In Australia, ESG reporting has been building up traction in the corporate landscape as investors and consumers place a greater emphasis on sustainability and ethical considerations. ESG reports are playing larger roles in decision-making, fostering positive change, reducing unnecessary risks, and building trust and transparency. Discover what ESG reporting is, how it ties in with sustainability, its importance, several frameworks and some of its best practices.
What is ESG?
Environmental, Social, and Governance (ESG) is a framework that is widely used to evaluate the sustainability and ethical impact of a company’s operations and practices. It is a set of criteria that investors, stakeholders, and organisations consider when assessing and reporting the non-financial performance of a company. ESG factors provide a comprehensive lens through which companies are evaluated based on their impact on the environment, society, and their governance practices.
What is ESG Reporting?
ESG reporting involves providing transparent and standardised information about the company’s sustainability initiatives, goals, and progress to demonstrate its commitment to responsible business practices. In turn, stakeholders will gain a better understanding of how sustainable the operations of a company are.
Sustainability reporting within the ESG framework allows companies to showcase their efforts in addressing environmental challenges, promoting social responsibility, and implementing robust governance practices. It provides a platform for companies to communicate their sustainability strategies, goals, and performance to investors, customers, employees, and the wider public.
What’s the difference between ESG and sustainability reporting?
Despite both ESG and sustainability, both share common goals, both are distinct concepts that approach reporting from different angles.
ESG reporting refers to a set of criteria or factors that investors, stakeholders, and organisations consider when assessing the non-financial performance of a company. ESG factors provide a framework for evaluating a company’s environmental, social, and governance practices and their impact on its long-term sustainability and risk profile. ESG factors are used to analyse a company’s policies, practices, and disclosures related to areas such as climate change, employee relations, board composition, executive compensation, and risk management.
On the other hand, sustainability reporting encompasses a broader perspective that encompasses the long-term viability and well-being of the planet, society, and the economy. It seeks to balance the needs of the present without compromising the ability of future generations to meet their own needs. Sustainability focuses on the interconnections between environmental, social, and economic factors, aiming for a harmonious and equitable coexistence of these dimensions. It involves considering the impact of business activities on the environment, society, and the economy and pursuing strategies that promote resilience, resource efficiency, and social progress.
Importance of ESG reporting
Conducting ESG reporting is important for Australian organisations, given how it can improve the company’s image and potentially minimise risk. Sustainability reporting in Australia has always been voluntary, though there are several reasons why you should consider ESG reporting for your organisation.
Overall Environmental Sustainability
Australia is home to an abundance of natural resources as well as a wide range of flora and fauna. To ensure that our future generations have the chance to appreciate this, organisations must do their part in reducing their impact on the environment when conducting daily operations. This means cutting down on carbon emissions, preserving natural habitats, and conserving water resources. Through these actions, organisations can help reach national sustainability goals, contributing to Australia’s efforts in combatting climate change.
Social Responsibility
Australian companies are increasingly recognising the importance of addressing social issues to ensure long-term success and stakeholder trust. This involves considerations such as fair labour practices, employee well-being, diversity and inclusion, and community engagement. Companies are expected to uphold ethical standards in their interactions with employees, customers, suppliers and the broader community. Businesses are aligning their corporate strategies to foster positive social impact while simultaneously meeting financial goals. ESG reporting provides a platform for your organisation to communicate your efforts, achievements, and future goals related to social responsibility, with the goal of enhancing the company’s reputation.
Regulatory Governance
The Australian regulatory landscape is evolving to place greater emphasis on ESG reporting. The Australian Securities Exchange (ASX) Corporate Governance Principles and Recommendations and the Modern Slavery Act are examples of regulations that encourage organisations to disclose their ESG performance. The ASX Corporate Governance Principles require listed companies to disclose their material ESG risks and how they manage them. Meanwhile, The Modern Slavery Act requires certain organisations to report on their actions to address the risk of modern slavery in their operations and supply chains. By complying with these regulations and embracing ESG reporting, organisations can ensure legal compliance, avoid reputational risks, and demonstrate good governance practices.
Examples of ESG Reporting Frameworks
In recent years, many industries in Australia have been adopting various ESG frameworks. Below are a few of the more common reporting frameworks you will see.
Global Reporting Initiative (GRI)
GRI is an internationally recognised reporting framework that provides guidelines for organisations to report on their economic, environmental, and social impacts. It offers a comprehensive set of indicators and metrics that organisations can use to measure and disclose their ESG performance. Many companies in Australia utilise the GRI framework to prepare their sustainability reports, enhancing their credibility and comparability across industries.
Sustainability Accounting Standards Board (SASB)
Another notable framework is the Sustainability Accounting Standards Board (SASB). SASB provides industry-specific guidelines for reporting financially material ESG information. The SASB standards are designed to be industry-specific, focusing on the ESG issues most relevant to each sector. By aligning with SASB standards, organisations in Australia can ensure that their ESG reporting is tailored to their specific industry and meets the expectations of investors and stakeholders.
Task Force on Climate-Related Financial Disclosures (TCFD)
The Task Force on Climate-related Financial Disclosures (TCFD) framework has also gained traction in Australia. TCFD provides a framework for organisations to assess and disclose climate-related risks and opportunities. It encourages companies to disclose information related to governance, strategy, risk management, and metrics and targets related to climate change. Conducting ESG reporting this way enables organisations to demonstrate their preparedness for climate risks and their efforts to transition to a low-carbon economy.
Best practices for ESG reporting
When it comes to ESG reporting, there are key ideas to keep in mind when presenting your findings to stakeholders.
Materiality Assessment: Identify, analyse, and report the most significant ESG issues relevant to the company industry, business model, and stakeholders. Perform due diligence when collecting your data to ensure that your reporting is using the most accurate information possible.
Clear and Transparent Reporting: Provide clear and concise ESG disclosures that are easily accessible to stakeholders. Choose one of the standardised frameworks mentioned above such as the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB) to improve consistency and comparability of reporting across industries.
Stakeholder Engagement: Engaging with stakeholders allows you to understand their expectations and concerns regarding ESG issues. Regularly communicate and seek input from investors, employees, customers, local communities, and other relevant stakeholders to ensure that reporting addresses their interests.
Integration with Governance and Business Strategy: Embed ESG considerations into the organisation’s governance structure and decision-making processes. Ensure that the board of directors and executive leadership prioritise and oversee ESG issues and integrate them into strategic planning and risk management.
How can BoardRoom help?
ESG reporting can be complex as it requires accurate data collection, reporting, and analysis. However, BoardRoom’s ESG Access offers a comprehensive software solution that streamlines sustainability reporting for corporations and portfolio managers. ESG Access provides a range of tools that simplify the process of data requests, response collection, and evidence gathering, ensuring that you have the necessary information at your fingertips. The software also includes features for reviewing, validating, and auditing, allowing stakeholders to contribute their input, review, and approve reporting timelines, all within a unified platform. Moreover, ESG Access enables you to design and customise your sustainability report according to the specific needs of your stakeholders.
Get a free 7-day trial on our ESG Access reporting software now.
Contact BoardRoom for more information:
