The ESG movement is growing in momentum. Investors are actively seeking information pertaining to a company's performance vis-a-vis environmental, social and governance issues. More recently, rating agencies and regulations seek to hold companies to a set of standards and require transparent communication about a company's performance.
Consider just one aspect of ESG: carbon emissions, which falls under environmental. From governmental regulations to taxes and activist stakeholders, companies increasingly face pressure to make and keep commitments that reflect ESG priorities. They also need to demonstrate compliance to regulatory bodies newly convinced of the importance of ESG reporting.
This ESG readiness checklist will help your company understand and meet obligations related to ESG reporting.
ESG Readiness Assessment
Research and understand ESG standards as they pertain to your business: SASB tracks ESG issues as they relate to 77 industries. Since not all ESG issues manifest equally across industries, their focused standards help businesses identify the issues most likely to matter to their stakeholders, tweak their approach, and improve their standing with the most relevant ESG issues.
Reflect on your company's current position: You can't improve ESG commitments without an accurate ESG assessment of where you are now. Use this ESG checklist of questions to dive deep into your current commitment to ESG and plan for how to meet expectations:
- What are your core values?
- What have you done previously regarding ESG issue?
- What, if any, policies are in place to make ESG a priority?
- What matters most to stakeholders, including board members and employees?
- When it comes to reporting and monitoring, how will you gather and analyze data?
- When it comes to reporting, are you aware of the relevant SEC filings that include ESG information?
- Are you prepared to disclose ESG information in required reporting?
- Do you have the right tools for data collection, analysis and reporting?
Craft policies: Once you understand your company's ESG contributions and the issues that matter most to stakeholders, it's time to craft policies. Policies not only demonstrate your commitment publicly, because you can point to them, they help employees stay on track by clearly outlining goals and priorities.
Understand required reporting: SEC filings that pertain to ESG vary by business, so what you'll need to file varies by what your company does. The SEC itself is a helpful resource on this; it maintains a resource page dedicated to ESG.
Many expect the SEC to increasingly require ESG reporting. Skadden attorneys believe the regulatory body will create new laws this year, with a focus on hot-button issues including:
- Board diversity
- Climate change
- Cybersecurity governance
- Management of human capital
While anticipated changes will likely make SEC reporting required, current SEC rules already require that a company disclose ESG issues when it has material impacts. Making a commitment to ESG preparedness now will put your business in a better position when the SEC amends rules to require broader ESG reporting.
Get Prepared for ESG Reporting
Companies are already rethinking the types of information they report through the lens of ESG. Whether it's environmental commitment or efforts to diversify leadership, companies are documenting their performance and sharing the results publicly. These sorts of non-financial disclosures help a business tell a more complete story than its financial statements might suggest.
The future of ESG reporting suggests a more formalized approach to sharing ESG performance.
By identifying the right ESG reporting software now, your company can invest in the right technology solution for next-generation financial and ESG reporting, train employees, and implement a new workflow that accommodates required and optional reporting needs.
DFIN offers ESG reporting and data management solutions that help companies capture all the relevant data, analyze it to see the bigger picture, and tell the full story of their ESG performance.
Companies appreciate the ability to benchmark their ESG commitment against industry peers, receive guidance from experts who are monitoring the ever-evolving shifts with governance and reporting, and automate workflows to save time.