In the current economy, Financial metrics are only one part of a Company’s Sustainability goals; factors such as Brand value, ESG Performance,Talent and Customer reach are increasingly becoming key points to consider for investment decisions as more and more Stakeholders are considering Environmental, Social and Governance (ESG) factors when they evaluate a Company’s Strategy, Risk profile and its plan for creating long-term value. Research done by various firms globally reveal that Reporting on ESG performance is going to be one of the important drivers of Sustainability for 2019 and beyond. ESG Reporting and Performance management is on the agenda of CFOs worldwide.
Many Companies have started to report ESG factors in response to these increased expectations for more Transparency. However, the ways Companies approach ESG and report it’s performance varies greatly, and this non-uniform reporting patterns create a disconnect between the Companies and Investors, in terms of what, where, and how often to report on ESG. Until we get to a common framework and set of standards, inconsistent Reporting and Disclosure of ESG data will undoubtedly affect it’s impact and usefulness.
So, how do we tackle this problem? Here we have identified the key steps on efficient, effective and real time ESG Reporting.
- One needs to start with the Assessment of existing ERM Profile and Strategy to evaluate and refocus the function’s materiality in terms of ESG Performance Unexpected and high-impact ESG risks can be significantly damaging to business growth and reputation. The consequences can range from Environmental disaster to Fraud risks. To escalate the importance of ESG risks, requires cross-functional competencies across the organizational spectrum to understand the emerging ESG trends and their impact on the business.
- The next step is to Identify all Controls relevant to ESG and create a multi year ESG plan with this initial Risk Assessment
- The final and the most important step is to automate ESG Risks by integrating them with ERM and map this into existing ESG frameworks
ESG information and it’s Reporting is certainly more useful if commonly recognized and understood standards are used when disclosing ESG metrics. Companies need to Report ESG data in a way that makes it insightful for the Board, Investors, Consumers and Stakeholders and is comparable to other Companies. Sophisticated, Centralized and Real time ESG data combined with automation and artificial intelligence will lead to greater transparency and help Companies be proactive with their internal as well as external communications.
The approach suggested here has a comprehensive perspective and it has a forward-looking dimension in terms of how Companies can achieve their Sustainability goals while staying on top of their ESG accountability. In the era of expanding Risk universe and disruptions, ESG performance depends upon the intuitiveness and easy adaptability of Technological process, efficient Resource allocation and identifying threats and opportunities in real time. Instead of just monitoring and tracking, Boards need to accelerate ESG performance by using the amalgamation of Emerging Technologies, Corporate Culture and the right “Tone at the Top”.
Stay tuned for more posts Governance best practices which are Agile, Intuitive and Future-ready !
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