Spark Newsletter – February 2023
Many companies have adopted environmental, social and governance (ESG) strategies to meet the demands of investors, regulators and the public. As a result, ESG performance tracking and reporting is becoming increasingly important.
This month’s Spark newsletter highlights some key areas related to ESG performance:
- The need for companies to continually measure and monitor their ESG metrics in order to manage their performance.
- How companies can prevent greenwashing.
- The need for investor-grade data in ESG reporting.
- How a circular economy goes hand in hand with ESG.
- What double materiality is and how it relates to climate change and its effects.
5 Steps to Improve Your ESG Performance
Consumers and investors are actively shaping ESG best practices by demanding more transparency and accountability from companies, and by seeking out products and services from companies that have strong ESG performance. Companies that prioritize ESG issues and communicate their performance and efforts effectively are more likely to attract and retain customers, attract investors, improve their reputation and ultimately achieve long-term success.
Learn about five steps to improve your company’s ESG performance.
What Is Greenwashing and How Can Companies Prevent It?
As the impacts of climate change become more severe and widespread, it’s clear that immediate action is needed to secure a sustainable future. To this end, many companies are working to make their operations more sustainable. Investors, too, are increasingly looking to back companies with strong ESG strategies. As a result, many companies have begun to publicly declare their ESG strategies to illustrate a commitment to greater sustainability, among other factors. However, if such strategies aren’t backed up by solid, auditable data and acted upon in a meaningful way, then they are useless.
Making empty or misleading statements about the sustainability of a company’s products or services (whether intentionally or unintentionally) is known as “greenwashing.†Often, companies may label their products as being sustainable just for the sake of marketing. Or greenwashing can occur when communication around the sustainability of products or services isn’t clear or well-defined.
Read more about how companies can prevent greenwashing.
The Need for Investor-Grade Data in ESG Reporting: What Companies Should Know
As ESG reporting is quickly moving from being a voluntary exercise to a mandatory one, the need for quality data is increasing as well. As we’ve seen in the past few months, investors, regulators and the public are demanding transparent reporting on the impact companies have on the environment, as well as the impact of climate change on companies’ performance and outlook.
At Sphera’s ESG Summit that took place June 21-23, 2022, Kim Knickle, research director of ESG and sustainability at Verdantix, detailed how companies can produce investor-grade ESG data and optimize ESG performance.
Read some takeaways from the session.
ESG, the Circular Economy and Opportunities Missed
James Pearson, a senior product manager in Sphera’s article compliance division, joined the SpheraNOW podcast to discuss how ESG can go hand in hand with a circular economy.
As part of the conversation, James defines how a circular economy relates to recycling:
“Circular economy can be used interchangeably with recycling. I mean, it shouldn’t be because recycling is part of a circular economy, but it is a key aspect, right? It’s sort of a foundational aspect of a circular economy, but there are, what we might say, other modes of circularity. So you have concepts like reuse and repair, of course, but then other sorts of business models like sharing and renting, or I suppose in North America, you’d say leasing business models, and they lend themselves to circular economy principles.â€
Listen to the full conversation about connecting the dots between ESG and the circular economy.
What Is Double Materiality and How Does It Apply to You?
As it relates to ESG, and specifically to climate change and its effects, double materiality examines the potential impact of climate change on the financial health and outlook of a company, as well as the impact the company has on climate change and the environment. The concept of double materiality features in both the EU’s Corporate Sustainability Reporting Directive (CSRD) and the U.S. Securities and Exchange Commission’s (SEC) climate-related disclosure requirements.
As companies come to terms with these reporting requirements, they need to ensure that their approach to sustainability reporting encompasses the climate-related risks and opportunities presented by climate change, as well as the impact the company has on climate change and the environment.
Read more about the concept of double materiality and how it applies to businesses.