Environmental, Social, and Governance (ESG) Reporting

Environmental, Social, and Governance (ESG) Reporting have increasingly become more and more important for companies. However not all aspects of E, S and G are equally important for all companies. When an organisation determines the various dimensions of ESG where it was to be excellent and where it wants to be good, important decisions have to be made.
Considering ESG requires consideration of the needs and expectations of a range of interested parties or stakeholders. Expectations are shifting over time and can hugely impact business dynamics. Business value and impact are not equal to financial performance. As such companies have to consider the broader perspective including development of a core strategy in combination with risks and opportunities, growth and creating long-term value.

Mapping for ESG requires a thorough exercise performed through different steps. Quite often it is a learning path. A successful way is to build a roadmap and framework that sets out the ambitions, goals and milestones. A roadmap for implementation, target setting, milestones and rationale will create buy-in from stakeholders, employees, public and investors. A roadmap incorporates being accountable for critical initiatives.

A materiality assessment will help understand your internal and external stakeholders priorities and relevance of ESG topics from their perspective. Once this step taken, it is important to assess the current status on existing programs, policies; metrics and engagements. Once the baseline is clear, define clear objectives and targets. Define a strategic roadmap to reach those ambitions. And finally report your progress.

The Corporate Sustainability Reporting Directive

The CSRD introduces more detailed reporting requirements on companies’ impact on the environment, human rights and social standards, based on common criteria in line with EU’s climate goals. The Commission will adopt the first set of standards by June 2023. To ensure companies are providing reliable information, they will be subject to independent auditing and certification.

For nearly 50 000 companies in the EU, collecting and sharing sustainability information will become the norm.

The rules will start applying between 2024 and 2028:

• From 1 January 2024 for large public-interest companies (with over 500 employees) already subject to the non-financial reporting directive, with reports due in 2025;

• From 1 January 2025 for large companies that are not presently subject to the non-financial reporting directive (with more than 250 employees and/or €40 million in turnover and/or €20 million in total assets), with reports due in 2026;

• From 1 January 2026 for listed SMEs and other undertakings, with reports due in 2027. SMEs can opt-out until 2028.

The CSDR envisages the adoption of EU sustainability reporting standards. The draft standards would be developed by the European Financial Reporting Advisory Group (EFRAG). The standards will be tailored to EU policies, while building on and contributing to international standardisation initiatives. The first set of standards were adopted in November 2022.