ESG Reporting and Frameworks

• Transparency in sustainability reporting builds trust and shows accountability to stakeholders
• Companies are disclosing their sustainability impacts due to pressure from regulators, investors, and consumers

Importance of Disclosure

• Ensures credibility by addressing both positive and negative impacts
• Aligns with global standards to prevent greenwashing
• Meets changing legal requirements across different regions

Sustainability Reporting Frameworks

• Global Reporting Initiative (GRI): A widely used standard covering environmental impacts, labor practices, human rights, and corruption
• Task Force on Climate-Related Financial Disclosures (TCFD): Focuses on climate-related risks, encouraging disclosure of climate change impacts on operations and risk management
• Sustainability Accounting Standards Board (SASB): Focuses on the financial materiality of sustainability issues, providing sector-specific standards for disclosing ESG factors

Key Benefits

• Enhance Reputation and Brand Loyalty
• Effective Risk Management and Compliance with ESG standards
• Operational Efficiency improvement
• Attracts Investment
• Drives Innovation and Competitive Advantage by fostering sustainable technologies and meeting stakeholder expectations

Transparency in Sustainability Reporting

• Consumers are more aware of environmental and social issues
• Investors seek clear information for informed decisions
• Governments are mandating sustainability reporting
• Businesses are expected to take responsibility for their environmental and social impact
• Social media increases scrutiny, making transparency more important

Greenwashing

• Greenwashing is making false or misleading claims about environmental or social efforts

Risk of Not Being Transparent or Greenwashing

• Loss of customer and investor trust
• Legal repercussions
• Damage to company reputation
• Loss of customers
• Falling behind competitors
• Financial loss through stock prices
• Negative impacts on sustainability efforts

Businesses can ensure reports are trustworthy by

• Obtaining verified certifications
• Sharing clear, real data with specific figures
• Acknowledging challenges and areas for improvement

Transparency in Reporting Builds

• Demonstrating accountability through actions and progress
• Building consumer confidence through clear and honest reporting
• Strengthening investor trust with reliable data

Overview of Sustainability Reporting Frameworks:

• Global Reporting Initiative (GRI)
• Sustainability Accounting Standards Board (SASB)
• Task Force on Climate-Related Financial Disclosures (TCFD)

GRI Standards

• Universal Standards: Mandatory for all organizations using GRI, covering general disclosure requirements and management approach to sustainability issues
• Sector Standards: Provide guidance for specific industries, addressing relevant sustainability issues
• Topic Standards: Detail disclosures related to individual sustainability topics

Global Reporting Initiative (GRI) Activities:

• Developing globally applicable and consistent sustainability reporting standards
• Monitoring corporate social responsibility (CSR) reports in its database
• Reviewing and developing new GRI standards
• Creating sector-specific standards
• Publishing indicators such as the Mining and Metals Sector Supplement
• Helping organizations report on their economic, environmental, and social impacts

GRI Practices

• Materiality assessment: Identifying significant sustainability issues relevant to the organization
• Reporting on multiple aspects: Covering environmental performance, social impacts, and economic contributions
• Modular structure: Allowing organizations to choose indicators and disclosures that align with their operations
• Stakeholder engagement: Engaging stakeholders to understand their concerns and priorities

Sustainability Accounting Standards Board (SASB):

• Sustainability Dimensions: Five broad themes including Environment, Social Capital, Human Capital, Business Model & Innovation, and Leadership & Governance
• General Issue Categories (GIC): Industry-agnostic topics represented in the SASB Materiality Map
• Disclosure topics: Industry-specific versions of GICs with an average of six per industry
• Accounting metrics: Quantitative and qualitative indicators for measuring performance on each disclosure topic (13 per industry on average)

Task Force on Climate-Related Financial Disclosures (TCFD) Activities & Practices:

• Climate Risk Identification & Scenario Analysis: Assessing physical risks, such as extreme weather events
• Governance & Oversight: Establishing climate risk strategies aligned with business objectives
• Financial Disclosure: Reporting how climate risks affect revenues, assets, and liabilities
• Setting and monitoring Climate targets: Establishing GHG reduction targets

Impacts of Choosing a Right Framework:

• The framework focuses on relevant operation, risks, and opportunities
• Builds trust by providing reliable and relevant information.
• Helps compliance with national regulations
• Framework enhances the company's ability to mitigate social issues.

Advantages of Using One Framework:

• Ensures compliance with legal and financial reporting requirements
• Enhances investor trust through consistency and comparability
• Simplifies internal reporting processes, reducing costs and complexity

Factors to Consider When Choosing a Framework:

• Certain industries have specific reporting needs
• Companies must comply with local accounting and reporting standards
• Stakeholders may expect specific disclosures

Pros of Having Multiple Frameworks:

• Helps multinational companies comply with different jurisdictions' accounting and reporting requirements
• Increases investor confidence by different business reporting
• Addresses the needs of diverse stakeholders

Cons of Having Multiple Frameworks:

• Requires aligning different reporting structures
• Requires additional resources
• Creates risk of time-consuming

Effective Strategies for Aligning Multiple Frameworks:

• Identify Common Themes and Overlaps
• Use a Core-Plus Approach
• Leverage Technology and Reporting Tools
• Ensure priority compliance
• Establish a Cross-Functional Reporting Team

Materiality Assessment in Sustainability Reporting:

• Formal exercise to engage external stakeholders and finds out how important ESG issues are to them

Concept of Materiality:

• Assessment prioritizes factors
• Stakeholders are engaged in the process
• Resources become more streamlined
• Data should adhere to standardized formats

Importance of Materiality Assessment:

• Companies are forced to formulate sustainability strategies
• Illuminates ESG challenges

How to Conduct a Materiality Assessment?

• Define objectives, scope, and audience
• Identify potential topics with clear roles and responsibilities
• Gather potential data from multiple sources
• Establish parameters for performance measurement
• Seek approval throughout the procedure

How to Identify ESG Issues:

• Engage stakeholders
• Analyze
• Prioritize
• Integrate

Challenges in Data Collection

• Data silos and inconsistent measurements lead to difficulties in analysis.
• Data scarcity and lack of completeness, especially in complex supply chains.
• Subjectivity and biases in sustainability metrics can result in reporting differences.
• Resource constraints may limit thorough data collection for smaller companies.

Challenges in Data Verification

• Absence of standardized frameworks and protocols makes comparisons difficult.
• Dependence on third-party auditors, which can vary in quality and be costly.
• Data integrity and manipulation concerns

Data accuracy and verifiability can improved through:

• Investing in data management systems to streamline data collection and analysis
• Applying standardized Metrics and Protocols for consistency
• Strengthening internal controls and data governance
• Engaging with Stakeholders to ensure reliable data collection
• Investing in Training and Capacity Building provide knowledge for collecting and managing

Types of data collected in sustainability reports:

• Environmental data: Includes GHG emissions, water use, waste generation, energy consumption, and biodiversity impacts
• Social Data: Diversity, Equity, and Inclusion (DE&I), Human rights, health and safety, community engagement
• Governance Data: corporate governance structure, and risk management

Improving Sustainability Data

• Utilize Standards and Common Metrics
• Prioritize Transparency
• Continuous Improvement is useful

How to ensure data accuracy?

• Frameworks for Data Governance
• Data Validation and Cleansing to identify errors
• Standardization of Data and Metadata Management
• Version Control and Tracking
• Technology and Automation makes it easier

How to integrate sustainability data?

• This allows for More Transparency & Materiality
• Leads to better Comparability & Integration

Sustainability Reporting Can Be Improved with Technology

• AI can help identify trends
• Blockchain allows for safer recording
• All leading to more transparent data

Real-time data can lead to

• Easier compliance
• Greater accountability
• Real-time data can influence financial situations

The GRI guidelines are..

• Is the starting point to organize and structure data points
• Designed to give the user what they must report

Four steps in determining topics for reporting

• Comprehend organization
• Determine potential
• Grade effects
• Grade significant