Environmental, social and governance (ESG) topics have quickly climbed the priority ladder for numerous corporations. A recent survey unveiled a striking fact: 43% of shareholders are eager to discuss ESG with corporate boards, making it the hottest boardroom topic. Consequently, corporations are hustling to pinpoint and roll out the gold standard in ESG methodologies: a series of protocols and policies that comprise a top-tier ESG plan.
On a parallel note, there’s a growing readiness among corporate boards to unveil information related to ESG, such as the diversity metrics of the board. This indicates that ESG reporting is fast becoming a cornerstone of corporate strategy, with many placing increasing emphasis on it.
So, why is there a rising tide for effective ESG reporting? Well, it’s inextricably linked to risk management. Today’s corporations are navigating an unprecedented climate risk terrain. Worldwide consumers, with amplified expectations, are putting companies under the microscope.
This paradigm shift has made boards turn to ESG as their guiding light. It’s worth noting that many institutions and investors have placed ESG at the pinnacle of their agendas, adding an undeniable financial incentive for corporations to embrace it.
Clear and transparent ESG reporting and best practices enable corporations to:
- Actively curb risk: Companies can proactively address environmental and social risks, which, if overlooked, could tarnish their reputation or financial stance.
- Align with shifting shareholder expectations: With 63% of global investors gravitating towards funds entwined with ESG, it’s a clarion call for companies to treat ESG issues with utmost gravity.
- Stay compliant: ESG-related regulations have seen a staggering 155% surge over the past ten years. By adhering to ESG best practices, corporations can smoothly sail through compliance checks.
- Enhance efficiency and reduce costs: Implementing ESG practices, like waste reduction, conserving electricity, and fostering diversity, is a double-edged sword that can slice operational costs and bolster performance.
Diving into the best practices, firstly, creating a robust ESG unit is paramount. It’s not just about going green or using eco-friendly packaging. Hence, it’s vital to have dedicated experts, from sustainability to risk management, focusing solely on ESG. Ensuring diversity within this team is not only aligned with the “S” in ESG but is also the conduit to leveraging a rich tapestry of experiences.
Choosing an apt ESG framework is the next crucial step. Aligning with universally accepted frameworks showcases commitment and a holistic understanding of ESG. Some of the revered frameworks are the International Organization for Standardization (ISO), Global Reporting Initiative (GRI), Sustainable Development Goals (SDG), and the Sustainability Accounting Standards Board (SASB).
Setting clear ESG objectives, deriving relevant metrics for those goals, accumulating pertinent data, formulating improvement strategies, ensuring transparency around ESG milestones, monitoring the ESG landscape, and tapping into ESG technology are other essential best practices.
Stepping up the ESG game, modern corporations can spearhead the movement, establishing themselves as ESG trailblazers. With the right technological solutions, they can signal their genuine commitment to ESG to investors and regulators.
Such tools can also arm the board with precise insights to make well-informed ESG-related decisions. For instance, Diligent ESG can be the beacon for organisations, streamlining data collection and furnishing comprehensive, audit-ready reports.
Read the full report from Diligent here
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