Tackling reporting fatigue: How to prioritize ESG reporting frameworks
In the fall of 2021, the Securities and Exchange Commission (SEC) will likely propose new disclosure rules on climate change risks, board diversity and human capital management according to their rulemaking plan issued in mid-June. With current and potential ESG reporting regulation on the horizon, companies should assess which voluntary disclosures can help them to create value. The value can come in multiple forms including anticipation of responses to investor concerns, enhanced company reputation and increased readiness for future regulations.
New frameworks and standards gain momentum
The context for ESG disclosure is evolving each year through both the issuance of new frameworks and the harmonization of established ones. For instance, this month the Sustainability Accounting Standards Board (SASB), developer of 77 industry-specific sustainability standards for corporate reporting of material ESG information, merged with the International Integrated Reporting Council (IIRC) to form the Value Reporting Foundation. The goal is to increase company focus on industry-relevant material issues while providing integrated reporting on financial and ESG value creation.
In addition, the Task Force on Climate-related Financial Disclosures (TCFD) reporting framework is quickly gaining support across industries. TCFD, established by the Financial Stability Board in 2015, encourages disclosure of decision-useful information to help financial markets better understand companies’ climate-related financial risks and opportunities. To this end, TCFD’s recommendations center on the four categories core to understanding any corporate initiative – governance, strategy, risk management, as well as metrics and targets.
A new framework founded on a similar structure, the Taskforce on Nature-related Financial Disclosures (TNFD), is gaining momentum in Europe and may soon influence U.S.-based companies. This framework was formed to guide reporting on natural capital risks (such as plastics in the oceanic food chain, and loss of soil fertility) with the recognition that the success of the global economy is linked to biodiversity. TNFD’s working group ranges from financial institutions such as Citi and State Street and companies including GSK and KPMG, to eight governments and regulatory bodies; and multiple international technical think-tanks and consortia. The framework is due to launch in 2023 and over time will be complementary to TCFD.
Context is key to prioritization
How can a company begin to navigate the current universe of ESG frameworks, standards and surveys?
1. Define your internal goals for ESG reporting by identifying your target audiences and their reporting expectations. Assess if your current reporting and survey participation aligns with those overarching goals. If they do not, establish a roadmap on how to achieve alignment.
2. Tailor the reporting content, tone and design to each audience’s concerns and interests. For instance, financial audiences will expect data-centric reporting with plans to address shortcomings, whereas NGOs will appreciate story-telling reporting of human impact.
3. Be proactive in responding to surveys that reinforce your company values. For example, if you are an industry leader when it comes to LGBTQ+ policies, make sure you respond to the Human Rights Campaign (HRC) questionnaire for the Corporate Equality Index.
How Addison can help
Addison can help you establish your ESG strategy and reporting roadmap. We are offering a free 30-minute consultation to get you started. With Addison’s more than six decades of corporate reporting and sustainability experience, our specialists have produced hundreds of sustainability reports for Fortune 500 clients. Addison’s ESG strategy, content and creative teams are here to help you achieve all your ESG reporting objectives. To schedule your free 30-minute consultation, please register here: firstname.lastname@example.org