ESG reporting provides organisations with the opportunity to share their progress toward environmental, sustainability, and corporate governance goals. The concept of ESG in general has been a corporate mainstay across industries and jurisdictions because it ensures companies don’t just take into account their profit margin, but also the impact they have on the world and society as a whole.
Organisations typically adopt an ESG policy and incorporate it into business operations and practices. However, ESG reporting holds organisations and their board members accountable and requires them to be transparent about their performance around environmental, social, and governance issues and criteria.
In this guide, we briefly go over the ESG reporting requirements in Australia.
What is ESG Reporting?
The goal of ESG reporting is to produce a public-facing document that includes strategic objectives for an organisation’s environmental, social, and corporate governance efforts. When a business discloses this information, its progress regarding ESG issues can be examined against benchmarks and targets. As a result, the company can be transparent with stakeholders — including investors, employees, and customers — regarding their environmental, social, and governance impact.
The importance of ESG reporting is evident in the fact that environmental and social issues directly impact an organisation’s bottom line. Failure to report on ESG initiatives may result in significant financial or reputational damage. An organisation may also face penalties if they operate in a country with regulations governing ESG reporting.
It’s important to note that Australia hasn’t implemented mandatory ESG reporting requirements at the federal level. However, companies are encouraged to report on ESG factors voluntarily.
A significant portion of ESG reports include metrics used to measure performance on environmental, social, and governance issues. Leading reporting frameworks, major accounting firms, and representatives from corporations, investors, and international organisations collaborate to develop ESG metrics, which center on four pillars: principles of governance, planet, people, and prosperity.
ESG risk is another key factor that’s often included in ESG reports. These risks include a company’s environmental, social, and governance factors that could harm its reputation or lead to financial liability. Within their reports, organisations should include strategies and plans for mitigating these risks. Otherwise, they could risk losing financing from ESG investors, offending socially-conscious customers, or violating regulations.
ESG rating agencies use ESG reports to assign scores by evaluating environmental, social, and governance criteria. ESG ratings matter because investors prefer companies with better overall ESG ratings. This typically means these companies have fewer liabilities, which makes it easier to acquire capital and hire top talent.
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ESG Reporting Frameworks
There are several ESG reporting frameworks to consider. It’s useful to understand the distinctions among different ESG frameworks to help you determine the right one for your organisation’s unique needs.
1. Global Reporting Initiative (GRI)
The standards developed by the Global Reporting Initiative (GRI) are a modular framework, including sets of universal, sector-specific and topic-based sustainability reporting standards.
2. Integrated Reporting Framework (IRF)
The International Integrated Reporting Council produces the Integrated Reporting Framework. Companies following the IRF are urged to issue concise, integrated reports that combine annual financial data with ESG data. The reports should detail how ESG initiatives create value in the short-, medium-, and long-term. The primary audience for these reports includes international investors, lenders, and insurers. Reports following the IRF framework aim to make it easier for investors to review information as part of normal research processes.
3. Sustainability Accounting Standards Board (SASB)
The SASB’s voluntary frameworks focus on financial information that’s relevant to investors. The framework provides information to the U.S. Securities and Exchange Commission (SEC). Investors can use this information to evaluate a company’s performance on important ESG issues. The SASB got its start in 2011. However, in 2022, it was consolidated into the IFRS Foundation to build a new framework for ESG reporting.
4. Task Force on Climate-Related Financial Disclosures (TCFD)
The Financial Stability Board created the 31-member Task Force on Climate-Related Financial Disclosures (TCFD) in 2015. This task force monitors the global financial system and recommends actions to strengthen it. When following this framework, organisations are encouraged to publicly disclose information about their financial risks related to climate change to investors, lenders, and insurance underwriters. The TCFD provides 11 recommendations that focus on governance, strategy, risk management, and climate-related metrics and targets.
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Today’s investors are looking beyond the bottom line to understand a company’s value and long-term sustainability. ESG reporting gives investors a lens into a company’s commitment to environmental, social, and governance issues. Therefore, achieving ESG goals have become embedded into forward-looking corporate strategies.
A board of directors plays an essential role in setting a company’s strategic direction and ensuring it operates in a way that considers ESG factors. Simplifying board governance proves essential to improving how companies approach environmental, social, and governance issues. With sound board alignment, businesses can successfully integrate ESG initiatives into their strategic planning, risk-management, and decision-making processes.
At OnBoard, we understand the significance of a strong ESG framework. Our board portal software is designed to effectively address your governance, risk management, and compliance needs. With OnBoard, you can expect an intuitive user experience, robust security measures, streamlined collaboration, simplified meeting management, and customisation options.
For an excellent starting point, download our free board meeting agenda template to see what OnBoard can do for your organisation.
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About The Author
- Adam Wire is a Content Marketing Manager at OnBoard who joined the company in 2021. A Ball State University graduate, Adam worked in various content marketing roles at Angi, USA Football, and Adult & Child Health following a 12-year career in newspapers. His favorite part of the job is problem-solving and helping teammates achieve their goals. He lives in Indianapolis with his wife and two dogs. He’s an avid sports fan and foodie who also enjoys lawn and yard work and running.
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