Learn what environmental, social, and governance (ESG) reporting is, whether it's required, and how it can benefit your organization and board of directors.
It’s no secret that boards of directors are increasingly expected to be involved in environmental, social, and corporate governance (ESG) activities. In fact, ESG issues are becoming more important to boards than ever before.
As a result of this increased importance, companies and nonprofits need to be prepared to provide accurate, up-to-date ESG information. This can help improve your internal operations, reduce ESG risk, and attract more investors.
And as ESG metrics become increasingly important to investors, boards and CEOs should work together to ensure their organizations are taking the right steps to improve ESG performance.
What is ESG Reporting?
ESG reporting is a company’s disclosure of its environmental, social, and corporate governance performance. These disclosures are intended to give investors and other stakeholders an idea of how well the company is performing in these areas.
In the last decade, ESG reporting has become an important factor in determining a company’s reputation and financial success. It also helps companies improve their practices by holding them accountable for their actions.
Learn more about each letter in the acronym ESG.
This refers to what a company is doing to improve and protect the environment, including conservation measures to reduce energy consumption and pollution. Investors often look at a company’s impact on climate change, deforestation, carbon emissions, waste management, water conservation, and pollution.
This entails how companies treat their employees, contractors, suppliers, customers, and the wider community. Social responsibility includes areas such as employee engagement, human rights, community relations, labor standards, diversity, and consumer protection.
Corporate governance refers to the structure of authority and responsibility within a private or public company, as well as the processes and procedures put in place to ensure the company is run effectively.
Good corporate governance helps ensure decisions are made in the company’s and its shareholders’ best interests. It also helps to protect against corruption and mismanagement.
ESG scores are a type of rating system used to determine how a company’s financial or economic risk performs in relation to environmental, social, and corporate governance issues. They can be used for a number of things, including:
- Evaluating the health of an organization’s ecosystem
- Determining how an organization treats its employees
- Determining whether if an organization has good financial health
- Helping environmentally-conscious consumers to make informed purchasing decisions
A company’s ESG score reflects how well a company performs in relation to ESG factors. The score can be between 0 and 100, with 100 representing the highest possible score.
ESG scores are used by various stakeholders, such as investors, creditors, consumers, regulators, and many others, to make informed decisions about an organization. For example, it gives investors the information they need to make decisions about where to put their money.
Many companies publish annual ESG reports on their websites, including information about how they measure up against regulatory and industry standards like workplace safety, employee training programs, and carbon emissions reduction targets, among others. You’ll also find ESG scores on third-party websites like Bloomberg and Trucost.
Benefits of a Strong ESG Strategy
A strong ESG strategy can help you attract and retain customers, reduce risk exposure, improve your reputation, and increase market capitalization. Companies that report on their ESG performance tend to have better relationships with their stakeholders than companies that do not.
Consequently, they’re more likely to have positive brand recognition, making it easier for them to attract new customers. It also means employees will be happier and more loyal, helping to keep costs down and improve productivity.
Additionally, companies that report on their ESG performance tend to have better financial results than companies that do not. In other words, having a strong ESG policy and strategy can help your organization to:
- Attract and retain high-value customers, investors, and employees
- Build brand reputation, trust, and loyalty
- Comply with regulatory requirements and industry standards
- Better identify, evaluate, and manage potential ESG risks
Remember, it also gives your company a competitive advantage over other companies that don’t have an ESG strategy in place. ESG disclosures help companies show they have high corporate governance standards, social responsibility, and sustainability practices.
Is ESG Reporting Required?
Many companies are required to produce ESG reports by law. However, some companies choose to publish these reports voluntarily as part of their commitment to greater transparency and accountability.
At the moment, up to 29 countries have some degree of mandatory ESG reporting. These countries have put regulations in place that require certain companies to publish their ESG data. While the U.S. doesn’t require full ESG reporting, the SEC has proposed rules around climate change and cybersecurity.
Even when ESG is not required by law, it’s recommended by a number of groups. For example, the UNGC (United Nations Global Compact) and GRI (Global Reporting Initiative), which helps companies share their sustainability efforts with consumers and investors, says ESG reporting is a key part of the foundational and broader sustainability management system.
The GRI also recommends that organizations publish annual reports that include financial and non-financial information about their environmental, social, and governance practices.
In short, as consumers, regulators, investors, creditors, and other stakeholders continue to demand and prioritize ESG metrics, many companies are increasingly adopting ESG disclosures to be more sustainable, ethical, and socially responsible.
Achieve Complete Board Alignment With OnBoard
ESG reporting is a way for companies to communicate their commitment to sustainability and transparency in the hopes of gaining or maintaining the trust of their customers and investors. It allows stakeholders to see how well a company manages its resources and impacts its community.
Board management software enables directors to facilitate online discussions and share crucial documentation to move ESG initiatives forward. OnBoard helps boards make their processes more transparent, document every activity for accountability, and incorporate additional levels of security into meeting files and documents, with features such as:
- Schedule and host virtual meetings with one click
- Create agendas and record meeting minutes with ease
- Collect feedback from stakeholders and make improvements based on their input
- Share documents and collaborate in real time on projects and goals
- Keep track of progress and get up-to-date insights on performance
In other words, our software offers all the features needed for effective board management, from meeting scheduling and live online video conferencing to agenda management and voting tools.
If you’re interested in learning more about how OnBoard can help streamline your board meetings and improve alignment across the organization, start a free trial of OnBoard today or check out our free Board Management Software Buyer’s Guide.
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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