For those PLCs with a June year-end, the reporting season has swiftly descended once again, and organisations with an established ESG policy and reporting procedure need to provide clear and compelling reports that all stakeholders can easily digest. The quality of ESG reporting can vary wildly, so with our strategic partners Addidat, we are taking a closer look at the common pitfalls faced when disclosing ESG activities.
ESG Disclosure Quality
Many firms are missing key opportunities to demonstrate how they are building long-term business resilience throughout the value chain. In collaboration with leading ESG data provider, Addidat, we aim to support organisations in creating reports that effectively and efficiently demonstrate ESG progress and sustainability reporting.
Environmental, Social, and Governance (ESG) frameworks can provide broader benefits to the business, particularly in terms of reputation management and brand building with customers. Many companies over-engineer their reports with levels of complexity that hide the great work they do, and open up their governance to accusations of greenwashing. By improving the efficiency of their reports, they can attract new customers looking for sustainability cues, provide clarity around the ESG issues the organisation faces, and protect their brand in the long term.
Speak to us today about our ESG Disclosure support.
Common ESG Reporting Errors
The number of proactive ESG-related disclosures has increased by 300% since 2022, often related to ESG reporting frameworks such as the Taskforce for Climate-Related Financial Disclosures (TCFD) or Science Based Targets Initiative (SBTi). These nature and climate-related frameworks require organisations to clearly map and declare their impact footprints and take a proactive approach to improving ESG performance. With the recent addition of the Taskforce for Nature-Related Financial Disclosures, the requirement for more reporting and ESG information has increased again. This is why 13% of businesses, especially in the agriculture, fashion, FMCG, mining and manufacturing sectors, are now producing separate reports specifically targeting ESG.
Many of these sustainability reports suffer from common issues that restrict the impact of the disclosure and fail to deliver awareness and exposure to value-building activities across the value chain.
Common errors include:
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ESG Terminology
Many reports become convoluted amongst the myriad of terms and acronyms used across the different frameworks. Mixing Global Reporting Initiative (GRI standards), SBTi and TCFD targets, or confusing terminology such as carbon neutral and net zero, leads reports to imply that organisations don’t have a clear grasp on ESG. This can lead to accusations of cover-ups or loose commitments to ESG principles. The fashion industry, in particular, is susceptible to the negative impacts of poor ESG disclosure statements and so must invest in improving the impact and clarity of disclosures, rather than producing more of them.
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Poor Reporting Structures
Overarching ESG strategy reports can be enormous, and therefore, a clear structure is crucial for a report to deliver impact. Each framework should sit under a clear objective, with activities showing direct results towards attaining that objective. The report should be simple in structure, making it easy for the reader to see how each aspect of ESG then delivers the strategy.
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Creating Space for Clear Evidence
Many ESG reports are packed with tables and charts that deliver data, but little insight. Readers can often clearly see what has happened, but not why. By working with professional report writers such as MSP Company Secretarial, organisations can visualise the impact of their great work, without bogging the reader down in heavy data sets and meaningless statistics.
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Repetition Buries Progress
An ESG strategy is a long-term vision of how the organisation will mitigate its impact on climate, people and planet. Due to this long-term nature, reports are often an evolution of the previous year’s work, rather than a wholesale new venture. Where disclosures often suffer is by allowing the repetition to smother the activities and achievements of the current financial year, giving the impression that nothing significant has happened, or that progress has stalled.
Working with MSP Company Secretarial and Addidat, your reports will clearly demonstrate ongoing success, and increase ESG reputation rather than restrict it.
We can help with all of these areas – speak to us today.
Implementing AI in ESG Disclosure
Our strategic partnership with Addidat combines the latest machine learning technology with years of report-building expertise for large-scale and smaller public companies. Addidat use their AI-driven platform to digest and analyse disclosures, while their ESG consultants produce insight from the data.
MSP Company Secretarial can then work on the report itself, improving the efficiency of each disclosure, working through the insight and structuring the report to ensure readers easily understand the impact of your ESG activities.
Effective reporting requires dedicated expertise. Speak to us today to find out how MSP Company Secretarial and Addidat can work with you to enhance your ESG Disclosures.
Together we are leading the way in ESG support – chat to us today to find out how.
ESG Disclosures: Frequently Asked Questions
Is ESG Disclosure Mandatory in the UK?
All UK PLCs and large private companies with at least 250 employees, and either; revenue of £36m or a balance sheet total of more than £18m, must include a non-financial statement in their company reports. This statement should cover ESG activities and disclosures.
There is also the Non-Financial Reporting Directive which applies to listed companies, banks and insurers, this mandates that companies should report on their ESG, human rights and anti-corruption activities or risks.
Many organisations have also volunteered to provide a greater level of transparency around ESG, especially with a focus on climate risks. Global frameworks such as the TCFD and TNFD are both voluntary, but require companies to disclose their sustainability goals, and their climate and biodiversity impacts, plus the ESG approaches taken to mitigate them.
Why is an ESG Disclosure Important?
As the impact of big business on people, climate and biodiversity becomes more apparent, many organisations are required to demonstrate that Board members understand the results that increasing financial performance has on local communities and the environments they operate in. There is also a growing understanding around the long term threat to sustainable profits as climate change increasingly affects daily life. From polluted or reduced freshwater courses increasing sick days amongst employees, through to higher temperatures reducing crop yields, organisations are now actively searching for ways to recognise impact throughout the supply chain and then remove or reduce them as much as possible. Disclosing and being transparent around ESG activities helps to increase trust in the brand, unlock funds from a more discerning investment community and deliver long term value creation.
How can MSP and Addidat Help?
Together with our strategic partners Addidat, MSP Company Secretarial can support the improvement of your ESG disclosures and sustainability reporting. Our services include:
- Our expert guidance creating reports to disclose corporate sustainability activities, ESG scores, and activities generating sustainable value
- Report construction that will increase stakeholder engagement and enhance sustainability reporting standards
- Provide detailed disclosure guidance and disclosure practices to improve future reports
- Help your organisation demonstrate ESG corporate governance in a clear and engaging way.
Speak to us today and ask about our ESG disclosure services.