esg and sustainability reporting: what it means to you

By Olivia Stein

Talk of ESG is everywhere these days—and the discussion isn’t likely to end anytime soon. As awareness of climate impacts grows and the immediate need to mitigate them becomes necessary, transparency through ESG will become a standard practice.

What is ESG?
Environmental, Social, and Governance is a framework used primarily in the corporate sector to measure sustainability practices and it includes a broad set of factors. Environmental refers to business activities that impact the environment, such as carbon emissions, waste reduction, and supply chain features. Social factors focus on the organization’s relationship with its shareholders and interested parties, which include customers and clients. This also means ensuring diversity, equal opportunity, and non-discrimination of the workforce as well as delivering services equitably, safeguarding workforce health and safety, and increasing the use of diverse suppliers. Lastly, Governance tracks an organization’s progress regarding board diversity, risk management, data responsibility, compliance, and ethics.
ESG in practice refers to the framework used by companies to assess risk and outlines specific parameters for measuring performance. These measurements are most important to shareholders that want to ensure their investments are secure. In other words, ESG refers to the way in which global forces, including supply disruptions from natural disasters or geopolitical conflict, can impact a company.
Sustainability reporting, though similar to ESG in its criteria for measurement, includes a company’s broader efforts to “do good” and measures how a company impacts the world.
Though differing in their approach, ESG and sustainability reporting require companies to engage in responsible decision-making, disclose information about their business practices, and be held accountable.
The rise of ESG expectations in the corporate world is helping to create greater transparency for both investors and the general public. Increased scrutiny from shareholders and consumers that want a company’s values to align with their own is encouraging businesses to adapt their objectives. And companies that do, can enhance their image as responsible corporate citizens, leading to increased brand loyalty, higher customer satisfaction, and improved relationships.
Research shows that companies with strong ESG and sustainability practices also have better financial performance. A study conducted by New York University found that sustainability initiatives help drive a business’s financial performance because of factors like improved risk management, increased innovation, and resiliency.

A Global Trend
As ESG becomes more common, the demand for more regulation among companies that use it is also on the rise. In the U.S. ESG reporting has been driven by voluntary, market-led responses. However, the past two years have seen a flurry of new ESG initiatives and proposals led by the U.S. Securities and Exchange Commission (SEC). Currently, the SEC requires all public companies to disclose information that may be material to investors, including ESG risks, and has issued guidance in these expectations.
In contrast, new rules from the EU will require reporting on a level never seen before. Both financial and non-financial ESG reporting will be required and companies from across the globe will be expected to comply.

Measuring ESG
ESG is a relatively new practice and standardization for reporting has not yet fully caught up with consumer expectations. This can make it difficult for companies to compare their performance with others and pose challenges for people to draw meaningful observations about ESG and sustainability efforts. There are a number of established frameworks for measuring ESG that provide guidance for users. The Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) are just a couple, and as reporting becomes more common, efforts to align standards are underway. Several frameworks have already merged to create a global standard.
Standardized metrics for ESG will ensure legitimacy and minimize concerns over greenwashing. According to Spencer Perillo, BRING’s resource conservation specialist who holds a certification in GRI, “You can use [ESG] to dispel some notions of greenwashing because you have quantifiable data, but if the company isn’t wholehearted with it and doesn’t come at it with the right intentions, it definitely can just be another exercise of greenwashing.”

Sustainability Reporting for Small Businesses
While large public companies are responsible for about 40% of GHG emissions, 85%-90% of businesses in the United States are small businesses, and access to reporting tools that help them engage with the community are helpful. To close the gap, BRING has started to integrate metrics into the Rethink Business Program’s online tool, GreenBizTracker. The online tool is free for all businesses enrolled in the Rethink Program and will allow them to track their impacts based on the data they collect. Many Lane County businesses are already tracking energy and water use. Using energy-mix metrics for our region, businesses can see in real time how the energy they use, and conservation measures they implement, show up.
All certified Rethink Businesses are members of the Oregon Rethink Business Network (ORBN). Founded by BRING, this statewide network also captures data from businesses enrolled in Marion County’s EarthWISE program and as more members join it will allow for data capture that can show the collective impacts of Oregon’s business community.
There is no longer a question of whether consumers are concerned with climate change and its risks. Both ESG frameworks and sustainability reporting have the potential to bring significant benefits to companies.

Are you a small business owner? Let us know, we can help!

Read the entire Spring 2023 edition of UsedNews here.

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