In a time where the climate has shot up the agenda of most important priorities, the growing demand for corporate sustainability reporting is climbing.
In a recent post by Ideagen, the company explored the benefits of ESG reporting as a way for companies to maximise their sustainability proportion.
The company said, “Due to the increasing spotlight on ESG by regulators, ESG reporting is now becoming a mandatory requirement in many countries. Yet even companies outside of those jurisdictions have begun to voluntarily provide this information, recognising its importance in terms of value creation and in communicating their vision and purpose effectively. Especially since it is not just regulators who have a vested interest in ethical and sustainable business practices.”
What are the leading benefits of ESG reporting? In the eyes of Ideagen, these include enhanced competitive value and brand perception as well as stronger defence against activists. The second part refers to the fact that activists are gradually putting pressure on investors, with 13% of ESG activist campaigns to get on boards in 2021 proving to be successful.
Ideagen said, “One sure way to level the playing field and immunise against activist action is to not only provide the necessary ESG information but also set credible goals for stakeholders to track. Though keep in mind that these must be achievable, as once your ESG sustainability report is in the public domain, activists will be keeping an eye out for underperformance.”
Another benefit of ESG reporting is an increased appeal to investors. Ideagen said, “ESG investors typically care more about the long term than what will happen in, say, the next quarter. Because of this, they are seeking businesses that share that forward-looking view. By including ESG disclosures in your annual reports, you can reassure existing investors that you are working to reduce your operational and reputational risks, and thus remain a safe and sustainable financial undertaking.”
It also helps get a prime pick of the talent pool. Ideagen remarked, “It is no longer enough to simply offer employees good compensation for the work that they do. Today’s workers, especially the younger generations, are environmentally and socially conscious, and organisations that champion ESG matters are quickly becoming destination employers. The social criterion of sustainability reporting, in particular, has a huge impact on employee culture, engagement and motivation. Paying attention to this in the long term can not only make for a happier and more productive workforce but also help you to entice top talent.”
It can also reduce regulatory intervention and improve leverage of opportunities and risks. On the second point, Ideagen said the first step on any business reporting on ESG is to evaluate the associated sustainability risks and opportunities – which can help companies identify and combat the challenges facing your organisation as well as the avenues through which potential growth may occur. Lastly, ESG reporting can offer a greater contribution to better planet.
Read the full post here.
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