Why Your Company Needs an ESG Reporting Strategy — Now

ESG (environmental, social, and governance) regulation and disclosure requirements are rapidly increasing worldwide. Investors, customers, partners, and shareholders need to know that corporations are living up to their ESG reporting commitments and marketing claims. 

In California, two landmark climate-related disclosure bills passed, requiring increased corporate transparency around greenhouse gas emissions and climate risks for more than 10,000 private and public companies. Alongside California’s bills, the European Union’s Corporate Sustainability Reporting Directive (CSRD) is already set to impact up to 50,000 entities both inside and outside of the EU, including at least 3,300 companies in the U.S. In tandem, the U.S. Securities and Exchange Commission’s proposed rule changes that would require certain sustainability-related disclosures in financial reports. 

While the demand for ESG transparency grows, companies still need to cut costs, reduce complexity, and find more efficient ways to do business. Balancing all of this while understanding and navigating the complexity of ESG can be challenging, but an effective ESG reporting strategy is quickly becoming a critical element of an organization’s core business activities.

We’ll cover what ESG means, why it’s important, and how you can develop your own ESG reporting strategy.

While this might seem overwhelming, here’s the good news: organizations that are proactive in ESG reporting can seize the moment and get ahead now with the right tools. And, companies that are serious about achieving ESG goals have also boasted a happier workforce and a healthier financial outlook. That’s a win-win.

What is ESG reporting? 

ESG is a self-regulating model that helps an organization maintain accountability — to itself and its key stakeholders, such as investors, customers, and employees. ESG topics represent risks and opportunities that will impact a company’s ability to create long-term enterprise value.

ESG reporting allows internal and external stakeholders to measure organizational performance and progress across ESG issue areas. Common reporting includes: 

• Environmental — encompasses such issues as climate change and greenhouse gas emissions, biodiversity loss, natural resource scarcity, water management, waste management, and energy usage
• Social — pertains to diversity, equity, inclusion, human rights, labor practices, supply chain management, political movements, culture, safety, training, product safety, and data security
• Governance — refers to how companies conduct their business, implement and uphold policies, compensate executives, hold management accountable, govern their boards, and publicly disclose company information

Why is ESG reporting important now, and what can it do for your company?

Government agencies around the world have stepped up their requirements for ESG reporting. While improving your ESG reporting strategy can help you remain compliant and meet these regulation and disclosure requirements, an effective ESG strategy can also deliver business value for your organization.

These business benefits include — but are not limited to — cost savings and efficiency, improved brand perception, increased capital access and market value, and a happier, more productive workforce.

By tracking and increasing transparency around ESG metrics, organizations can clearly identify opportunities to reduce waste and water usage, choose energy-efficient equipment, switch to renewable energy resources, and more. By becoming more efficient overall, companies see lower operating costs in the long term. 

Organizations that are transparent about their ESG reporting metrics and working to improve them can also see improved brand perception as a result. In fact, the majority of U.S. consumers say they will pay more for sustainable products. 

According to PwC’s 2021 Global Investors Survey, 79% of investors consider ESG risks and opportunities an important factor in investment decision-making. KPMG reports that 70% of U.S. CEOs said their ESG programs improved their financial performance, and that 59% of CEOs are feeling pressure to increase their ESG transparency. 

Improving your ESG reporting and strategy can benefit your employees, too. A 2023 report by Bain & Company and EcoVadis found that companies with ESG activities focused on the workplace improve employee satisfaction, thus increasing workforce productivity and the ability to attract and retain top talent. A 2022 Salesforce survey found that 82% of the global workforce wants their company to be more sustainable, which means you could save on hiring, training, and other costs associated with employee turnover. 

With stakeholders ratcheting up the pressure on companies to report more transparently, ESG metrics will increasingly influence businesses’ performance. Shareholders want to know how their investments are impacting the world, making ESG transparency a business imperative. 

How can you develop a successful ESG reporting strategy?

It’s important to set guiding principles as you work to build a successful ESG reporting strategy at your company. Here are some to get you started: 

1. Understand where you’re starting 

The first step is to understand which topics are most important to your company and assess what data you are already tracking. Companies should ensure they’re aligned with three types of ESG metrics: 

1) Universal metrics: All companies, no matter their size or country of origin, should be measuring and reporting on topics such as governance, climate, and diversity

2) Industry-specific metrics: data privacy, water use, and fair labor, among others

3) Company-specific metrics: the topics most material to your specific business

Once you know your starting point, you can identify key gaps in your ESG reporting and prioritize how to address them.

2. Set targets and make a plan

Global systemic issues — such as poverty, human rights, and climate change — can’t be solved overnight. This can be daunting, but the most important step is to set targets and make an improvement plan over time; don’t just look for a quick fix. It may take a few years to publish a comprehensive ESG report. 

Start small. Break it down, put what you believe out there, listen to your stakeholders, and stay consistent. This transparency will earn the trust of your stakeholders.

3. Leverage technology

The effective use of technology can help you manage ESG data in real time, streamline the reporting process, and increase efficiency. For example, Salesforce’s Automate ESG Reporting solution, which is built around Net Zero Cloud, helps organizations automate the ESG reporting process. This solution integrates data from disparate systems, tracks progress in real time, creates intelligent insights, and generates accurate and complete reports that align with voluntary reporting frameworks. 

Improving your technology allows you to expand your capabilities and align to global standards.

ESG reporting and disclosure requirements aren’t slowing down and will continue to grow and evolve. Organizations need to set goals, start tracking against those goals, and report out to stakeholders. 

In the ever-changing landscape of ESG disclosures, it’s key for your ESG technology to keep up. An effective ESG solution should also offer framework-specific wizards, such as Carbon Disclosure Project (CDP) and Global Reporting Initiative (GRI), that walk users through creating an ESG report according to each framework. As global disclosure and reporting requirements continue to grow, this solution will adapt to help organizations remain compliant.

You don’t need to do it all at once; the key is to get started. We can’t sit back waiting for the future to arrive — together, we can shape that future today.