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12 Best Practices for Transparent and Effective ESG Reporting

As environmental concerns continue to dominate headlines and consumers demand more sustainable practices, ESG (Environmental, Social, and Governance) reporting has become increasingly crucial for impact-focused brands and businesses. In this blog, we’ll explore the best practices for transparent and effective ESG reporting that are shaping how companies demonstrate their commitment to sustainability and responsible business. From setting clear objectives and engaging stakeholders to ensuring data quality and integrating ESG into risk management – let’s dive in to the best practices for transparent and effective reporting.

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Credit: Karsten Würth on Unsplash

1. Set Clear Objectives 

Before diving into the weeds of the technologies involved, it is best to think of your ESG report as a roadmap. Define clear objectives for your ESG reporting efforts. You should also understand why you are reporting, who your stakeholders are, and what information they expect. New Leaf Paper, a small business specializing in environmentally responsible paper products, also a founding B-Corp, sets clear goals for reducing carbon emissions and increasing recycled content in their products. Knowing your destination helps chart the course effectively.

2. Conduct a Materiality Assessment 

Next, consider viewing the materiality assessment as a treasure hunt, identifying the gems that matter most to your audience and stakeholders. You can use this approach to identify the most relevant ESG issues for your business through a materiality assessment. Sweetgreen, a restaurant chain, conducted such assessments to focus on key issues like carbon neutrality. By zeroing in on what matters most to their customers and community, they ensure their reports are relevant and valuable.

3. Integrate Reporting

Integrating ESG reporting into your overall corporate reporting framework will help you build consistency in your efforts. Through connecting your ESG metrics, sustainability initiatives, and governance practices with financial performance, you’ll be on your way to providing a comprehensive view of your company’s value creation. Take a look at this example from Greyston Bakery, a social enterprise and a B Corp in New York invests that combines their financial reporting and impact reporting in their annual report. 

4. Engage Stakeholders

A crucial element of ensuring longevity with stakeholders is also to understand their ESG concerns and priorities and expect that these may change over time. Regularly communicate these with investors, employees, customers, suppliers, and communities to gather feedback and improve your reporting process. If you find that they are changing too often, consider putting more formal frameworks and procedures in place to emphasize consistency. 

5. Ensure Data Quality and Accuracy

ESG data needs to be robust and reliable as this forms the foundation of your report. You can ensure the accuracy and reliability of ESG data by using standardized frameworks and methodologies. It is best practice to implement robust data collection, verification, and validation processes. Having a third-party auditor verify this information independently, can give confidence to stakeholders that the company is committed to transparency and accountability.

New Belgium Brewing Company in Colorado, a B Corp and the 1st certified carbon neutral beer in North America, connects their 2030 climate action plan to Science-Based Targets. Companies and financial institutions can use the SBTi’s standards, tools and guidance to set science-based targets. They then submit these targets to the target validation services team to have them validated.

6. Maintain Transparency

I can’t emphasize the importance of being transparent about your ESG performance, including both successes and challenges. Set aside focused and intentional time to provide context and explanations for your ESG metrics to help stakeholders understand your progress. Ben & Jerry’s is a great example of this. They publish an annual Annual Social and Environmental Assessment Report (SEAR), which details their performance in social and environmental areas. Their commitment to transparency shows in how their reports have evolved over the years.

7. Disclose Material Information

Disclosing material information should be timely, relevant, and structured. Disclose relevant ESG information in a timely and transparent manner. Follow recognized reporting frameworks such as the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), or Task Force on Climate-related Financial Disclosures (TCFD). Depending on the industry, you could look at using industry specific standards. 

Eileen Fisher, a women’s clothing retailer and a B Corp, uses the Higg Index, specifically the Higg Brand and Retail Module (BRM) to help identify and address sustainability risks and opportunities. The Higg Index helps consumers avoid brands that misrepresent their environmental impact and to help organizations standardize their sustainability measurements.

8. Consistency and Comparability

It’s crucial to maintain consistency in ESG reporting over time to track progress and performance. We recommend that you use standardized metrics and indicators to facilitate comparability with peer companies and industry benchmarks.

Seventh Generation, a Vermont-based cleaning products company and a B Corp, uses  Greenhouse Gas Protocol and frameworks like Project Drawdown, The Sunrise Project, Clean Creatives, Influence Map, Ceres, and others to create a matrix of climate impact best practices. However, their reporting is not consistent.

9. Establish Governance and Oversight

Governance and oversight ensure everything runs smoothly and stays on course. Establishing clear governance structures and processes starts by gaining commitment from top leadership and includes creating a dedicated committee, developing an ESG policy, defining key performance indicators (KPIs), allocating resources, integrating ESG into business strategy, establishing reporting procedures, ensuring compliance, and monitoring and evaluating progress. In IKEA’s Sustainability Reports, they talk about their Strategic Sustainability Council, ethics and integrity, and their Raise a Concern platform.

10. Commit to Continuous Improvement

Continuously assess and improve your ESG reporting practices. Be sure to solicit feedback from stakeholders, stay informed about emerging trends and best practices, and adapt your reporting approach according to their questions and concerns, to the best of your ability.

Warby Parker’s Impact Reports shows that they continually refine its ESG practices by incorporating feedback and staying ahead of emerging trends. This commitment keeps their reporting relevant and impactful.

11. Integrate ESG into Risk Management

Like adding a smoke detector to your home, integrating ESG into risk management helps identify and address potential hazards early on. This will help enhance long-term business resilience and sustainability.

Burt’s Bees cultivate mutually beneficial partnerships with the communities where they source their ingredients, ensuring the protection of these essential resources that their business relies on. This happens after identifying risks and opportunities.

12. Promote Training and Awareness

In this day and age especially, it is important to budget to Invest in training and awareness programs to educate employees about the importance of ESG issues and their role in supporting ESG objectives. Within the Green Marketing Academy, they offer resources and education that can help you start your journey. To get started, subscribe to updates to receive more information on upcoming events and training offerings. 

Conclusion

By embracing these best practices, businesses can craft ESG reports that are not only transparent and effective but also resonate deeply with stakeholders. ESG reporting is more than a compliance exercise—it’s a strategic tool for building a responsible, resilient, and thriving business or brand. I’d love to hear your thoughts on this article and what you took away from it. Feel free to get in touch with me here!


A headshot of the author Anuja Sawant with a light pink background.

Author

Anuja Sawant is a Sustainability Professional with 10 years of experience working with companies across the world to reach their sustainability goals. She’s passionate about utilizing business as a tool for positive impact with proven experience in program and project management, ESG reporting, and sustainability strategies. To learn more about Anuja, visit her website or reach out via email.