???? How to start your first ESG report or improve your next ESG reports: A comprehensive step-by-step guide to ESG reporting ????

? Step 1: Understanding the Purpose of Your ESG Report ??

To start your ESG reporting journey, it is crucial to comprehend the underlying purpose. Is it for compliance with reporting requirements, aligning with frameworks like CSRD, GRI, SASB, or TCFD? Or is it aimed at establishing transparency and connecting with stakeholders? The goal should not be a mere box-ticking but instead integrate ESG risks into the business model through stakeholder engagement. For example, the scope of ESG report of a software & IT company would differ significantly from a manufacturing company. Moreover, CSRD defines the roles and expertise of the supervisory and management boards, consequently allowing these entities to delineate the boundaries of their reports.

? Step 2: Conducting a materiality assessment ??

After defining scope of ESG reporting, the subsequent step would be identifying the key material issues from the perspective of double materiality. Construct materiality matrices tailored to your business model and industry. For example, NKT, a Denmark based cable provider, in its latest ESG report defines the relevant material areas by scoring them as significant, large, moderate, and medium. Whereas FL Smidth does so in line with the CSRD, assessing which areas have importance to society and our industries like biodiversity and circularity.

? Step 3: Defining commitments in terms of Targets ??

This is one of the critical steps that enables quantification of commitments through target settings and attainable goals. Numerous frameworks exist to aid in this process. After evaluating the impacts, risks, and opportunities, a sustainability roadmap can be developed for each material area. An ESG report must provide granular data when striving for net-zero emissions or when a company commits to employee satisfaction. For instance, Simcorp's sustainability report, for example, says one of their strategic commitment is ,'to foster diversity, equity, and inclusion', which is further supported by specific targets such as the representation of women in the executive committee or a particular employee engagement score.

? Step 4: Establishment of a Robust Data Management System ??

Similar to the requirement for financial reports to be fair and accurate, ESG reports should possess a structure that ensures reliability and accuracy. It should provide reliable and scalable data across critical dimensions. Rather than confining parameters to regional jurisdictions; align with global baselines for comprehensive reporting.

? Step 5: Writing the ESG Report ??

The ESG report should outline each step, clarifying assumptions and underlying principles. Incorporate overall vision, strategy, and a transition plan to meet TCFD/GRI and CSRD requirements. For instance, TCFD requires maintaining overall vision and strategy in short term, medium-term and long-term, similarly CSRD requires a transition plan to ensure that the business model and strategy of the company are compatible with the transition to a sustainable economy (including the limiting of global warming to 1.5 °C in line with the Paris Agreement). Illustrate the detailed process used for materiality assessment while identifying key ESG issues. Clear quantitative measurements should accompany commitments. For example-rather than simply stating, we have a ‘good waste management system’, the report should provide numerical data (e.g., tonnes per facility or per unit of production volume) to substantiate goals and progress.

? Step 6: Assurance ?

Assurance serves as a critical component of the ESG reporting journey, verifying the accuracy and credibility of the disclosed data and underlying methodologies.With the CSRD mandating limited assurance for ESG reports, it becomes imperative to document each of the aforementioned processes in order to ensure reliability and instill confidence in the reported information.Moreover, assurance provides an opportunity to identify any gaps or areas for improvement in the data management system, reporting methodologies, and internal controls.

In conclusion, starting on the journey of ESG reporting requires a systematic and well-structured approach. By following the step-by-step guide outlined above, companies can enhance the relevance and coherence of their ESG reports, aligning them with recognized frameworks and stakeholders' expectations. Each step, from understanding the purpose of the report to ensuring assurance, plays a crucial role in delivering comprehensive and reliable ESG information.

??PS: In subsequent posts, I will delve into each step in greater detail, providing comprehensive insights and practical examples to further assist you on your ESG reporting journey. Stay tuned for more in-depth discussions on how to effectively implement each step and unlock the full potential of your ESG reporting practices.??????

You can also explore my earlier articles on ESG reporting and sustainability at https://linktr.ee/esgwithshilpa