The Definitive Guide to ESG Reporting [in OneStream]

ESG criteria are used to assess whether a company is worth investing in whereas CSR is a business model applied by individual organizations. ESG scores your company's commitment to sustainability and related values.

CSR ( Corporate Social Responsibility) initiatives drive higher ESG (environmental, Social and Governance) ratings.

Organizations with a good ESG Score typically have higher ratings in terms of reputation and carry less risk thus attracting more substantial investments. Mastering ESG reporting allows you to communicate the true value of your company to (external) stakeholders while also improving the overall management of ESG initiatives

ESG is a theoretical approach that looks at how well a company is meeting social and environmental goals, in addition to its financial goals. It’s a framework for investors to determine if a company is worth investing in.

Because of all the different frameworks and standards it’s challenging to understand which ones are relevant for your business.

There are three framework categories:

1. Reporting Frameworks
2. Guidance Frameworks
3. Third Party frameworks

1. Reporting frameworks for Benchmarking and scoring

These frameworks help you benchmark your company against peers and competitors. Reporting frameworks take form of surveys and questionnaires to collect quantitative and/or qualitative data which feeds a Scorecard or other rating structure.

This rating can be used to communicate your organization’s dedication to ESG with all stakeholders.

2. Guidance frameworks for shaping ESG initiatives

Guidance frameworks can help you shape your ESG efforts and decide what kind of deliverables to use in order to share your results. A common deliverable is a corporate social responsibility (CSR) report, which can highlight your organization's current efforts and future plans and goals for improvement.

This frameworks helps you decide what to include in your reports. From adding the right context to choosing the correct audience and ensuring the most significant topics are addressed for your stakeholders.

3. An independent ESG overview with Third-party aggregated frameworks

Using publicly available data like external communication, website information and annual reports these frameworks paint an independent picture of your ESG initiatives.

Third party frameworks include:

GRESB

GRESB provides validated ESG performance data and peer benchmarks for investors and managers to improve business intelligence and industry engagement. GRESB, formerly the Global Real Estate Sustainability Benchmark. In the case of GRESB, real estate owners, asset managers, and developers are the intended responders.

CDP

CDP uses the scoring methodologies to incentivize companies to measure and manage environmental impacts through participation in CDP's climate change, forests, and water security questionnaires. Each of CDP's questionnaires has an individual scoring methodology.

UNPRI

The United Nations adopted the Principles for Responsible Investment to encourage investors to implement six sustainable investment principles. Each signatory must report their responsible investment activities each year using the UNPRI Reporting Framework.

GRI

The GRI reporting framework consists of universal standards and topic standards that organizations can use to prepare and report information that showcases significant sustainability impacts

SASB

The Sustainability Accounting Standards Board (SASB) is an ESG guidance framework that sets standards for the disclosure of financially material sustainability information by companies to their investors

TCFD

The TCFD has developed a framework to help public companies and other organizations disclose climate-related risks and opportunities.

SAM Corporate sustainability Assessment

The SAM Corporate Sustainability Assessment (CSA) annually evaluates the sustainability practices of more than 7,300 companies. Participants choose to fill out a questionnaire specific to their industry, and CSA assigns a sustainability score for each completed questionnaire. These scores help companies compare their sustainability performance to peer companies.

Corporate sustainability and climate change efforts are rapidly moving from voluntary to mandatory in many countries. Even the US Securities and Exchange Commission is heading to define crystalline disclosure guidelines for listed companies.

From a Framework perspective:

Some might argue that ESG is often well meaning but has flaws. From risking setting conflicting goals to distracting from goals to tackle climate change.

ESG cramps together a wide array of objectives potentially providing no coherent guide to investors.

ESG Scoring systems potentially have some inconsistencies leading to organizations being able to game the system. An example: Corporates can improve their ESG score by selling assets to a different owner who continues doing business as usual.

From an ESG software perspective

Advanced ESG reporting encompasses the whole process of goal setting, planning, monitoring and reporting, and analyzing results to track progress and make adjustments as needed to stay on track.

Many organizations manage ESG reporting via spreadsheets or point solutions. The problem with this is that it creates a separate process for data collection, consolidation, and reporting process separate from the financial reporting process. But ESG metrics should be reported alongside financial data and processed as such. Not aligning ESG with Financial Reporting increases the chances of duplication, a decline in accuracy, compliance issues and a drop in success rates of ESG initiatives.

Upfield ESG report Example