Sustainability/ESG Report – Blake Miller, CPA, Auditor
It has become increasingly common to hear investors and stakeholders request environmental, social and governance (ESG) information from companies to assist them in assessing a company’s performance. Many large companies have responded by delivering this information to stakeholders for further consideration. In 2020, 92% of the S&P 500 companies and 70% of the Russell 1000 companies issued some sort of Sustainability/ESG report. Many have issued separate reports on their sustainability goals while some have chosen to include them with their SEC filings.
Sustainability reporting was recently brought up at the United Nations Climate Change Conference where the international accounting governing body (IFRS) announced they created an International Sustainability Standards Board (ISSB). This new governing body was developed to provide a baseline and guidance on ESG topics and reporting to meet the needs of investors and stakeholders. ESG information isn’t currently required for international corporations, but international political leaders have embraced sustainability reporting as they all work towards achieving climate change initiatives and agreements.
Sustainability reporting does not currently have one set of standards or framework for companies to follow. In fact, most reporting companies do not use one framework but a hybrid of multiple frameworks to determine how they wish to disclose their sustainability standards.
The common items included within ESG reports are as follows:
+ Environmental – How a company is exposed to or manages risks associated with environmental factors related to pollution, waste, natural resource scarcity, carbon emissions, and general land management. Cooperatives and their members are at the forefront of environmental sustainability.
+ Social – How a company’s values and actions impact the communities they work in. This relates to human capital, labor, safety, and giving back to local communities.
+ Governance – Information on the rules, practices, and processes of the governing body of an organization. This includes structure of the board, critical event responsiveness, corporate resiliency and policies and practices on lobbying, political contributions, and bribery and corruption.
The current business environment has been requesting additional transparency and accountability of a company’s social responsibility goals be met. Although not required, it might be worth considering if your investors or stakeholders would value the type of information that would be included in such a report.