Did you know that 71% of consumers prefer to invest in companies with values that align with theirs? Because this is true, it’s important to let potential investors know that you can be trusted.
ESG reporting is the best way to make this happen. But what is ESG reporting, anyway? Read on to learn what this means, what regulations it looks into, and why it’s important.
What Is ESG Reporting?
ESG reporting is a nonmandatory practice in which a company reports its performance in three areas to investors. These areas are environmental, social, and governance standards. In disclosing this data, investors get a snapshot of the business’s impact in these three areas.
Each area is scored on a model in which 50 is average. Scores under 50 mean that the business does not meet standards. Scores over 50 are desirable for investors.
Each section of ESG reporting has various criteria that it considers. If it does not meet these standards, it will be frowned upon by investors and face more financial challenges. The environmental standards look at:
- How companies use resources and energy
- How companies actively manage their environmental impact
- Level of carbon emissions
- Energy efficiency
- Air and water quality
- Waste management
Social standards look into the culture of a company. It ensures that employees are treated well and that the company has a positive impact on the community. Some aspects include:
- Inclusivity and diversity
- Affirmative action
- Diverse genders, races, religions, and sexualities
- Employee engagement levels
- Data protection and privacy
- Human rights and labor standards
Governance standards look into the internal practices of a company. They examine how it stays ahead of government regulations and avoids violations. Some of its facets include:
- Best practices
- Dialogue with regulators
- Structure of committees
- Lack of bribery, corruption, and lobbying,
- Executive and board composition
- Political contributions
- Whistleblower programs
Why Is This Important?
ESG isn’t mandatory, but people are demanding it of companies more and more often. It likely will become involuntary in the future. Getting ahead of ESG reporting allows you to be prepared for when this day comes.
However, even if this takes place in many years, ESG reporting still has many benefits. It helps your company increase its ROI by building trust with investors. Not reporting also gives investors concerns about your transparency and discourages them from working with you.
The Best ESG Reporting Tools of 2021
While there are many ESG reporting tools on the market, Workiva is the absolute best tool that you can invest in. This platform actively works to improve investor relations by helping you create complex reports on how you meet and exceed ESG standards.
When you work with this digital tool, you’ll have a much simpler time reaching out to consumers and ensuring that they understand your values. You will ultimately boost your brand image and grow to new heights.
So, what is ESG reporting?
At its core, it’s a way that you can ensure that others find your business an appealing and ethical investment.
Check out the ‘business’ tab on our home page for more ideas on how you can keep your business appealing to potential investors. You can also look at the ‘economy’ tab for information on how you can grow and scale your organization, so start browsing today!