Environmental, social, and governance (ESG) reporting is becoming increasingly important for businesses of all sizes. According to a recent study by Royal Bank of Canada Asset Management, 83% of institutional investors say they factor ESG considerations into their investment decisions. The pressure is on for businesses to get their ESG reporting in order—but that’s easier said than done. Here are the top three challenges businesses face when it comes to ESG reporting, and how to overcome them:
1. Defining & Measuring What Matters Most
One of the biggest challenges businesses face when it comes to ESG reporting is figuring out what factors are most important to investors and other stakeholders. Key considerations include environmental impact, employee diversity and inclusion, human rights violations, and corruption. Once you’ve identified the key considerations, you need to find a way to measure them effectively. This can be a challenge in itself, as some of these factors are harder to quantify than others. But it’s essential to get it right—if you’re not measuring the right things, your ESG report will be ineffective at best and misleading at worst.
2. Managing Data Collection & Disclosure Across Multiple Functions & Locations
Another major challenge businesses face when it comes to ESG reporting is managing data collection and disclosure across multiple functions and locations. This is a complex task that requires coordination between different departments and personnel in different parts of the world. It’s also important to make sure that the data you’re collecting is accurate and up-to-date—if not, your ESG report will lack credibility
3. Complying With New & Evolving Regulations
Finally, businesses must also contend with the constantly changing regulatory landscape when it comes to ESG reporting. Regulations related to climate change, human rights, and anti-corruption are constantly evolving, and businesses need to make sure they’re compliant with the latest requirements. Failure to do so could result in heavy fines or even criminal charges. Keeping up with new regulations can be a full-time job in itself—but if you want your ESG report to be credible, it’s essential.
ESG reporting is becoming increasingly important for businesses worldwide—but it’s also becoming increasingly complicated. From figuring out what matters most to investors to complying with new regulations, there are many challenges businesses must overcome if they want their reports to be successful. But by taking a strategic approach and by implementing strategic frameworks through using ESG risk software, like EmpoweredESG, you can overcome these challenges and ensure your report meets all the necessary requirements.