1. A convergence of standards
The ISSB was launched in Glasgow at COP26 in response to demand from international stakeholders to tell one story in the marketplace, its objective is to provide quality comparable information to inform better economic and investment decisions.
The ISSB catalysed the convergence of several standards commonly termed as the ‘alphabet soup’ of ESG standards including CSRD, SEC, GRI, SASB and others, to work towards a common language within the capital markets. There continues to be active and progressive conversations across all these stakeholders.
2. Shifts in the reporting lens
Investors are looking to understand the systemic view of impact across organisations, as well as their value chains and subsidiaries. Ultimately, they are looking for further detail regarding how businesses are taking accountability for their impact and ensuring that performance is transparently communicated in an engaging, efficient, and easy to access way, as well as evidencing it with quality data.
Over the years ESG topics have been covered as historical activities within reporting, focused on environmental and social performance. There has been a significant shift recently, with stakeholders and reporting bodies now calling for businesses to develop a more forward-looking approach focused on impact performance reporting.
3. Continued call for quality data
It is acknowledged that quality data is one of the most contentious components when considering ESG reporting. To meet expectations, it is critical to understand the level of influence to create positive impact, what data is required to make decisions as well as assess how meaningful that data is to your reporting audience.
4. Greenwashing
There is a lot of scrutiny when it comes to ESG claims. Any organisation that commits to stretching goals to adapt to climate change will be vulnerable to accusations of greenwashing. The key to prevent this is to focus on how you respond, be balanced and transparent when commitments have not been achieved and outline what you plan to do to adapt and optimise. It is important for the audience to understand the trade-offs that are being made, a better balance of data and disclosures will enable this to be achieved.
5. Importance of broad stakeholder engagement
It is important to be transparent about how you prioritise stakeholders and demonstrate how you are listening to activists, politics, board members as well as other key stakeholders. Think about how these stakeholders contribute value rather than taking a defensive tone.
It is important to engage all stakeholders and bring the ESG story to life. Incentivising the leadership team and in some cases the wider employee base has been found to be an effective way to catalyse the ESG agenda across the full organisation. Ensure that leadership teams are educated on ESG to ensure effective decision making and they are aware the investment on closing the skills gap is essential to achieving long term commitments.
6. The desire for brevity
Investors and analysts are largely time poor it is important to ensure that your report is easily accessible, concise and an evidence-based report that is provided through quality data. This will ensure that businesses will have their performance accurately reflected across their rating scores.
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