Home Business framework ESG and compliance – Reporting | Thomas Renard

ESG and compliance – Reporting | Thomas Renard


We then turn to ESG reporting. This may, at first glance, appear to be something outside the orbit of the compliance profession, however, on closer inspection, this is precisely what compliance professionals are committed to. It’s because of my well known mantra Document, document and document. One of the main reasons for documenting your compliance regime is that if a regulator comes to the door, you can show them the results, in other words, report.

One of the current problems with reporting is that there is no such thing as a global or even an American standard. Cueto and Lewis note that there are or will be EU standards, initiated by the five widely adopted standard setters namely SASB, IIRC, GRI, CDP and CDSB, referred to here as G-five, Forum global economy and IFRS. The Nasdaq, without establishing mandatory standards, said: “Our thinking in this area has been guided by a foundational document, The Model Guidance on Reporting ESG Information to Investors, originally published in 2015 by the United Nations Initiative. for sustainable scholarships.

Based on all these variations, Schneider Electric stated, in The future of ESG reporting, “As a result, different internationally recognized frameworks, standards, ratings and indices began to guide ESG reporting, and since then they have continued to evolve. These four instruments are complementary and can work with each other.

  • Standards are process-based measures that provide specific rules for ESG measurement and disclosure. ESG standards will dictate what companies must report.
  • Frameworks are high-level guidelines that provide principles and guidance on how information should be disclosed.
  • Rating agencies are developing surveys and methodologies to collect ESG data from different companies.
  • Indices combine data into one and represent a particular market or strategy. Indices allow investors to track a company’s performance regarding their ESG reports.

It is clear that compliance must take into account many factors when it comes to ESG reporting. Oliver Rowe, writing in Financial Management, quoted Robert Hirth, co-vice-chair of the Sustainability Accounting Standards Board (SASB), who at the AICPA & CIMA CFO annual conference said: “demands from investors, communities , employees, customers and, in some cases, suppliers, meaning that corporate reporting has now been permanently extended to include environmental, social and governance information. Hirth added, “ESG is important because companies with good ESG practices have a lower cost of capital, better operational performance and better stock price performance. ESG performance is part of this competition for capital. Companies that take ESG seriously enjoy greater attraction and retention of employees. At some point, every publicly traded organization will more than likely report some form of ESG information. “

Rowe also quoted to Martin Farrar, Associate Technical Director – Management Accounting at the Association of International Certified Professional Accountants, “It’s complicated. All reporting frameworks use different terminology. [They are] not integrated for the moment, [and] measurements vary. Rowe then provided a framework from Hirth and Farrar that a compliance professional could use to think about ESG reporting. It included the following features:

  • Understand what your business is already doing in terms of sustainability. This includes ESG monitoring, KPIs and reporting in your organization.
  • Evaluate how the different sustainability standards would apply to your business. Under this point, you should consider the ESG areas that you currently practice without calling them ESG. Diversity in hiring, energy and energy efficiency, diversity and board rotation. Institutional justice and institutional equity. Good corporate governance. These can all be part of your ESG reporting.
  • Look at reports made by peer companies. Benchmark, Benchmark and Benchmark.
  • Carry out an assessment of the ESG behavior of stakeholders. Understand who is driving your ESG journey. There is a wide variety of stakeholders in the ESG journey. These could be shareholders and investors, employees, customers, communities where you do business, or even third-party vendors.
  • Develop your ESG culture. Here Rowe pointed out Farrar, who said: “It can also be done by having interdisciplinary conversations outside your organization, including with climate change and biodiversity experts. What are the companies in your supply chain doing? What is your sector or industry doing? “
  • Don’t think of sustainability as a cost. Just as compliance is not and shouldn’t be viewed simply as a cost, Rowe here quoted Hirth, who said: “Companies shouldn’t see ESG factors as a cost but as a way to focus on some factors that make you a better business. , which reduce risk, which [make] you more attractive to customers, to employees, a better supply chain.

Another approach to start thinking about your report was suggested in a Yahoo! article, titled 6 ESG questions, who said: “ESG reports disclose non-financial data that holds companies accountable for ethical issues. More specifically, these reports demonstrate the efforts of organizations to reduce energy emissions, fight climate change, increase the efficiency of waste management, improve employee health and well-being, support diversity. , equality and inclusion (DCI), having an impact on the community at large, guaranteeing executive compensation, in addition to other concerns.

The bottom line is that much of the work done by compliance can be used as the basis from your ESG reporting. From third party risk management reports to the supply chain and gifts, travel and entertainment (GTE), these assessments are similar to other risk or performance assessments. With all the different standards, there is a wide range of exact rating methodologies and frameworks governing ESG reporting, some best practices have emerged:

  • Auditable ESG reports must follow a specified set of mandatory and voluntary requirements. This allows stakeholders to compare performance and make meaningful decisions.
  • Transparency is essential to the process in which some companies emerge as sustainability leaders, others as laggards. In addition, transparent reporting allows stakeholders to have a clear picture of a company’s direction and progress.
  • For example, a company may not be carbon neutral today but may be making significant efforts to achieve this goal. Stakeholders need visibility on progress, as well as on goals.

Ethixbase noted that “ESG reporting begins with an entrenched sustainable business practice. If a company has taken a decisive attitude towards ESG, this should show in performance. As always, action rings louder than words. They suggest some ways to improve your ESG reporting.

  • Choose the right disclosure framework for your organization and stick to it. This will ensure that your business takes actions that are recognized as key to your business performance.
  • A report on the processes involved, as well as any corrective action, is taken to improve your operations. Methodologies are important for making strong and accurate ESG judgments and careful consideration of these factors leads to better results.
  • Integrate ESG data and mindset into day-to-day business operations. Small actions add up to big changes and can make demonstrable improvements in performance. On top of that, an ESG mindset allows your organization to create a platform for other activities both internally and in your supply chain.
  • Visualize the process of determining your ESG outlook. Data analysis and visualization can help your organization identify areas of your business that need improvement on ESG topics.

Reporting is a cornerstone of your ESG program. But it must be done accurately and with all data verified. The SEC has made it clear that unverified claims will not be taken lightly. In addition, in the court of public opinion, serious damage to reputation will only be magnified by social media. All of these concerns will be very familiar to the compliance professional. Join me tomorrow where I will end this short series on an ESG framework with a discussion on response and improvement.

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