ESG & Sustainability Reporting: Enhesa shares 3 things to know about the future

We are honored to have a guest author on our blog, Mary Foley, Expert Services Strategy Director from Enhesa. Partner to multi-national corporations that want to help make the world a better place, Enhesa empowers businesses through comprehensive EHS and product compliance intelligence. Mary Foley has been working directly with these companies to enhance their risk management and compliance programs for over 20 years. Most recently, she’s led them in the challenge of deciphering the myriad elements of Corporate Reporting and charting a way forward by managing risks of non-compliance. 

ESG as easy as 1,2,3? If you’ve even thought about implementing Environmental, Social, Governance reporting in your business, you already know that it’s not that simple. While reporting might not yet seem a clear-cut process, you can have a clear view of the best next steps. That includes preparing for the future of ESG. Below, are my top takeaways from tracking ESG trends – and what they mean for tomorrow’s Corporate Reporting. 

1. Hard-and-fast rules are on the horizon.  

Technically, this area isn’t widely regulated – yet. But that’s changing quickly. Of course, there’s already a plethora of guidance, standards and principles, lining the path to reporting requirements. But the biggest trend we see today is the advancement toward regulations related to Corporate Reporting. This is especially evident through instruments such as the current European Union (EU) NFRD (Non-Financial Reporting Directive) taxonomy regulation and the forthcoming Corporate Sustainability Reporting Directive (CSRD). The game-changer, at the moment, however, is the formation of the International Sustainability Standards Board (ISSB), whose intention it is “to deliver a comprehensive global baseline of sustainability-related disclosure standards.” Altogether, ESG and Sustainability Corporate Reporting is hurtling down the road and moving rapidly from voluntary to mandatory.  

The CSRD is set to firm up today’s guidance and frameworks-based approach. This proposed Directive will extend the scope to all large companies as well as all publicly-traded ones. When adopted, companies operating in the EU will need to meet even more detailed reporting requirements based on current financial reporting standards.  

On the other side of the Atlantic, the US Securities and Exchange Commission is in the process of reviewing disclosure rules and guidance, and we await the publication of its approach. The feedback could mean modifications to existing requirements, the emergence of new ones, or even cite new frameworks for companies to adhere to. What we can be fairly sure of is that they’ll be closely aligned with the ISSB standards and the Task Force for Climate-Related Disclosure (TCFD) recommendations. 

2. Make way for standardized (and verifiable) metrics. 

All the forward movement toward regulation brings forth not only the need for standardization but an official call for it. As part of the CSRD, businesses’ reported information will be required to be taggable – right from its initial collection. Eventually, those tags will need to roll up into a European-wide single access point. That means standardization needs to start at the source, usually at the operational level. Both reporting methodologies and how you track your metrics in the first place will need to follow a uniform format.  

That track also leads back to transparency. More and more, verifiable and evidenced-based information is key when it comes to successful corporate reporting. Where aspirational goals (and achievements therein) were once an acceptable approach, the status quo will instead soon call for verifiable data – and nothing short of it. As we move into a more advanced era of ESG and Sustainability Corporate Reporting, your business will need to be transparent about your initiatives as well as your processes for measuring them.  

If you already have a framework for tracking your EHS compliance metrics, then you’re more than one step ahead. Records on how well you meet your regulatory requirements and how you provide evidence-based data – that can be both measured and verified – will be crucial.  

As such, it’s important to build on what you already have. This isn’t a case of reinventing the wheel. Most companies already understand what’s material to them. You know your business, you know your risks, you know your EHS compliance obligations, you know what’s important to your stakeholders. Use this information to form the basis for your eventual ESG and Sustainability Corporate Reporting. 

These “hard” metrics, such as EHS legal obligations and, for example, requirements for energy efficiency of buildings and processes, emissions trading, waste management, etc, all give you a leg up on providing a clear picture of your efforts. This data’s generation, capture, and management at each step of the process is vital. Having a robust mechanism to meet, monitor and provide evidence of your progress on these requirements is no longer just a nice to have.  

3. Skip the silos: Collaborate based on clear-cut roles. 

From beginning to end, ESG and Sustainability reporting is only as strong as the bridges you build across your business. While your reporting will need to have a clear leader to keep it moving forward, you won’t get far without inter-team collaboration. Its importance will continue to increase as Corporate Reporting evolves. 

Determining materiality is where the rubber hits the road, and there aren’t any shortcuts. When first starting out, you’ll need to understand how your ESG and Sustainability reporting processes fit with your strategic objectives and embedded risk management programs. This will mean consulting with teams across your businesses, including your EHS, ESG/Sustainability/Corporate Social Responsibility (CSR), Financial, HR, Risk Management, and Governance teams (among others).  

At the same time, you’ll need to ensure your reporting has one clear, collective voice behind it. This means choosing definitive roles for teams: who will own the information and who will lead the reporting. Later in the process, eliminating potential blurred lines between business teams will keep your processes clear – and transparent – for both stakeholders and regulators. 

Of the different teams involved in Corporate Reporting, EHS has historically had one of the foundational roles. While some may think that ESG and Sustainability initiatives fall solely to the Sustainability teams to work out, in reality, EHS professionals play a big part. To confirm this, in a poll during Enhesa’s recent ESG reporting webinar, over half of the respondents reported that ESG and Sustainability responsibilities already fall within their EHS teams. 

Successful Sustainability Reporting starts with where you stand on EHS regulatory compliance 

The bedrock of ESG and Sustainability Reporting should be evident in your EHS compliance metrics. With the right approach,  these metrics will cleanly feed into your Corporate Reporting, disclosures, and then into your ESG ratings. The time to transition is now. If regulators are moving forward, you need to be ready. While it’s good news that you can begin from where your business already is, to move forward, there will be some decisions to make and actions to take.

To learn more about how to best use your EHS compliance information to inform your Corporate Reporting and to keep track of emerging guidance and regulations, watch the Enhesa Webinar Replay of ESG reporting: How you can leverage your EHS insights

Mary Foley
Enhesa Expert Services Strategy Director

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