If the events of the past 18 months have shown us anything, it is that the private sector has a big role to play – and the big expectations that come with it – in helping the world achieve a sustainable and equitable recovery and future.
However, companies report that one of the biggest challenges to advancing sustainability is embedding it deeply within operations, strategies, and supply chains. Environmental, Social, and Governance (ESG) reporting is designed to do exactly that. By linking business outcomes to the SDGs, ESG reporting gives us the ability to harness the power of the global economy to help solve many of the inequalities it has helped to create in the first place.
According to the United Nations Global Compact, currently only 37% of businesses have business models that are able to fund that integration. However, a monumental shift is underway as more and more businesses pivot to sustainable, equitable, and even regenerative business models. Consumers, investors, employees, and even governments are increasingly demanding transparency and accountability from the companies with the most power to shape our collective future. To quote U.S. President Joe Biden, “Today, sustainability is a competitive advantage. But tomorrow it will be business as usual. Don’t get left behind.”
So, if you’ve been thinking about implementing ESG reporting at your own company and/or working to make it more effective, here are 12 steps to follow based on our MovingWorlds Guide: What ESG Reporting Is, and How To Do It:
Step 1: Set Clear Ownership & Support
Get clear on ownership for leading ESG reporting, and ensure there is support from three key bodies:
- The Board
- The executives
In addition, you will want to align with leaders of CSR, Citizenship, Government Relations, and Human Resources if this isn’t already in place. For more advice about building internal support for social responsibility, check out our Complete Guide to Making Your Business Socially Responsible.
Step 2: Build an ESG Team
Build a team that can help establish metrics and report on them. This will likely start as a volunteer group, and should include an Executive Sponsor, as well as a senior-level manager/operator that can help make connections across the enterprise.
Step 3: Decide on What to Measure
Find the metrics that matter most for your company at the intersection of:
- The SDGs that your organization can impact through ‘do more good’ & ‘do less harm’ activities
- Things your company is best in the world at doing, based on your core competencies and assets
- Future looking business priorities and initiatives, based on your company priorities
- Things that investors, stakeholders, partners, and employees want you to prioritize, using the SASB materiality framework, UNGC principles, and GRI guidance (We share more about these and other popular ESG frameworks in our full guide)
Step 4: Establish a Framework and Decide on ESG Factors to Report
These are different for every company based on industry and size. As such, you’ll need to decide on the framework you will use and report on publicly. If in doubt, start with the SASB Materiality matrix to decide on what is material, and then use the GRI framework to understand how to measure each factor. We also think it’s a good idea to take the B Impact Assessment, even partially, to decide on which of the factors you will be reporting on later, and to get the guidance on how to measure it later. With these in hand, look for alignment to the UN SDGs using the Global Compact. Learn more about combining different frameworks and using them together here.
Step 5: Establish Targets and a Baseline
Using guidance from your chosen frameworks, determine your baselines for the key metrics. Then, using guidance from the frameworks (GRI & UNGC), as well as public CSR and ESG reports from competitors, identify your target. Use the Science Based Targets (SBTi) to set ambitious targets.
Step 6: Align Executive & Board Compensation/Evaluation with ESG Targets
This is likely your hardest task and it may take a long time. However, use the growing trend of executives tying their compensation to ESG targets to get your company’s leadership to tie their evaluation and compensation to ESG targets. This should be in place for the Board, Chief positions, and all senior level leaders that report to C-level positions. The Enacting Purpose Initiative provides a very helpful framework here for aligning Board members. Competent Boards also has a certificate course for ESG Board Members.
Step 7: Integrate ESG Reporting and Achievement Across the Business
Using your Executive Sponsor and ESG team, find the business units that have the most authority over your metrics, and work to build alignment with them to capture needed data. From there, serve as a business partner to help them achieve targets. (Need more guidance? Check out our complete guide to intrapreneurship.)
Step 8: Build Systems to Automate Data Capture & Reporting
Once you know where and how to get the data, research the right tool (from the suggestions above) to help you do this in real-time.
Step 9: Get Audited and Improve Processes
With systems in place, partner with a verification firm that can audit your policies, procedures, and data, and then use their recommendations to improve. This will likely need some legal support from your side – here is a useful resource of Dos and Don’ts from Covington on voluntary ESG disclosure.
Step 10: Communicate Progress by Creating Real-Time Reports
Partner with PR, Marketing, Branding, Sales, and HR teams to identify how your captured metrics can produce benefits for others across the business. Then share with them key achievements to communicate your progress. In addition, make your data, targets, and progress as visible and transparent as possible to employees, customers, partners, investors, and all stakeholders.
Step 11: Compare and Compete
Submit your data to evaluation bodies, like the DJSI and CDP, for verification and recognition. If investors are an important audience, also submit to CSRHub, GlobeScan, SustainAlytics, MSCI, etc. to see how you compare to others, and compete to be better. You can learn more about ESG requirements and regulations by geographic region here.
Step 12: Influence and Lead Change
Alternatively, you could call this step “sell”. With the data in hand, work across your organization to highlight ESG wins, and also put pressure on those not prioritizing ESG to join your efforts.
For more on ESG, including its history, the most popular frameworks, and tips on how to do it, check out the MovingWorlds Guide: What ESG Reporting Is – and How to Do It. And to join a community of professionals committed to making the world a more sustainable place through their careers, apply to the MovingWorlds Institute where we go deeper on topics like this.