In this guide
Starting out in your ESG journey, or looking to take it to the next level? If so, you’ve come to the right place.
As environmental, social, and governance reporting becomes mandatory for an increasing number of companies around the world, having a solid ESG strategy has evolved from a “nice to have” to an essential part of any organisation’s toolkit.
Whether you’re driven by regulations, public demands or a desire to go above and beyond, here’s what you need to know.
What is ESG reporting?
ESG reporting is all about disclosing information covering an organisation's operations and risks in three areas: environmental stewardship, social responsibility, and corporate governance. Consumers look to ESG reports to find out if they are supporting a company whose values align with theirs. Meanwhile, investors look for qualitative and quantitative information to help them screen investment opportunities according to the ESG factors below.
Environmental
How are companies using energy and managing their environmental impacts? How prepared are they to face the challenges of climate change?Examples: Carbon emissions, Climate change effects, Pollution, Waste disposal, Renewable energy, Resource depletion
Social
How are companies fostering people and culture, and what kind of impact does that have on their own employees and the wider community? Examples: Supply chain, Discrimination, Political contributions, Diversity, Human rights, Community relations
Governance
How are companies directed and controlled, and how are leaders held accountable?Examples: Executive compensation, Shareholders' rights Takeover defence, Staggered boards, Independent directors, Board elections
ESG Scores
You may have seen companies publish ESG scores from organisations such as Bloomberg, S&P Dow Jones Indices (S&P DJI), or others. Ratings measure the degree to which a company's economic value is at risk due to ESG factors and therefore whether a company is investable. Companies that are willing to more thoroughly report ESG performance than others tend to score higher. A lack of solid, transparent ESG reporting can hurt an organisation's ESG score.
The global issuance of bonds for environmental, social, and governance goals in 2021 was on pace to hit $1 trillion for the first time ever, more than double what was sold in all of 2020.
- Bloomberg 2021
There is a demand for ESG data investors can trust.
The demand for ESG data.
Timely
The impact of ESG requirements on reporting timelines is the second biggest challenge, with over a third (36%) naming it as their main worry.
Verifiable
Almost the same number of finance professionals (34%) are primarily concerned about auditing processes and requirements.
*Workiva commissioned a survey of 539 finance leaders across Europe in the Spring of 2022.
Sustainability initiatives at corporations appear to drive better financial performance due to mediating factors such as improved risk management and more innovation.
- ESG and Financial Performance, NYU Stern Center for Sustainable Business and Rockefeller Asset Management, 2021
Strong ESG strategies are linked to better outcomes.
Producing a strong ESG report is about more than just meeting local requirements. Companies that go above and beyond ‘tick-box’ compliance, while reporting in a clear and reliable way, see a number of benefits:
Increased Trust
Solid ESG reporting strategies demonstrate good governance, transparency and future-readiness to investors, strengthening overall trust in the company.
Stronger Reputation
Knowing how to communicate well with customers about ESG performance and strategy can help solidify brand reputation, avoid greenwashing claims and improve overall market perception.
Better Performance
A McKinsey analysis found that ESG reporting increases equity returns 63% of the time, while a Nasdaq report revealed that companies were less volatile in the 30 day period after making public ESG disclosures.
Employee Retention
ESG performance has been linked to happier staff—and happy employees work harder, stay longer, and attract more high-quality talent. A report by Marsh & McLennan found that “ESG performance will become increasingly important to attracting and retaining talent” in coming years.
Is ESG reporting mandatory?
In the European Union and the United Kingdom, ESG reporting is mandatory for most large listed companies. Soon, considerably more EU-based organisations will need to start producing ESG reports as a result of the Corporate Sustainability Reporting Directive (CSRD). The UK is also currently tightening its reporting requirements, while in Switzerland, mandatory ESG reporting is now being introduced for the first time. Outside of Europe, many countries are now doing the same, with mandatory requirements emerging in New Zealand, Canada and Malaysia. While ESG reporting is not presently a legal requirement for companies in the United States, the Securities and Exchange Commission has proposed climate disclosure reporting for listed companies as of 2024.
ESG reporting across regions.
Europe
Europe
Large listed companies in the EU (listed with over 500 employees or more than €500 million in annual turnover) are required to produce an annual ESG report. Current requirements, however, are soon to be expanded.
Under the CSRD, far more organisations will need to report on ESG, following much stricter disclosure requirements: companies will, for instance, be required to disclose the extent to which their activities align with the EU Taxonomy (which determines the business activities deemed sustainable by the EU).
Meanwhile, the Sustainable Finance Disclosure Regulation (SFDR) imposes disclosure-related requirements on financial market participants and advisors in the EU.
In the United Kingdom, ESG reporting is also mandatory for large organisations—and, similar to in the EU, requirements are now expanding. Soon, companies will need to produce reports in line with the Task Force on Climate-related Financial Disclosures (TCFD).
(You can find out more about the CSRD here, read all about the EU Taxonomy here, and learn about the TCFD here).
Asia
Asia
The stock exchanges in both Singapore and Thailand require ESG disclosures. ESG reporting has been mandatory for listed companies in Malaysia since 2016, and in July 2022, China published its first set of voluntary ESG reporting guidelines.
United States
United States
While the SEC is making its own moves on climate-related regulations, Congress showed with H.R. 1187 in 2021 that they're not afraid to step in and propose what they think ESG disclosures should look like.
What major companies are doing.
A number of ESG disclosure frameworks exist to help companies make their disclosures as clear, precise and relevant as possible. Three popular frameworks are the SASB Standards, the Global Reporting Initiative (GRI) Standards, and the Task Force on Climate-related Financial Disclosures (TCFD). A single company can use multiple frameworks: for example, according to its sustainability report, Microsoft informs its reporting using the GRI Standards and adapted frameworks from the TCFD and the SASB. While many of these frameworks are voluntary, some investors or countries may require specific frameworks to be followed. For instance, the TCFD is now being mandated in both the UK and New Zealand, while one of the aims of the CSRD is to establish a common reporting framework for companies across the EU.
Microsoft
MSCI ESG Rating: AAA
Frameworks used: SASB, TCFD, GRI, SDGs
3M
MSCI ESG Rating: AAA
Frameworks used: SASB, GRI, United Nations Global Compact (UNGC), TCFD, SDGs
The Coca-Cola Company
MSCI ESG Rating: AA
Frameworks used: SASB, GRI, TCFD, SDGs, UNGC, UNGPRF
American Express
MSCI ESG Rating: AA
Frameworks used: SASB, GRI, TCFD
Disclaimer: All trademarks are property of their respective owners and are used for identification purposes only.
How can I start?
Identify stakeholders, and build your team
Once you have determined the internal and external stakeholders who would be interested in reading your ESG reports, it's time to tap into your company network. You will need a team of self-motivated individuals who are good learners to stand up your ESG program. Build a diverse, cross-functional team with expertise in different areas, which could include finance, human resources, or risk.
Research industry leaders' ESG reports
Download peers' ESG reports to determine what data they're disclosing and which frameworks they're using. Based on this research, engage stakeholders to brainstorm which metrics are important to your organisation, identify what data you're already collecting, and determine the data you still need.
Build your roadmap
Engage stakeholders to refine the metrics and values that matter to your organisation. Then map the journey to achieving your goals for ESG reporting and ESG performance overall.
Be ready for what's next.
Working across departments to compile, analyse, and report financial and non-financial data for ESG disclosures isn't always easy.
Here's what can help:
Collecting ESG data.
Aggregating data from both systems and people? Across multiple places? We’ve got you covered—automate the collection of data and connect directly to your source systems.
Reporting data you can trust.
Sharing your ESG data with critical stakeholders? Breathe easy. Workiva easily takes your integrated reporting and connects to all your ESG reports and presentations to ensure your story is the same, every time.
Keeping up with changing frameworks.
Whether you use globally recognized ESG frameworks or your own, no problem! With Workiva’s platform, you can do both.
Being ready for anything
Work in the same audit-ready environment as financial reporting teams to ensure your ESG disclosures stand up to the highest level of scrutiny. Collect, manage, and report data with complete audit trails, data lineage, and transparency.
Explore the next step in building your vision for modern ESG reporting.
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