Reporting ESG: Meeting investor’s demand for clearer sustainability data
With investors’ increasing demand for more transparency and honesty from companies before they invest, the annual report more than ever needs to bring to life their true brand purpose and culture.
The annual report is any company’s shop window to the world. But it’s not just about the numbers. Investors are demanding more information about ESG – the company’s Environmental, Social and Governance standards and policies. With this increased demand for transparency, what should a company report on, what’s the best way to present it, and where does it fit in the annual report?
The annual report needs to bring to life the company’s brand purpose and give a true reflection of how they go about their business.
It’s a movement that has been gathering momentum for the past few years, driven by socially conscious investors – and, increasingly, mutual funds – who want to put their money where their consciences are.
It’s no longer enough for annual reports to slap in a couple of pages on CSR that pay lip service to these issues. Investors are voting with their feet, and if they don’t like – or can’t find information – about how ESG is embedded into the company’s culture and operations, they won’t invest, and some are even disinvesting.
This makes clear the central role that ESG must now take in the annual report, especially as the world tries to ‘build back better’ post-pandemic. The annual report needs to bring to life the company’s brand purpose and give a true reflection of how they go about their business. The ESG thread that must run throughout the annual report acts as a showcase of its commitment on:
• Environmental – what are its environmental commitments and what steps is it taking to reduce its own carbon footprint, as well as supporting others to do the same?
• Social – how does it ensure the wellbeing of its employees, customers and the wider communities in which it operates, and what about inclusivity?
• Governance – who are the company’s leaders, and how do its internal controls ensure accuracy and transparency?
It’s no longer enough for annual reports to slap in a couple of pages on CSR that pay lip service to these issues.
What is included in an ESG report will vary hugely, depending on the scale of the business and the line of work it’s in – BP’s reporting will be a lot different from M&S, for example. And there are numerous standards and frameworks by which they may be measured.
The annual report enables companies to discuss openly how they engage in good ESG practice, giving confidence to their investors that their money is helping to have a positive impact on society and the environment.