The Importance of ESG Reporting
Reporting on a company’s environmental, social, and governance practices, has become increasingly important in recent years. Investors, consumers, and other stakeholders are often judging companies on the impact that companies have on the world around them. For large corporate entities with vast amounts of data stored in various locations, ESG reporting can be a daunting task. In this blog, we’ll explore some of the typical difficulties faced by these entities when it comes to ESG reporting.
ESG Reporting Challenges
First and foremost, one of the main challenges for large corporate entities is identifying metrics that matter – what is material to the enterprise. This is dependent on the industry, the business activities, and the interests of all stakeholders.
Next is the immense challenge of collecting and consolidating all of the relevant ESG data. This data may be housed in various locations, such as financial reports, sustainability reports, databases, internal IT systems, and third-party data sources. It most likely will be stored in different formats, making it difficult to combine, compare and analyze. As a result, companies typically struggle to gather a comprehensive picture of their ESG performance.
Another difficulty is ensuring the accuracy of the data. With so many different sources and formats, it can be challenging to verify that the data is complete and up-to-date, and represents one source of truth. This is especially true for companies with complex supply chains or operations in multiple countries. Inaccurate data can not only affect the company’s ESG reporting but can also lead to reputational damage if stakeholders discover discrepancies.
Moreover, large corporate entities may struggle to prioritize ESG reporting amid other competing demands. With so many different areas of the business to manage, it can be challenging to devote the necessary time and resources to ESG reporting. This can lead to incomplete or inconsistent reporting, causing reputational risk and possibly eroding stakeholder trust.
Finally, once the information has been prepared, there is the challenge of effectively communicating ESG performance to stakeholders. Even if a company is able to collect and verify accurate ESG data, it may struggle to present that data in a clear, concise, and engaging way. Stakeholders may not have the time or inclination to sift through pages of dense reports, and may instead rely on more accessible sources of information, such as social media or news articles.
In further blog posts, we will consider how companies may respond to collecting and consolidating relevant data, ensuring its accuracy, prioritizing ESG reporting amid competing demands, and effectively communicating ESG performance to stakeholders. Overcoming these challenges requires a concerted effort to develop robust ESG reporting systems and a commitment to transparency and accountability.