Environmental, social, and governance reporting has become a mainstream feature of corporate America. In addition to responding to stakeholder concerns, ESG reporting can also inform decisions that lead to bottom line benefits — if companies are geared up to get the most out of their own internal assessment.
In a recent conversation with TriplePundit, Alyson Genovese, Head of Corporate and Stakeholder Relations in North America for the Global Reporting Initiative (GRI), underscored the significant difference between the corporate charitable giving of the past, and the ways in which companies can use ESG reporting to improve their operations:
“Companies are starting to realize that charity does not replace responsibility and good governance. It should reflect the values of the organization, not simply ‘give back.’
“Giving part of the profits to charity is admirable, but stakeholders are saying that they care about how those profits are made, too.”
In the area of sustainability, for example, corporate leaders generally accept that companies have the ability to take action on climate change.
“Companies are starting to realize there are risks and missed opportunities if they don’t understand their relationship to climate change,” said Genovese. “The challenge is that they need to take action before they see an immediate impact on the bottom line.”
Employee productivity is another area in which companies can benefit by being proactive on sustainability issues:
“When a company can track and measure impacts, it can make connections between seemingly disparate issues,” Genovese explained. “For example, a company can connect environmental issues to employee wellness, and use that information to foster a culture of health and wellness.”
The role of companies in creating change has also been developing. In the past, awareness was a deliberate, integrated strategy exemplified by companies like Kenneth Cole and Patagonia. Now “regular” companies are taking stands on issues, partly in response to employee concerns.
“There is also a greater understanding that, in the absence of government leadership, corporate leadership has a role to play,” Genovese explained.
According to Genovese, the next challenge is for companies to realize the value of ESG reporting, and reflect that value by assigning a full team to collect and disseminate information.
“Companies are beginning to see their sustainability directors as a strategic internal resource, but they are not necessarily getting the staffing,” she said. “Companies need to grow their sustainability teams as internal resources. They need to right-size their sustainability teams.”
Along with ramping up staffing, companies also need to meet the growing need for training and certification. Genovese explained:
“Ten years ago, sustainability reporting was not a profession. Now it is a professional role, and we are pivoting toward developing the skill set needed to implement GRI standards.”
In addition to direction from GRI, Genovese also noted that for most companies, the vast majority of impacts occur in their supply chains. That makes communication and knowledge-sharing between companies an essential part of the process.
Competition between companies can also motivate change:
“We are seeing companies respond to each other. They don’t act in isolation. They respond as competitors or as parts of each others’ supply chains. They are demanding information from each other, and they influence each other. When a major customer takes action, companies in the same field pay attention.”
As the uses and benefits of ESG reporting come into sharper focus, there will be increased demands on companies to assemble, analyze and disclose current, reliable data.
Genovese emphasized that having sufficient staff to meet the demand is only one part of the disclosure equation. The other part is timeliness. She made the case that annual ESG reports need to be released earlier:
“ESG reports are now being seen as reference documents to be shared with stakeholders inside and outside of the company. That means they have to be current and contextual.”
“Right now public companies have to have all hands on deck to deliver their annual reports by March, but their sustainability data might not come out until the fall. That sends the message that this information is less value and is not closely tied to the rest of the reporting.”
“That doesn’t necessarily mean it has to be integrated with the annual report. It’s a matter of getting decision-useful data into the hands of people who need it.”
ESG reporting has come a long way in a relatively short period of time, and Genovese foresees another wave of growth as companies grow their teams and develop an institutional base of knowledge and experience.
“For most companies, currently there is not sufficient expertise in-house,” she said, “That’s why it’s vital to have a certification process, to get the graduate schools involved, and to establish a career path.”
During the October 23-25 3BL Forum, Alyson Genovese of GRI will host a half-day workshop on October 23 that will focus on materiality assessment, valuable to both new and experienced ESG and sustainability reporting practitioners. Register now and save 25 percent with code GRI2018VIP.
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