If you want to land a job in ESG, understanding sustainability reporting is essential. Reporting forms the backbone of ESG roles, connecting environmental, social, and governance issues.
As ESG becomes more mainstream, reporting requirements continue to evolve. The field is growing rapidly, which means even if you're new, you're not far behind—everyone needs to keep up. This article will help you understand the basics: What is reporting? What’s the difference between voluntary and mandatory disclosures? What purpose do they serve? Mastering these concepts will boost your chances of securing an ESG role and help you stand out by showing how ESG frameworks influence business strategy.
Sustainability disclosure refers to the process of reporting a company’s sustainability performance, covering aspects such as:
Environmental, social, and governance (ESG) metrics.
Progress toward sustainability goals.
Risks related to sustainability challenges.
These disclosures provide transparency to stakeholders (investors, regulators, customers, etc.) and help them understand how the company is addressing key sustainability issues.
Sustainability disclosure is shaped by two main categories:
Mandatory reporting: Required by law and enforced by regulations.
Voluntary reporting: Optional but often expected by investors, customers, and other stakeholders.
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Different regions and industries have specific regulations and voluntary standards that companies must navigate.
Mandatory Sustainability Reporting
As concerns over climate change and environmental sustainability grow, more countries are requiring companies to disclose their sustainability performance, particularly related to climate-related financial risks. A key framework for this is the Task Force on Climate-related Financial Disclosures (TCFD), which has been integrated into many national regulations. However, regions like the European Union (EU) have introduced the Corporate Sustainability Reporting Directive (CSRD) with European Sustainability Reporting Standards (ESRS), which go beyond climate-related disclosures to cover broader ESG topics.
Understanding TCFD: A Global Standard
Established in 2015 by the Financial Stability Board (FSB), TCFD provides a consistent framework for companies to disclose the financial impact of climate-related risks and opportunities. This framework helps investors, lenders, insurers, and other stakeholders make informed decisions by assessing a company’s exposure to climate risks and how these risks are managed.
Several countries have recognized the importance of TCFD in guiding corporate disclosures and have mandated TCFD-aligned reporting for publicly listed companies and other significant entities. These mandates often focus on sectors like finance, energy, and other industries exposed to climate-related risks. To disclose in alignment with TCFD, companies can use standards such as GRI (Global Reporting Initiative), CDSB (Climate Disclosure Standards Board), and SASB (Sustainability Accounting Standards Board).
The EU’s Unique Approach: Corporate Sustainability Reporting Directive (CSRD)
While many countries have adopted TCFD-aligned reporting mandates, the European Union (EU) has introduced the Corporate Sustainability Reporting Directive (CSRD), which goes beyond climate-related disclosures to cover a broad range of ESG factors, making the EU's approach distinct.
Key Features of CSRD and European Sustainability Reporting Standards (ESRS)
Comprehensive ESG Reporting: CSRD mandates reporting on a wide range of environmental, social, and governance (ESG) issues, such as:
Environment: Climate change, pollution, resource use, biodiversity, and ecosystems.
Social: Impact on workforce, supply chains, communities, and consumers.
Governance: Business conduct, ethics, compliance, and anti-corruption.
Mandatory and Phased Rollout: Starting in 2025 (covering FY 2024), CSRD will expand to include more companies, including small and medium-sized enterprises (SMEs), by 2028. Unlike TCFD, which focuses mainly on climate, CSRD requires disclosures on all ESG categories.
European Sustainability Reporting Standards (ESRS): Developed by EFRAG, ESRS aligns with the ISSB framework but goes beyond TCFD by addressing non-financial sustainability impacts as well.
Voluntary Sustainability Reporting
While mandatory reporting is legally required, many businesses also engage in voluntary sustainability reporting to meet the expectations of investors, customers, and other stakeholders. This allows companies to showcase their sustainability efforts beyond regulatory requirements, helping them stand out in the marketplace. Voluntary reporting typically falls into two categories:
Investor-focused (e.g., ESG ratings).
Customer/operational-focused (e.g., sustainability performance for clients and internal benchmarking).
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Investor-Focused Voluntary Reporting
Investors increasingly use ESG metrics to assess long-term viability and risk management. Many businesses voluntarily disclose ESG data to improve their visibility and performance in ESG ratings, which are critical for attracting capital.
CDP (Carbon Disclosure Project): A widely recognized platform for reporting climate-related risks. Companies disclose carbon emissions, water management, and deforestation efforts. High scores attract environmentally conscious investors and highlight climate leadership.
Sustainalytics, MSCI, and Other ESG Rating Agencies: Businesses provide sustainability data to improve their ESG ratings. These ratings, used by institutional investors, assess risk and performance. Strong ESG scores enhance a company’s attractiveness to investors. Agencies like Sustainalytics and MSCI rank companies relative to peers, helping investors make informed decisions.
UN Global Compact: A voluntary initiative encouraging alignment with ten principles related to human rights, labor, environment, and anti-corruption. Companies report progress annually, enhancing sustainability credibility and appealing to ethical investors.
Customer and Operational-Focused Voluntary Reporting
Voluntary disclosures also meet customer expectations and drive operational improvement, helping companies stand out as responsible brands. Consumers increasingly prioritize sustainable brands, leading to higher loyalty and market differentiation.
EcoVadis: Widely used to assess sustainability performance across supply chains. Companies performing well in EcoVadis ratings often attract more business from sustainability-focused clients.
Internal Benchmarking and Operational Reporting: Companies track metrics like energy consumption, waste reduction, and water use to meet internal goals. These disclosures lead to operational improvements, greater efficiency, and reduced environmental impact.
When you understand the reporting landscape and its requirements, you'll be better equipped to meet the expectations of regulators, investors, and customers. This knowledge will guide you toward more effective practices and help you achieve stronger sustainability targets. Remember, this field is still evolving, and even if you're just starting your career, you're not behind—everyone is learning as the landscape continues to grow and change.
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1 Must-See Post: Leading the LinkedIn Feed
Last week was crazy, I have hit 6000 likes🥳🥳 with this meme, you can check it out here.
2 Great Insights - A Book I am Reading
Title: The Diary of a CEO
Author: Steven Bartlett
Summary: 33 Laws of Business and Life by Steven Bartlett offers insights and lessons from Bartlett's journey as an entrepreneur and CEO. The book is divided into 33 "laws" or principles that blend business wisdom with personal growth. Bartlett shares his experiences building businesses, addressing topics like leadership, resilience, emotional intelligence, and self-reflection.
Highlighted Insight: This law resonated with me because it's true—and it works. To establish a new habit or break a bad one, it’s essential to first understand what a habit is: a routine triggered by one or more cues, followed by a reward. Take smoking as an example. Smoking is the routine, but the trigger might be something like a good meal or a cup of coffee. The reward, in this case, is the pleasure or great feeling you get after each cigarette—especially the one in the morning. 😊
As I mentioned, this law really struck a chord with me because it works. After more than a decade of smoking, I quit at the beginning of this year. It wasn’t about fighting the habit; instead, I established new, healthier habits for each trigger.
3 Key Takeaway - Podcasts on the Move
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