How to prepare for ESG reporting? The complete guide.
Are you wondering how to prepare for ESG reporting? Find the answer in our guide. Some specific steps and methods will help you effectively fulfill your ESG report obligations and make the necessary changes to meet the expectations of all stakeholders.
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Key Information
ESG reporting is an opportunity to strengthen trust and build relationships, although many companies in Poland are not yet fully prepared for the process. The average score achieved by organizations reporting non-financial activities is 5.08 on a 10-point scale (2023).
Effective preparation and implementation of an ESG strategy requires a SWOT analysis, definition of measurable goals, consideration of stakeholders, and integration with business processes.
For effective ESG reporting, regular monitoring of progress, communication of results through transparent non-financial reports, and continuous engagement and collection of feedback from stakeholders are essential.
The main aspects of ESG reporting
ESG reporting is not only an obligation but also an opportunity to strengthen trust and build long-term relationships with investors, customers, and partners. Awareness of the importance of ESG issues is growing. In Poland, many companies are still not fully prepared for this task, but significant progress is being made.
It is worth starting with understanding EU guidelines and international standards, such as the European Sustainability Reporting Standards (ESRS) or the Corporate Sustainability Reporting Directive (CSRD), which define the framework for sustainability reporting.
Sustainability matters business
88% of listed companies, 79% of venture and private equity companies, and 67% of private companies had ESG initiatives in place. More than three-quarters (77%) of small- and mid-cap companies have a formal ESG-related statement of purpose. Nearly one in five (18.5%) small- and mid-cap companies use ESG standards. These include elements such as the UN SDGs, GRI, and SASB. More than one in four S&P 500 companies interviewed for Q4 2020 results cited “ESG reporting.” This represents a 63% increase in ESG mentions over the previous quarter. This also marks the highest number of ESG reports mentioned in the last ten years. More than 200 companies have signed The Climate Pledge.
Identifying the company’s reportable areas
Every organization must carefully analyze its operations in terms of environmental and social impact. This process requires taking a detailed look at the entire value chain and working to reduce the negative effects of the company’s operations.
The aspect of biodiversity, which is becoming increasingly important in the context of new regulations, cannot be overlooked either.
Transparency and reliability of data
Transparency and reliability of data are the foundation for building trust. That’s why regular external audits and adherence to international standards like GRI and ESRS are important.
However, the challenge remains to ensure information is complete and not subject to subjective interpretation. This is why, according to the latest European Union regulations, every report should be subject to an external and independent audit.
Such an audit is intended not only to verify the conformity of calculations but also to prevent greenwashing, which can have serious consequences for companies, both image-wise and financially.
ESG strategy planning
During the planning stage of an ESG strategy, it is crucial to align existing practices with sustainability goals, including the Sustainable Development Goals (SDGs), to train staff, and to engage decision-makers in the pursuit of sustainability.
Using the ESRS and GHG Protocol standards can be a starting point for developing an effective ESG strategy tailored to the challenges of a specific sector.
SWOT analysis in the context of ESG
A SWOT analysis is a tool that allows you to identify the key factors affecting your business from an ESG perspective. It will also help you understand where the opportunities and risks of your sustainability efforts are, which is essential for developing an effective strategy.
Defining ESG goals
ESG goals must not only be consistent with the company’s values but also realistic and measurable. These could be measures to reduce CO2 emissions, make production more sustainable, or improve diversity in the workplace. An ESG diagnosis report can serve as a solid basis for setting these goals.
Mapping stakeholders and their expectations
Stakeholder mapping will help you understand who influences your organization and what expectations they have. Stakeholders should be included while analyzing the company’s value chain. Regular feedback from stakeholders is the key to continuous improvement and adjustment of ESG strategies.
Implementation of ESG management system
Introducing an ESG strategy into an organization is a process that requires precise planning. It is necessary to assess readiness for change and engage the entire team. Task allocation must be rational to ensure the “burden” of changes is evenly distributed across the company. The ESG strategy should be based on reliable data. Therefore, it is essential to develop an appropriate method for collecting, processing, and analyzing information.
Integration of ESG with Existing Business Processes
In some enterprises, the difference between business and ESG goals is gradually becoming blurred. This is a very positive trend that allows for an optimistic outlook on the future. Integrating ESG issues with business processes is key to achieving sustainable development. Initially, it requires redefining priorities and adjusting business models. Changes will affect both internal operations and supply chains, and even employee management.
Increasing Employee Engagement
ESG training for management and employees is a way to increase their awareness and engagement. It is important to promote ESG as part of the organizational culture. This can significantly contribute to improving the employee experience and the company’s image.
Monitoring Progress and Updating the Strategy
Regular monitoring and evaluation of the effectiveness of the ESG approach allow for the identification of areas requiring change. To achieve this, appropriate structures must be introduced to enable quick response and adaptation of the strategy to changing conditions.
Communication of results and ESG reporting
Communicating progress in the ESG area allows companies to showcase their actions and achievements, which is essential for building stakeholder trust. ESG reports, a form of non-financial reporting, should be clear, transparent, and easily accessible to all interested parties. Entrepreneurs must remember that reports must primarily comply with the requirements imposed by the GHG Protocol, and detailed reporting guidelines are subject to external audits.
Creating the Structure of an ESG Report
Creating the structure of an ESG report requires identifying key performance indicators and ESG policies that will enable the presentation of measurable data. Utilizing modular standards such as ESRS, GRI, or SASB supports the creation of a uniform report structure.
Storytelling and Data Presentation
Effective storytelling in the ESG report allows for a more engaging presentation of the company’s mission and goals. Meanwhile, using visualization tools makes it easier to understand complex data and demonstrate progress. Schematics and graphics allow the audience to more easily grasp even complicated data.
Stakeholder Feedback and Continuous Improvement
ESG reporting, including mandatory ESG reporting, should meet the expectations of various stakeholder groups and be understandable to them. Engaging stakeholders in the process also allows for continuous improvement and adaptation of reporting to their needs.
Benefits of ESG reporting
ESG reporting brings numerous benefits, such as:
- Better financial performance – ESG reporting increases operational efficiency and reduces costs by reducing resource consumption. It improves access to capital and attracts customers who support responsible companies. All of this leads to better financial performance.
- Competitive advantage – ESG stimulates innovation and builds a company’s reputation for being responsible, attracting informed consumers. Being prepared for changing regulations helps avoid penalties. Companies with strong ESG have a competitive advantage.
- Improved image – transparent ESG reporting builds stakeholder trust and improves the perception of a company as ethical. Effective ESG risk management positively impacts a company’s image. This translates into greater customer loyalty.
- Reducing costs and risks – ESG initiatives lead to cost savings and reduced waste. Identifying ESG risks avoids legal and financial problems. Long-term ESG strategies increase company stability.
- Increasing customer engagement and valuable talent – customers and employees who value sustainability are more loyal to companies that implement these values. This attracts talent and increases employee motivation. Greater engagement translates into better company performance.
Opportunities and challenges in ESG reporting
Companies face challenges such as the diversity of ESG standards, the need to adapt quickly to new requirements, and ensuring support from management. Nonetheless, analyzing a company’s operations from an ESG perspective is an opportunity to transform the business model and seize new opportunities – nearly 75%investors evaluate potential investments from an ESG perspective. Lack of ESG reporting, in turn, can have consequences for a company.
Checklist: How to start?
To get started on an ESG report, a company should set a timeline for action and identify the best solutions for its business model. Check out Plan Be Eco, which offers support in developing and implementing ESG strategies.
- Familiarize yourself with the ESG (Environmental, Social, Governance) concept and its relevance to your industry.
- Conduct an analysis of current practices and performance in the environmental, social, and governance areas.
- Identify gaps and areas for improvement.
- Set realistic and measurable ESG goals in line with the company’s mission and strategy; prioritize them
- Establish a team responsible for developing and implementing the ESG strategy
- Define specific actions and initiatives that will achieve the set goals
- Create a schedule of activities and identify the resources needed to implement them
- Integrate ESG activities into the company’s daily operations and business processes
- Put in place systems to monitor and evaluate the achievement of ESG goals – for example, the Plan Be Eco
- Report regularly on results and progress
Summary
ESG reporting is a process that requires commitment and a well-thought-out strategy, but it also brings significant benefits to companies. Through systematic action and continuous communication with stakeholders, organizations can effectively implement sustainability in their operations.
We invite you to learn more about Plan Be Eco and take advantage of a free consultation with an ESG expert to learn how our assistance can help you achieve your sustainability goals.
Frequently asked questions
What exactly is ESG reporting?
ESG reporting is documenting a company’s activities in environmental, social, and corporate governance. It is designed to ensure transparency and accountability of the company to stakeholders and to measure progress toward sustainability goals.
What are the main benefits of implementing ESG reporting?
Implementing ESG reporting brings major benefits, such as improved reputation and stakeholder trust, better financial performance, increased competitiveness, minimized risk, talent attraction, and customer loyalty. Therefore, it is worth considering its implementation.
What challenges may arise during ESG reporting?
During ESG reporting, there may be challenges in complying with the standards and regulations, ensuring management support, and effective cooperation between departments. It is also important to build analytical capabilities to effectively collect and process ESG data.
Are there international standards for ESG reporting?
Yes, there are international standards for ESG reporting, such as GRI, ESRS, and the GHG Protocol, which support consistent and comparable ESG reporting.
What are the first steps in preparing for ESG reporting?
The first steps in preparing for ESG reporting are to establish a timeline of activities, train staff, identify key company areas, and address stakeholder expectations. These are key steps on the road to effective ESG reporting.
