a 97% uptake which is a strong indicator of its importance in the reporting landscape. Sometimes the big picture can make it seem unrelatable to smaller organisations.

It costs £550-£1250 in membership fees for small and medium sized businesses. A number of free, well-designed, training courses are available.

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Other points to consider:

GRI seems to be the market leader in the US and Latin America. TCFD is now prominent in the UK. TCFD reporting/ disclosures are now required by UK premium listed companies (which the FCA announced in Dec 2020) and is a sign of further disclosure requirements to come for all.

When you are choosing which reporting framework to use you should consider where your customer is. As an example if you are looking to become a supplier of a BCorp then absolutely it would make sense to consider the GRI framework and B Corp certification.

If your customers are consumers then the design of your messaging and impact report becomes really important. 

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What does all this mean for small & medium sized businesses?

Smaller businesses have the benefit of having limited mandatory reporting requirements which gives flexibility as to the framework you choose. Depending on your goals you can decide the extent to which you implement the frameworks. 

If you are looking for investment in the future you could consider recognised detailed reporting such as GRI. If you are looking to engage with your teams, simple goals and measures can be adopted and an internal impact report would suffice. 

If you are looking to win new business a certification such as B Corp with a SDG reporting framework could be used.

You could keep it simple and start to track your ESG metrics, either through a purpose built platform or even more simply in a spreadsheet.

‍You can make the report itself as simple or as sophisticated as you would like. Some organisations produce high quality downloadable reports to be shared, some produce video’s and some show their reports in the public domain through their website.

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Profit Impact is here to help ease this process and guide you through your approach. You can book a call with Sarah today!

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