Why your business must report its ESG impact: How to commence reporting

  • 16 Oct 2023
  • 3 Mins Read
  • 〜 by Abigael Ndanu

In today’s fast-evolving business landscape, Environmental, Social, and Governance (ESG) factors have emerged as critical components of corporate success and sustainability. ESG reporting, a practice of significant recent importance, provides a transparent framework for businesses to evaluate and communicate their impact on the planet, society, and internal governance. It’s not just good practice; it’s essential.

Across the globe, regulatory bodies increasingly enforce mandatory ESG reporting requirements. For instance, the Nairobi Securities Exchange (NSE) in Kenya mandates listed companies to report their ESG impact. Additionally, the United Nations Global Compact (UNGC) demands annual updates from signatory companies on their progress in implementing its 10 principles, covering various ESG aspects. International regulators, such as the European Union, the US Securities and Exchange Commission (SEC), and stock exchanges, have also introduced ESG disclosure requirements. These regulations underscore the growing importance of ESG considerations and the need for transparency and accountability in the corporate world.

ESG reporting is not only a corporate obligation; it is a valuable tool for businesses to demonstrate their commitment to sustainability and responsible practices. As a business, ESG reporting allows you to build trust and credibility with investors, customers, and other stakeholders. Transparently revealing your impact on the environment and society attracts socially conscious investors and fosters long-lasting relationships with customers who prioritize ethical and sustainable brands.

More importantly, ESG reporting empowers companies to proactively address critical issues, such as climate change, labour practices, and corporate governance, thereby minimising potential financial and reputational risks. Additionally, companies that demonstrate their dedication to sustainability and ethical practices stand out in the market, drawing a broader customer base and attracting top-tier talent.

For businesses embarking on their ESG reporting journey, several prominent sustainability reporting standards ensure uniformity and consistency, such as:

  1. Global Reporting Initiative (GRI): Offering comprehensive guidelines covering environmental, social, and governance aspects and is widely recognized globally.
  2. Sustainability Accounting Standards Board (SASB): Focusing on industry-specific sustainability reporting standards for relevant ESG metrics tailored to specific sectors.
  3. Task Force on Climate-related Financial Disclosures (TCFD): Concentrating on climate-related disclosures, pushing companies to assess and report the financial impact of climate change on their operations.
  4. UN Global Compact (UNGC): Guiding businesses to align their strategies with broader societal goals, particularly for companies committed to the United Nations Sustainable Development Goals.

Despite these guidelines, some businesses may still grapple with how to commence their ESG reporting journey. Here are a few essential tips:

  1. Commitment from Leadership: ESG reporting requires the backing of top management; leaders should champion the cause and allocate resources for ESG initiatives.
  2. Materiality Assessment: Identify the most pertinent ESG factors for your industry and stakeholders through a materiality assessment to prioritise focus areas.
  3. Data Collection: Gather data on your ESG performance, encompassing metrics related to environmental impact, labour practices, human rights, and governance.
  4. Reporting Framework: Select a reporting framework that aligns with your industry and goals, considering one or a combination of the standards mentioned earlier.
  5. Transparency: Be transparent and honest in your reporting; address both achievements and challenges and establish clear targets for improvement.

Recently, we’ve seen EABL and Safaricom launch their latest sustainability reports, establishing themselves as reputable brands committed not just to profit but also to the welfare of people and the environment. They do so under the guidance of a robust governance structure, placing a strong emphasis on providing ESG oversight.

Therefore, ESG reporting isn’t merely a trend; it is a fundamental requirement for 21st-century businesses. It builds trust, mitigates risks, and provides a competitive edge. As regulations and investor expectations continue to evolve, companies embracing ESG reporting will be better positioned to thrive in a changing world while making a positive impact on society and the environment. It’s time for businesses to lead the way in shaping a more sustainable and responsible future.

If you find ESG reporting complex, it is advisable to seek support from a sustainability reporting agency, ESG reporting consultant, or expert. At Oxygene Marketing Communication, we have an in-house team ready to kick-start your reporting journey. Feel free to reach out to us at hello@oxygene.co.ke, and we’ll be more than happy to guide and support you throughout the process.