ESG reports are primarily just that: reports. They inform and analyze. On their own, they’re not communications tools meant to inspire or engage. They don’t have a call to action. That’s because ESG reports are primarily intended for number crunchers—hard-headed investors and analysts who want to understand your company’s exposure to risk; your approach to managing, anticipating, and mitigating that risk; to measuring progress toward defined targets—including science-based carbon emissions, for example—and your company’s approach to more sustainable value creation over time.
In my experience, however, that’s where ESG reporting often gets bollixed up. Ask the Chief Sustainability Officer, who is generally charged with overseeing the production of the report who their primary audience is, and that seemingly straightforward question is often met with a bunch of hemming and hawing—investors, employees, consumers, customers, NGOs—you name it.
And that’s where the—or at least a—problem lies. Without a clearly defined target audience—or even a few of them, reports sprawl to 100 plus pages, filled with—from the POV of investors and analysts—fluff.
The reality is that while investors and analysts may feel responsibility to people and the planet, they have a fiduciary responsibility is to their clients. That’s why they’re probably not particularly interested in your so-called sustainability stories—the tug-at-the-heartstrings narratives of how your company donated backpacks to local schoolchildren in need, or the crafts club started by ten of your employees for a nearby nursing home or the cans of soup you donated to families during the holidays.
Investors and analysts want to understand at a granular level that your company is a good and reliable bet—particularly as the frequency and severity of storms increase, fires rage out of control and the demand for reducing the emissions that lead to climate change rises.
They want to know that you have transition plans in place, based on science-based targets, to reach net zero emissions. They want to know that your governance is diverse and that your company has a diversity and inclusion plan in place. They want to know that you’re protecting natural capital—biodiversity—by eliminating deforestation and developing sustainable supply chains. They want to know that you’re creating long-term sustainable value.
So no matter which reporting framework you choose—Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB) or Task Force on Climate-related Financial Disclosures (TCFD)—investors what to know that you’re collecting accurate, consistent data. As businesses wait for the Securities and Exchange Commission to provide clarity on climate disclosures, businesses can still adopt a lean, efficient and cost-effective approach to reporting—one that will demonstrate to investors and analysts that your company is a good bet now and in the future.