As reporting standards continue to rise across the globe, it is important to have a baseline of voluntary reporting for organizations to keep ahead of the curve for a competitive market advantage, according to a new report from Planetly.
Regulations for environmental, social and governance (ESG) activities can be limited by location and size of an organization, but voluntary reporting continues to rise. Several studies show a link between financial performance and ESG efforts, according to Planetly, and the Guide to Voluntary ESG Reporting shows reasons for the correlation between ESG and a company’s performance.
The report outlines the five benefits of voluntary ESG reporting.
- Sharing Values and Knowledge with Customers, Suppliers, and Industry Peers
- Demonstrating Transparency and Good Governance to Investors
- Building Trust with All Stakeholders
- Attract and Engage New Talent
- Cultivating Employee Purpose and Pride
These can be important, Planetly says, as regulations are slow to define requirements for ESG reporting, despite continuously increasing policies and standards.
These include the European Union’s Non-Financial Reporting Directive, which suggests a framework for organizations with more than 500 employees to report on their climate impact. There is also the Global Reporting Initiative, which provides resources to support effective sustainability reporting.
Additionally, the US Securities and Exchange Commission last month approved plans to make reporting on areas such as Scope 1, 2 and 3 emissions mandatory for organizations attempting to file as public.
Reporting is also significant as investors and stakeholders are increasingly demanding that companies make ESG targets and improvements, according to Planetly. Many financial executives view ESG efforts just as important as financial success to their companies.
As more executives and business leaders focus on those efforts, companies have created programs to reward employees for helping hit ESG targets as well as implementing more technology to measure sustainability progress, stay on top of regulations and make reporting more straightforward.
Some steps Planetly says can be taken toward voluntary reporting include publishing annual sustainability reports, and ensuring that CEOs and executives demonstrate a commitment to ESG that helps build trust from investors and stakeholders. Additionally, organizations should assess the ESG topics that have the greatest impact on their businesses and should have data to show information on progress and potential improvements of their efforts.
Finally, companies should set measurable ESG goals and have descriptions of strategies and programs for reaching those targets that provide measurable metrics that highlight year-over-year progress as those efforts move forward.